Tax News【October 2014】
☞ The following tax information is translated from Korean for foreign-invested companies, and is not legally binding.
(Q) An art gallery in Korea purchased an art work by a foreign artist from a gallery outside Korea for possession. In this case, is the payment for the art work taxable?
Also, if the foreign artist granted the right to use the art work in posters, catalogues, publications, etc. for no extra cost, can this be considered income from the use of copyright?
(A) The payment for the purchase of an art work from a gallery in Japan is considered business income as prescribed by Article 93(5) of the Corporate Tax Act and Article 7 of the Republic of Korea-Japan Income Tax Convention, and the income is not taxable in Korea provided that the Japanese gallery does not have a place of business in Korea.
In regard to the right to use art work for the purpose of an exhibition granted by the artist who owns copyright for the art work, if the right was granted for no extra cost and the art work was not used for the purpose of making profit, copyright fee shall not be separately considered for taxation.
※ Related laws: Article 7 of the Republic of Korea-Japan Income Tax Convention, Article 93 of the Corporate Tax Act
(Q) The Turkish Embassy in Korea, which is a non-profit foreign company, gained income by transferring the embassy building and attached land. Is the income taxable in Korea?
(A) In the case that the Turkish Embassy in Korea - a non-profit foreign company - transfers the embassy building and attached land and gains domestic source capital gain as prescribed by Article 13 of the Republic of Korea-Turkey Income Tax Convention, tax is exempted for the income in Korea in accordance with Article 23 of the Vienna Convention on Diplomatic Relations.
※ Related law: Article 93 of the Corporate Tax Act
(Q) If partial withdrawal has been made from a three-year foreign currency time deposit six months from the contract date and two and a half years from the contract date, is the interest income from the latter withdrawal non-taxable?
※ In accordance with Article 21-2 of the Restriction of Special Taxation Act, in the case of foreign currency time deposits with contract period of not less than one year opened by a non-resident or foreign company between January 1, 2013 and December 31, 2015, no income tax or corporate tax shall be imposed on the interest accrued from the relevant deposit during the contract period.
(A) If a non-resident or foreign company opens a foreign currency time deposit with contract period of three years and makes a partial withdrawal from the deposit six months from the contract date and two and a half years from the contract date, income tax or corporate tax not imposed on the income accrued from the withdrawn amount shall be collected.
However, if no withdrawal was made for one year and partial withdrawal occurred two and a half years from the contract date, income tax or corporate tax shall not be imposed on the interest accrued for one year from the contract date.
※ Related law: Article 21-2 of the Restriction of Special Taxation Act
☞ For more information, please contact the International Tax Resource Management Office of the National Tax Service (82-2-397-1438~9).
