аЯрЁБс>ўџ 57ўџџџ4џџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџьЅС5@ №RП№bjbjЯ2Я22$­X­X№џџџџџџˆ„„„„„„„˜     Ќ˜/ dЬЬЬЬЬЬЬЬЎ А А А А А А $“RхPд „м ЬЬм м д „„ЬЬщ ‚ ‚ ‚ м F„Ь„ЬЎ ‚ м Ў ‚ ‚ ’ „„’ ЬР Р‡йКЦ " "’ Ў џ 0/ ’ 5D .5’ ˜˜„„„„5„’ Ь l r‚ о \: ЂЬЬЬд д ˜˜dќЄr ˜˜ќJune 30, 2006 Designation of subject territory under Special Withholding Procedure                                                                  * Source : Ministry of Finance and Economy   'Special Withholding Procedure' refers to a new tax regime introduced with a view to preventing the abuse of tax treaty benefits. When non-residents or foreign companies residing in a designated area subject to the tax regime ('subject territory') gain interest, dividends, royalties and capital gains from the alienation of shares, they are subject to withholding tax as stipulated under the domestic tax law. The tax withheld shall be returned if they indeed are proved to be beneficial owners after due diligence.   1. Legal grounds for the designation of subject territory   The Special Withholding Procedure will take into effect from July 1, 2006 in accordance with the Income Tax Act (Art. 156-4) and Corporate Tax Act (Art. 98-5).   2. Designated territory   The Ministry of Finance and Economy has designated Labuan, Malaysia as a subject territory, and duly posted such announcement.     3. Reasons for the designation   After the designation of 'subject territory' was confirmed after consideration whether a candidate territory or a country retains a special taxation system which is considered harmful under international standards and whether a candidate territory or a country has a tax treaty with Korea that may be abused for the purpose of tax avoidance.   4. Effect of designation   The withholding taxpayer should comply with the new regime as stipulated under the domestic tax law* when he/she provides interest, dividends, royalties and capital gains from the alienation of shares with non-residents or foreign companies residing in the designated territory (Labuan, Malaysia).   * Withholding tax rates under the domestic tax law - Earning of interest, dividends or royalties: 25 percent of the paid amount - Capital gains: the lesser of the 10 percent of the paid amount or 25% of the capital gains   5. Additional designation in the future   Territories or countries subject to the special withholding procedure may be newly designated, if such territories or countries retain harmful taxation system within the purview of international norms or when cases of tax treaty abuse are deemed to be frequent. Designated territories or countries can be lifted out of the list with elimination of probable tax avoidance due to changes in their tax regime or revision of tax treaty.   6. Operational process of special withholding procedure   (1) Withholding tax rate When a withholding taxpayer remits interest, dividends, royalties and capital gains from the alienation of shares (collectively, 'income') to non-residents or foreign companies residing in Labuan, Malaysia, he/she is subject to the above withholding tax as stipulated under the domestic tax law.   However, when recipient of the income concerned obtains a prior approval from the Commissioner of Korea's National Tax Service, then the tax rate* under the tax treaty shall be applied.   * Withholding tax rates under the tax treaty by and between Malaysia and Korea - 15 percent on earning of interest, 10~15 percent on dividends and royalties, and tax exemption on capital gains from the alienation of shares are imposed to non-residents and foreign companies residing in Labuan, Malaysia.   (2) Application for prior approval The actual beneficiary of the income generated in Korea (earning of interest, dividends, royalties, and capital gains from alienation of shares) submits a 'standard application form' to the Commissioner of Korea's National Tax Service prior to the actual receipt of such income, together with supplementary documents proving 'his/her being the beneficial owner of such income' (i.e., 'certificate of resideny in the subject territory/country, and 'income disposal plan').   (3) Review of the application and notification of the review result Upon receipt of prior application from the beneficial owner, the National Tax Service shall review it and determine whether the applicant being the beneficial owner of income generated in Korea and notify the decision within 3 months.   (4) Application for 'correction request' and notification of the review result When failed to apply for or obtain 'prior approval' for such reasons as absence of required documents, non-residents or foreign companies can file a 'correction request' with due presentation of written documents proving their being the legitimate beneficial owner under the tax treaty within 3 years from the withholding tax payment date.   The head of pertinent tax office shall determine whether refund is available after verifying whether the 'correction request' being within the purview of the set-out correction cases within 6 months upon receipt of such request.  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