Korea: Foreign tax credits and withholding tax - KPMG Global
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Korea: Foreign tax credits and withholding tax under tax treaty

Korea: Foreign tax credits and withholding tax

Courts and tax tribunals in South Korea addressed the following items in recent cases.


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  • A tax treaty’s provision for reduced tax rates cannot be viewed as a tax reduction provision in the country where the income is sourced, a tax tribunal held. In this case, the taxpayer company received dividend income from a subsidiary in China and in filing its corporate income tax return, the taxpayer applied a foreign tax credit for the taxes in China withheld at a rate of 5% under the Korea-China income tax treaty. The taxpayer also claimed that it would be entitled to a “deemed” foreign tax credit of 5% with respect to the dividends (that is, the difference between the 10% tax rate under an article of the second Protocol to the treaty minus the 5% reduced tax rate under the treaty). The tribunal rejected the claim for the deemed foreign tax credit.
  • The Supreme Court held that the starting date for a refund request must be the day when the taxpayer became aware of the occurrence of a relevant event—and not the day when the taxpayer became aware of a court case that changed the interpretation of the relevant transaction.
  • A tax tribunal found that even if an extension of the due date for the corporate income tax return is approved, this does not mean that the local tax filing deadlines are also extended because this is subject to the authority of the local government.

The national tax agency in September 2017 announced that the statutory deadline for certain taxes—including withholding tax and the securities transaction tax—and the date for issuance of electronic tax invoices has been extended to 13 October (from 10 October) because of a long-term holiday that begins 30 September and continues until 9 October.


Read a September 2017 report [PDF 727 KB] prepared by the KPMG member firm in Korea

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