Individual Income Tax Compliance Tips

Korean company

Employees of Korean company

At company level

(1) If the RSU satisfies all 4 conditions listed below, such RSU costs shall be deductible for corporate income tax purpose in accordance with Article 10-2 of the Enforcement Decree of the Korean Corporate Income Tax Law:

a. The parent/affiliate company provides such RSU within 10% of its total issued and outstanding shares;

b. There is a written agreement on charge-back of RSU costs between the parent/affiliate company and the Korean subsidiary company;

c. The parent or an affiliate company is defined as a foreign(non-Korean) company listed on a domestic or foreign securities exchange, which holds not less than 90% of the shares in the Korean subsidiary company directly or indirectly; and

At individual employee level

(1) Where employees receive RSU granted from the parent company/affiliated company and the RSU costs are charged back to the Korean subsidiary company, the related RSU income of employees shall be subject to monthly Korean payroll income taxes and payment obligations at the time of vesting (not at the time of grant). The employer as the withholding agent shall be obligated to withhold payroll taxes and report to the tax authorities together with regular payroll.

(2) If RSU costs are not charged back to the Korean company or do not qualify for deduction for Korean corporate income tax purposes, the employees concerned shall be required to report such RSU income and pay income taxes thereon to the Korean tax authorities voluntarily either:

d. In the case where a RSU recipient is a board member or a statutory auditor of the Korean subsidiary, their total annual compensation shall not exceed the ceiling amount as approved at the shareholders’ meeting or at the board of directors’ meeting.

(2) If RSU does not satisfy all 4 conditions above, such RSU costs shall be treated non-deductible for corporate income tax purpose in Korea.

(i) through a taxpayers’ association by the 10th day of following month of RSU vesting) (in which case 5% income tax credit with an annual cap of KRW 1 million will be allowed) OR

(ii) alternatively through filing annual global income tax return (종합소득신고 in Korean) which is due by May 31 of the following year (in this case, a 5% tax credit shall not be allowed).

In this case, the employer shall not be obligated to withhold/report payroll income taxes.

To be deducted when RSU is vested.

To be taxed when RSU is vested.

Category

Filing due dates

Land, buildings or rights related to real estates

­ Within 2 months from the last day of the month in which an asset is transferred

Shares of companies (excluding shares of foreign companies)

­ Within 2 months following the end of the half year to which the share transfer date belongs