ENFORCEMENT DECREE OF THE EDUCATION TAX ACT
Wholly Amended by Presidential Decree No. 13197, Dec. 31, 1990
Amended by Presidential Decree No. 14088, Dec. 31, 1993
Presidential Decree No. 14438, Dec. 23, 1994
Presidential Decree No. 14812, Nov. 30, 1995
Presidential Decree No. 14992, May 4, 1996
Presidential Decree No. 15569, Dec. 31, 1997
Presidential Decree No. 15970, Dec. 31, 1998
Presidential Decree No. 16270, Apr. 30, 1999
Presidential Decree No. 17038, Dec. 29, 2000
Presidential Decree No. 18181, Dec. 30, 2003
Presidential Decree No. 18630, Dec. 31, 2004
Presidential Decree No. 19339, Feb. 9, 2006
Presidential Decree No. 19898, Feb. 28, 2007
Presidential Decree No. 20516, Dec. 31, 2007
Presidential Decree No. 21296, Feb. 4, 2009
Presidential Decree No. 22570, Feb. 18, 2010
Presidential Decree No. 22570, Dec. 30, 2010
Presidential Decree No. 23022, Jul. 14, 2011
Presidential Decree No. 25206, Feb. 21, 2014
Presidential Decree No. 26076, Feb. 3, 2015
Presidential Decree No. 26953, Feb. 5, 2016
Presidential Decree No. 27076, Mar. 31, 2016
Presidential Decree No. 27511, Sep. 22, 2016
Presidential Decree No. 27842, Feb. 7, 2017
Presidential Decree No. 29529, Feb. 12, 2019
“Foreign insurance company prescribed by Presidential Decree” in subparagraph 6 of the attached Table to the Education Tax Act (hereinafter referred to as the “Act”), means a foreign insurance company under the Insurance Business Act, that engages in the business of providing insurance services for Korean nationals and foreigners in the Republic of Korea. Such foreign insurance company does not include an insurance company that engages in the business of providing insurance services only for foreigners in the Republic of Korea. [This Article Wholly Amended on Feb. 7, 2017]
| Article 2 (Calculation of Tax Bases) |
| (2) | If a person liable to pay education tax fails to pay such tax based on which the education tax is assessed, and thus a penalty tax is added to such tax, the penalty tax shall not be included in the education tax base. |
| (3) | For the purposes of calculating the tax bases provided in Article 5 (1) 2 through 4 of the Act, the tax base of goods manufactured with, or processed from, raw materials subject to education tax, shall be calculated by deducting the amount of the individual consumption tax, traffic, energy and environment tax, or the liquor tax paid in relation to the raw materials, from the amount of tax assessed as individual consumption tax, traffic, energy and environment tax, or liquor tax on the manufactured or processed goods. <Amended on May 4, 1996; Feb. 28, 2007; Dec. 31, 2007> |
| Article 3 (Maximum Amount of Education Tax on Swap Transactions) |
The maximum amount of education tax on the revenue arising in relation to a swap transaction defined in the proviso of Article 5 (1) of the Act shall be the amount deducting the amount prescribed in subparagraph 2 from the amount prescribed in subparagraph 1: | 1. | The aggregate amount of revenue arising from the management of KRW-denominated funds, acquired through the sale of foreign currency funds and the various revenues arising from the redemption of foreign currency funds; |
| 2. | The aggregate amount of the total interest and various fees paid upon the acquisition of foreign currency loans and margins arising from the difference between domestic and foreign interest rates and from exchange rate fluctuations to be collected by the Bank of Korea in the redemption of foreign currency funds. |
| Article 4 (Amount of Revenue of Finance or Insurance Business) |
| (1) | “Amount prescribed by Presidential Decree” in Article 5 (3) of the Act means each of the following: <Amended on Dec. 29, 2000; Dec. 31, 2004; Feb. 28, 2007; Feb. 4, 2009; Feb. 18, 2010; Dec. 30, 2010; Jul. 14, 2011; Feb. 21, 2014; Feb. 3, 2015> |
| 1. | Discount charges received; |
| 2. | Trustor fees and distributions; |
| 5. | Net profit after the following aggregate amounts: |
| (b) | Profit or loss arising from foreign exchange transactions (excluding derivatives, etc.); |
| 5-2. | Deleted; <Jul. 14, 2011> |
| 5-3. | Deleted; <Jul. 14, 2011> |
| 7. | Gains on disposal of fixed assets; |
| 8. | Other operating revenues and non-operating revenues. |
| (2) | None of the following shall be added to the revenue that forms the tax base provided in Article 5 (1) 1 of the Act: <Amended on Feb. 9, 2006; Feb. 4, 2009; Feb. 18, 2010; Dec. 30, 2010; Feb. 3, 2015; Sep. 22, 2016> |
| 1. | Revenue arising from overseas places of business; |
| 2. | Revenue arising from the valuation of assets and liabilities, or from differences in the time in which revenue and expenses are recognized, being any of the following: |
| (b) | Revenue arising from the reversal of expenses not deducted from the tax base; |
| (c) | Amounts equivalent to bad debt expenses and bad debt allowances of bonds, out of the profit on sale or redemption of the bonds; |
| (d) | Other internally or temporarily recognized revenues, irrespective of external transactions; |
| 3. | National subsidies, insurance margins, gains from liabilities forgiven, and gains from assets contributed; |
| 4. | Values of goods or services subject to value-added tax; |
