Emerging Markets Rates and Currencies Handbook

21 Citi | Emerging Markets Currencies Handbook 2021 South Korea Item Inter-Co Debt Offshore Bank Loans Offshore Local Borrowing Derivatives Equity W/H Tax 20% WHT • Under certain tax treaties typically 10%, with further reduction possible on country-by-country basis In addition to the above indicated tax rates, a resident surtax is charged at a rate of 10% of the respective tax rate 20% WHT In addition to the above indicated 20%, a resident surtax is charged at a rate of 10% of the respective tax rate In case of the borrowings from the listed local financial intuitions, the interest is not subject to WHT N/A 20% WHT • Under certain tax treaties typically 5-15%, with further reduction possible on country-by-country basis 10% surtax applied incrementally to above rates (i.e. 10% multiplied by WHT rate) Deductibility of interests Cap on interest deduction to 30% of company’s EBITDA If borrowings from a foreign controlling shareholder exceeds 2x the ownership equity of the foreign controlling shareholder (6x for FI), the paid interest and discount fee on the relevant excessive portion will be disallowed and further treated as a dividend payment If borrowing from a third party under a payment guarantee by the foreign controlling shareholder exceeds 2x the ownership equity of the foreign controlling shareholder (6x for financial institution), the paid interest and discount fee on the relevant excessive portion will be disallowed and further treated as a dividend payment Generally deductible as long as the related loan is used for business purposes, however, there are multiple exceptions N/A N/A Deductibility of FX losses Generally tax deductible Other taxes, duties Nominal stamp duty is calculated based on the loan notional N/A N/A Comments MOEF report is required for over US$30mm financing in cumulative basis within last 12 months 15.4% WHT (includes 10% surtax on the 14% base rate) for interest on bonds issued by the State, local government and a domestic corporation A lower rate on treaty countries generally applies if the beneficial owner of the dividends is a company with a substantial ownership (typically 25%; depending on country) in the dividend paying company Note: Citigroup Inc. and any of its affiliates do not provide accounting, tax, or legal advice. Please seek advice from a relevant licensed advisor. Source: Relevant legislation, publicly available sources. Subsidiary Funding — Tax Consideration Tax Summary — South Korea