(1) Corporate Tax
In order to engage in business activities for profit in Korea, one must register its business at the national tax office and once such registration has been made the business must follow the tax laws of Korea (except in cases where it is explicitly stated otherwise in tax agreements entered into between nations). Basically, any local corporation established in Korea must register its business.
For businesses that have registered, the corporate tax must be reported annually and 10% tax rate is applied up to 200 million KR W and 22% for the amount excess over 200 million KR W.
However, for foreign companies that do not register its business in Korea and temporarily work during the production period, no tax shall be imposed except for Indirect Tax because such companies do not follow the Korean tax law. For example, simple liaison offices and receiving only production services that do not resister its business fall under this category.
(2) Value Added Tax: VAT
Korean VAT is one of typical indirect taxes and when business provides goods and services, the receiver imposes a rate of 10% of the price of such goods and services and file VAT return. In Korea, if the business has registered its business, then according to procedures and regulations the business may get a rebate or deduction on the VAT it paid.
Therefore, in cases where those residing in Korea have not registered its business, simple liaison office or when only receiving production services, Korean tax law shall not be applicable but it must still bear VAT when it receives goods and services within Korea.
1) VAT Rebate for Foreign Business
If a business is registered in Korea then it may receive rebate on most of the VAT it has accumulated, and even if it is a foreign business that has not yet registered in Korea it may receive rebate on the VAT it has indirectly incurred while producing the movie in Korea. These may include VAT that is imposed on food, board, ads, leases, office equipment and supply purchases and rentals which have been made in Korea.
2) Procedure on Receiving Rebate
For a business registered in Korea, VAT rebate is handled by the management department of the company. For foreign businesses not registered in Korea, it must be designated to tax officials, accountants, and other professional agencies dealing in tax rebate and they must apply for a rebate on behalf of the company. So for these business transactions, to make sure everything is filed correctly, it is in the best interest to assign a proxy company or an agent to deal with these matters.
(3) Personal Taxation such as Individual Tax
If the source of the income is from Korea then tax will be imposed on such income in Korea. In cases where foreigners have an income in Korea, to avoid the issue of double taxation by being taxed in Korea and in their foreign country and to avoid the issue of an income withholding tax in Korea, they must first refer to the tax treaty made between Korea and their respective country because Korea has a treat with many nations. Generally most business income that does not have a domestic place of business and wages for short term labor are not considered as incomes where income withholding tax applies. Such income sourced from Korea can be subjected to income withholding tax depending on the type of income. To make an accurate assessment of tax liability, you must know the applicable law, the employment status, job description, work period, stay period, and other details, therefore it would be in the best interest to consult with a tax official or an accountant who are well-known on these international tax matters.