1. Adjustment of interest rate for term deposits when calculating deemed rent for real estate

- Related law: Article 47 of the Enforcement Rules of the Value Added Tax Act
- Objective of amendment: To reduce taxpayers’ tax burden since the interest rate of term deposits which are used to calculate deemed rent rate has recently been lowered.
- Changes

Changes

before	after
Term deposit interest rate applied for calculation of deemed rent for leased real estate: 2.5%	Adjusted term deposit interest rate:1.8%

- Applicable period: Applied to tax returns filed for the taxable period to which Mar. 9, 2016 belongs.

2. VAT refund for foreign tourists’ plastic surgery expenses

- Related law: Article 109-3 of the Enforcement Decree of the Restriction of Special Taxation Act
- Objective: To support the attraction of foreign medical tourists
- Changes

Changes

before

after

None

ㆍVAT refund for foreign tourists’ plastic surgery expenses - Applicable to plastic surgeries for cosmetic purposes* * Double eyelid surgery, rhinoplasty, breast augmentation, liposuction, face lift, cosmetic dentistry, etc. - Applicable period: Apr. 1, 2016-Mar.31, 2017 (1 year) ㆍVAT refund process 1. The medical center issues a confirmation of supply of medical service to the foreign tourist. 2. The foreign tourist submits the certificate of confirmation to the VAT refund counter operator and receives the refunded VAT. * ‘VAT refund counter operator’ means a person who operates a business of refunding or remitting the VAT or individual consumption tax that a foreign tourist paid when purchasing tax-free goods, in accordance with Article 5-2 of the Regulations on Special Cases Concerning Value Added Taxes and Individual Consumption Taxes for Foreign Tourists, etc. 3. The VAT refund counter operator reports VAT refund records to the medical center and the National Tax Service. 4. The medical center files a VAT return.

- Applicable period: Applicable to plastic surgery service supplied on or after Apr. 1, 2016.

   If a company paid interim severance pay to an executive and the cause for payment does not fall under Article 44 (2) 4 of the Enforcement Decree of the Corporate Tax Act, the payment shall be considered provisional pay unrelated to business as prescribed by Article 53 (1) of the Enforcement Decree of the same Act until the executive actually retires, in accordance with Article 22 (2) of the Enforcement Rules of the Act.

Source: National Tax Service (Nov. 22, 2016)

If a domestic company gratuitously received its stocks from a shareholder who is a special related person, the amount equivalent to the value of the stocks is included in profit and appropriated as internal reserves, and the same amount is included in loss when the stocks are disposed of. When a company’s capital reduction is not based on the ratio of stock ownership and profit is distributed to specific shareholders, etc. who are special related persons through capital transactions in which stocks of certain shareholders are disposed of, the regulations on repudiation of wrongful calculation shall apply as prescribed by Article 52 of the Corporate Tax Act and Article 88 (1) 8 (c) of the Enforcement Decree of the same Act.

Source: National Tax Service (Nov. 22, 2016)

The profit or loss from the sale of containers which are used in container vessels’ ocean freight activities is considered “shipping income” as prescribed by Article 104-10 (1) 1 of the Restriction of Special Taxation Act and Article 104-7 (2) of the Enforcement Decree of the same Act.

Source: Ministry of Strategy and Finance (Oct. 24, 2016)

When determining whether a company qualifies as a ‘small enterprise’ as prescribed by Article 6 (5) of the Restriction of Special Taxation Act, the sales criteria shall be based on the sales of the company con- cerned and not the sum of the sales of its affiliated companies.

Source: National Tax Service (Dec. 9, 2016)