Korea’s regulatory environment is often cited as being one of the most difficult aspects of doing business in Korea. Among the various regulations that foreign invested companies and foreign investors must contend with, Korea’s tax laws tend to draw particular disdain, especially with respect to the enforcement of tax compliance through tax investigations. The ongoing tax dispute between the U.S. private equity group, Lone Star Funds, and the Korean tax authorities has put Korea’s tax enforcement policies in the international spotlight and has made Lone Star the poster child for what can happen to foreign companies making money in Korea.
Although tax controversies involving foreign-invested companies or foreign investors tend to receive heavy media coverage, they do not necessarily portray a full and accurate picture of Korea’s tax regime or the tax issues that are under examination. This article is intended to provide an overview of key aspects of Korean taxation from a foreign perspective; it reviews the major tax issues that can affect foreign-based multinational companies doing business in Korea as well as foreign investors investing in Korean assets.