| 5. | Insurance premiums received in the Republic of Korea under re-insurance agreements in relation to insurance underwritten by overseas insurance companies; |
| 6. | Re-insurance commission recovered, re-insurance profit commission and claims survey fees that an insurance company receives from a re-insurance company by purchasing re-insurance coverage; |
| 7. | Fees received by the financial or insurance business entities referred to in subparagraphs 4, 9, 10, and 12 of the Table attached to the Act for providing investment advisory services or discretionary investment services; |
| 8. | Fees distributed to another company, where the financial or insurance business entity referred to in subparagraph 12 of the Table attached to the Act engages in the brokerage of financial investment products jointly with that company and receives both fees for itself and fees to be distributed to such company, collectively; |
| 9. | Fees received by the financial or insurance business entity referred to in subparagraph 12 of the Table attached to the Act for providing investment brokerage services overseas; |
| 10. | Where a credit card company engaged in the business of issuing credit cards defined in subparagraph 2 of Article 2 of the Specialized Credit Finance Business Act (hereinafter referred to as “credit card issuer”) is not the same as a credit card company engaged in the business of recruiting and managing credit card merchants (hereinafter referred to as “membership solicitor and manager”); fees paid by a membership solicitor and manager to a credit card issuer, out of the membership fees it receives from credit card merchants for transactions using credit cards, etc.; |
| 11. | The following amount of revenue earned by the financial or insurance business entity referred to in subparagraph 14 of the Table attached to the Act: |
| (b) | Interest on trade bills re-discounted; |
| (c) | Interest and fees received from non-residents; |
| 12. | The following amount of revenue earned by the Korea Development Bank established under the Korea Development Bank Act (hereafter referred to as the “Korea Development Bank” in this subparagraph): |
| (a) | The amount of revenue, including interest and fees incurred in relation to loans (including loan agreements entered into by the Korea Finance Corporation prior to the date on which the merger was registered pursuant to Article 4 (6) of the Addenda to the Korea Development Bank Act, wholly amended by Act No. 12633) the Korea Development Bank, inherited from the Korea Finance Corporation (hereafter referred to as the “Korea Finance Corporation” in this subparagraph) established under the Korea Finance Corporation Act (which was in force prior to its repeal under Article 2 of the Addenda to the Korea Development Bank Act, wholly amended by Act No. 12633; hereafter the same shall apply in this subparagraph) pursuant to Article 6 of the Addenda to the Korea Development Bank Act, wholly amended by Act No. 12633; |
| (b) | The amount of revenue, including interest and fees incurred in relation to bonds the Korea Development Bank lends to, invests in, or guarantees for, financial or insurance business entities using the methods provided in the subparagraphs of Article 21 (3) of the Korea Finance Corporation Act to engage in the business of providing funds to support small or medium enterprises under Article 21 (1) 1 of the same Act among the business affairs the Korea Development Bank inherited from the Korea Finance Corporation pursuant to Article 7 of the Addenda to the Korea Development Bank Act, wholly amended by Act No. 12633. |
| (3) | Deleted. <Dec. 30, 2010> |
| (5) | The amount of revenue of a pawnbroker shall be the aggregate amount of interest received, discount charges received, and profits on disposal of forfeited pledges. <Amended on Apr. 30, 1999; Dec. 31, 2004> |
| (6) | The amount of revenue of a money exchanger registered under the Foreign Exchange Transactions Act shall be the aggregate amount of gains on foreign exchange transactions and fees received. <Amended on Dec. 29, 2000; Dec. 31, 2004; Feb. 9, 2006> |
| (7) | The amount of revenue of a cash loan provider shall be the aggregate amount of interest, discount charges, fees and loan commissions received. <Amended on Dec. 31, 2004> |
| (8) | The amount of revenue of a specialized credit finance company permitted or registered under the Specialized Credit Finance Business Act shall be the aggregate amount of revenue, excluding the following: <Newly Inserted on Feb. 4, 2009; Feb. 18, 2010> |
| 1. | Principal of operating leases; |
| Article 5 (Calculation of Amount of Revenue from Insurance Premiums) |
Insurance premiums referred to in Article 5 (3) of the Act (deducting the amount set aside as policy reserves and contingency reserves and re-insurance premiums), shall be the amount deducting the amount of subparagraph 2 from the amount of subparagraph 1: <Amended on Dec. 31, 1998; Dec. 29, 2000; Feb. 9, 2006; Feb. 4, 2009; Feb. 18, 2010; Feb. 12, 2019> | 1. | The aggregate amount of insurance premiums, assumed re-insurance premiums, policy reserves and contingency reserves (referring to the amount calculated under Articles 30 (1) and 31(1) of the Corporate Tax Act; hereinafter the same shall apply) as at the end of the preceding fiscal year and cash surrender value (referring to an amount equivalent to unearned premiums out of the amount paid upon voluntary termination of insurance policies before maturity) received from a re-insurance company; |
