SOUTH KOREA Law and Practice Contributed by: Heejun Choi, Kyoung-Ho Kim, Sungsok Yang, Eunjee Kim and Kwang-Chun Park, Dentons Lee
but mandates employee information, consultation or consent for specified matters, particularly work - force restructuring, working-time arrangements and adverse changes to employment conditions.
Accident Compensation Insurance is borne entirely by the employer. Employers are responsible for withholding employees’ taxes and social insurance contributions and remitting both the employee’s and employer’s portions to the relevant authorities. Failure to comply may result in surcharges, penalties or other sanctions. Accordingly, employees bear income tax, local income tax and their share of social insurance contributions, while employers act as withholding agents and bear their own contributions, including the full cost of Industrial Accident Compensation Insurance. 5.2 Taxes Applicable to Businesses A company doing business in Korea may be subject to corporate income tax, local income tax, value-added tax (“VAT”), withholding tax and other transaction- or industry-specific taxes. A Korean company is generally taxed on its worldwide income, while a foreign company is generally taxed only on Korean-source income, including income attributable to a permanent establishment in Korea. Corporate income tax is imposed at progressive rates: • 10% on the first KRW200 million of taxable income, • 20% on taxable income over KRW200 million and up to KRW20 billion, • 22% on taxable income over KRW20 billion and up to KRW300 billion and • 25% on taxable income exceeding KRW300 billion. Local income tax is imposed at 10% of the corporate income tax liability, resulting in a combined top mar - ginal rate of approximately 27.5%. VAT is levied at the standard rate of 10% on the supply of goods, services and imports, although exports and certain goods or services are zero-rated or exempt. Companies may also have withholding obligations. Dividends, interest and royalties paid to non-resi - dents or foreign companies without a Korean perma - nent establishment are generally subject to Korean
5. Tax Law 5.1 Taxes Applicable to Employees/ Employers
In Korea, the principal tax and social security obli - gations arising from employment are the individual income tax, the local income tax and mandatory social insurance contributions. Employees are subject to Korean income tax on employment income. Korean tax residents are gener - ally taxed on worldwide income, while non-residents are taxed only on Korean-source income. Employ - ment income includes salary, wages, bonuses, allow - ances and other employment-related compensation. Employers must withhold and remit income tax and conduct a year-end tax settlement. Employment income is taxed at progressive national rates of 6% to 45%, depending on taxable income after applicable deductions. Local income tax is lev - ied at 10% of the national income tax, resulting in a combined top marginal rate of 49.5% before deduc - tions, credits or special tax regimes. Certain foreign employees may qualify for preferential tax treatment, subject to statutory conditions. Employees and employers must also contribute to the: • National Pension; • National Health Insurance (including long-term care insurance); • Employment Insurance; and • Industrial Accident Compensation Insurance. National Pension and National Health Insurance con - tributions are generally shared equally. Employment Insurance is funded by both parties for unemploy - ment benefits, with additional employer contributions for employment security programmes, while Industrial
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