Local firm in Kaesong first to pay tax to N. Korea

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Local firm in Kaesong first to pay tax to N. Korea

A South Korean company in the inter-Korean industrial zone in North Korea paid about $7,000 in corporate income tax to the North last year, the Unification Ministry said yesterday.

It was the first time a South Korean company has paid tax to North Korea since 2004 when the two Koreas opened the complex in the North’s border city of Kaesong to boost cross-border economic cooperation.

South Korean companies in Kaesong are subject to a 10 percent to 14 percent corporate income tax, but their taxes are exempted for five years after they first generate profits, and are reduced by 50 percent for the following three years, according to the ministry, which handles inter-Korean affairs.

The company and three others also paid about $153,000 in corporate income taxes to the North’s authorities this year for their profits in fiscal year 2011. The development indicates that some South Korean companies have begun to make money for their operations in the industrial complex, which marries South Korean capital and technology with cheap labor from the North. The complex is now home to more than 120 South Korean small and medium-sized companies, which produce clothes, utensils, watches and other goods.

Last year, the production of the industrial complex reached an all-time high of $400 million. The complex has produced $1.65 billion worth of goods since 2004.

A ministry official said more South Korean companies are expected to pay corporate income taxes to the North next year. He did not give details on how many South Korean companies make money in Kaesong.

The two Koreas keep the joint complex intact despite lingering tensions over the North’s two deadly attacks on the South in 2010. The complex serves as a key legitimate cash cow for North Korea. Yonhap
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