| 2. | The aggregate amount of policy reserves and contingency reserves as at the end of the current fiscal year, cash surrender value (referring to an amount equivalent to unearned premiums out of the amount paid upon voluntary termination of insurance policies before maturity) and ceded re-insurance premiums (excluding ceded re-insurance premiums in relation to insurance premiums provided in Article 4 (2) 5): Provided, That where any of the following amounts is incurred in the current fiscal year, the relevant amount shall be added to policy reserves only for that current fiscal year: |
| (a) | An amount equivalent to liability reserves extinguished upon maturity, death or surrender or on other grounds; |
| (b) | Claims paid upon the occurrence of an insured incident, etc., under an insurance policy in which interest rates are used as basis for calculating the insurance premium and whose net premium consists of only risk premium. |
| Article 6 (Location where Place of Business of Financial or Insurance Business Entity is Situated) |
| (1) | The location of each place of business that can be determined as the place for paying the education tax under the proviso to Article 6 (1) of the Act, shall be the location where the headquarters or branch office of a financial or insurance business entity provided in subparagraph 1 of Article 3 of the Act (hereinafter referred to as “financial or insurance business entity”) is situated, if that financial or insurance business entity operates a branch office, other than the headquarters, under the independent financing system. <Amended on Jul. 14, 2011; Mar. 31, 2016> |
| (2) | Where a financial or insurance business entity intends to change the place for tax payment from the seat of its headquarters or main office to the location of each place of business, or from the location of each place of business to the location of its headquarters or main office, it shall submit a report on change of place for tax payment, stating its personal details, the places for tax payment prior to and after the change and the grounds for the change, to the head of the competent tax office by the end of the pertinent taxable period. <Newly Inserted on Dec. 31, 1993> |
| (3) | The head of a tax office in receipt of a report submitted under paragraph (2), shall immediately notify the head of the competent tax office of the fact that he or she has received the report. <Newly Inserted on Dec. 31, 1993> |
| Article 6-2 (Interim Prepayment) |
| (1) | Where a financial or insurance business entity intends to pay interim tax calculated under Article 8-2 (1) of the Act (hereinafter referred to as “interim tax”), it shall submit a Statement of Calculation for Interim Prepayment of Education Tax in attached Form 1, to the head of the competent tax office. |
| (2) | Notwithstanding paragraph (1), a financial or insurance business entity shall submit the Education Tax Base Return in attached Form 2 to the head of the competent tax office in cases falling under subparagraph 3 of Article 6-3. |
| (3) | A financial or insurance business entity that has no revenue in a period of interim prepayment due to temporary closure or other reasons need not pay education tax for that period of interim prepayment. |
[This Article Newly Inserted on Feb. 5, 2016]
| Article 6-3 (Interim Prepayment in Case of Mergers) |
Where a corporation intends to pay interim tax, it shall pay interim tax calculated as follows:
| 1. | Where a corporation surviving a merger pays interim tax in the first business year after the merger, it shall pay the interim tax calculated, deeming both the immediately preceding business year of the surviving corporation and the business year immediately preceding the business year, in which the date the dissolution of the merged corporation (referring to a corporation dissolved in the course of a merger; hereafter the same shall apply in this Article) is registered falls, to be the immediately preceding business year referred to in Article 8-2 (1) of the Act; |
| 2. | Where a corporation incorporated through a merger pays interim tax in the first business year after the establishment, it shall pay the interim tax calculated, deeming the business year immediately preceding the business year, in which the date the dissolution of the merged corporation is registered falls, to be the immediately preceding business year referred to in Article 8-2 (1) of the Act; |
| 3. | Where any of the following corporations intends to pay interim tax in the first business year after a spin-off, it shall make a payment by calculating the interim tax on the revenue in that business year as provided in Articles 4, 5, 7 and 8 of the Act: |
| (a) | A corporation incorporated in the course of a spin-off; |
