Korea is removed from EU tax-haven blacklistKorea was removed from the European Union’s (EU) tax-haven blacklist after it reduced benefits granted to companies receiving foreign investment funds.
According to the Korean Ministry of Economy and Finance on Tuesday, it will no longer provide seven-year tax benefits to companies receiving these investments starting this year.
Depending on the size of the foreign investment, the government provided tax benefits for five to seven years on the profits that they made in companies located within economic free zones or in foreign investment areas.
The five-year tax benefits included 100-percent corporate tax exemptions for three years and 50-percent exemptions for the remainder, while for the longer period, a five-year full exemption was offered with a 50-percent reduction for the two additional years.
The Korean government will continue to provide customs-duty exemptions for five years on capital goods for companies that report investment from foreign sources.
An exemption for foreign companies for up to 15 years on acquisition and property taxes will also remain in place.
In its first tax haven blacklist, announced in December 2017, the EU’s Economic and Financial Affairs Council (Ecofin) included Korea among 17 countries and territories labeled as “non-cooperative jurisdictions for tax purposes.”
The EU said Korea’s foreign investment tax incentives in special economic zones, only granted to non-residents, fail to meet fair taxation criteria.
The tax haven list was designed to combat aggressive tax structures and came after the disclosure of high-profile offshore tax evasion.
A month after the list was announced, Korea was among the seven countries — including Barbados, Grenada, Macao, Mongolia, Tunisia and the United Arab Emirates (UAE) — tentatively removed from the list and placed on the “gray list,” as they promised to improve their tax codes by the end of 2018.
“Our aim is to promote good tax governance globally,” said Bulgarian Finance Minister Vladislav Goranov.
The Korean government created a task force to look into the country’s foreign investor tax benefits and drew up improvement measures in July last year. It decided to abolish the corporate tax benefits granted foreign investor funding.
It said it has restructured the entire investment program, making it more centered on attracting new growth-engine investments and generating jobs. Tax benefits will be focused on research and development expenses.
The Korean ministry said in a statement that the EU’s decision to take Korea off the list shows that the international organization has recognized the country’s effort to comply with global standards.
BY LEE HO-JEONG [firstname.lastname@example.org]