| (b) | A corporation surviving a merger with a unit of a spin-off corporation. |
[This Article Newly Inserted on Feb. 5, 2016]
| Article 7 (Filing Tax Returns and Paying Taxes) |
| (1) | Where a financial or insurance business entity intends to file an education tax return and pay the education tax, as referred to in Article 9 (1) of the Act, it shall make a payment to the head of the competent tax office using the Education Tax Base Return in attached Form 2, or to the Bank of Korea (including its agencies; hereinafter the same shall apply) or a postal service agency with a payment slip issued under the National Tax Collection Act, which shall be accompanied by an Education Tax Base Return. <Amended on Feb. 9, 2006; Feb. 5, 2016> |
| (2) | Where a taxpayer intends to file an education tax return and pay the education tax, as referred to in Article 9 (2), he or she shall state the relevant amount of tax and the amount of education tax respectively and the aggregate amount of such taxes in the Tax Payment Form based on Self-Assessment prescribed by the relevant tax law. |
| Article 8 (Assessment and Collection) |
| (1) | Where the head of a competent tax office intends to simultaneously collect education tax and the amount of such tax, based on which education tax is assessed, pursuant to Article 10 of the Act, he or she shall issue a tax payment notice stating the relevant amount of tax and the amount of education tax respectively and the aggregate amount of such taxes. |
| (2) | Where the head of a tax office only intends to issue an education tax payment notice, he or she shall issue such notice stating, therein, that the amount of such tax shall be based on which such education tax is assessed. <Amended on Dec. 29, 2000> |
| Article 9 Deleted. <Dec. 29, 2000> |
| Article 10 Deleted. <Dec. 29, 2000> |
| Article 11 Deleted. <Dec. 29, 2000> |
| Article 12 Deleted. <Dec. 29, 2000> |
ADDENDA <Presidential Decree No. 13197, Dec. 31, 1990>
This Decree shall enter into force on January 1, 1991.
ADDENDUM <Presidential Decree No. 14088, Dec. 31, 1993>
This Decree shall enter into force on January 1, 1994.
ADDENDA <Presidential Decree No. 14438, Dec. 23, 1994>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Articles 2 through 5 Omitted.
ADDENDA <Presidential Decree No. 14812, Nov. 30, 1995>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 Omitted.
ADDENDUM <Presidential Decree No. 14992, May 4, 1996>
This Decree shall enter into force on July 1, 1996.
ADDENDA <Presidential Decree No. 15569, Dec. 31, 1997>
Article 1 (Enforcement Date)
This Decree shall enter into force on January 1, 1998.
Articles 2 through 5 Omitted.
ADDENDA <Presidential Decree No. 15970, Dec. 31, 1998>
Article 1 (Enforcement Date)
This Decree shall enter into force on January 1, 1999: Provided, That amended Articles 5, 9, 12 through 15, 72, 82 through 85, 88, 96, 97, 116, 120, 123, 124 (limited to the provisions related to spinoffs), 36 (2), 56 (1), 62 (1) 5 and 14, and Article 13 (1) of the Addenda; shall enter into force on the date of its promulgation; and the amended provisions of Articles 54, and 120 (2) through (4) shall enter into force on January 1, 2000. Articles 2 through 19 Omitted.
ADDENDA <Presidential Decree No. 16270, Apr. 30, 1999>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 Omitted.
ADDENDUM <Presidential Decree No. 17038, Dec. 29, 2000>
This Decree shall enter into force on January 1, 2001.
ADDENDUM <Presidential Decree No. 18181, Dec. 30, 2003>
| (1) | (Enforcement Date) This Decree shall enter into force on the date of its promulgation. |
| (2) | (Applicability to Forms) The amended provisions of the attached Form shall begin to apply from the first education tax returns filed by the financial or insurance business entities in the first quarter of 2004. |
ADDENDA <Presidential Decree No. 18630, Dec. 31, 2004>
Article 1 (Enforcement Date)
This Decree shall enter into force on January 1, 2015.
Article 2 (Applicability)
This Decree shall begin to apply from the taxable period in which the enforcement date of this Decree falls.
Article 3 (Transitional Measures concerning Profits from Sale or Redemption of Securities)
| (1) | For the purposes of the amended provisions of Article 4 (3), where the value of a security as at December 31, 2004, which was acquired prior to this Decree entering into force, exceeds the amount calculated under Article 41 of the Corporate Tax Act and the education tax has been imposed on the security;, profits from the sale or redemption of such security shall be calculated, treating such value as the acquisition value; and, where the value of a security as at December 31, 2004 exceeds the amount calculated under Article 41 of the Corporate Tax Act and no education tax has been imposed on the security, profits from the sale or redemption of such security shall be calculated, treating the amount calculated under Article 41 of the Corporate Tax Act as the acquisition value. |
| (2) | For the purposes of the amended provisions of Article 4 (3), where the value of a security as at December 31, 2004, which was acquired prior to this Decree entering into force, does not exceed the amount calculated under Article 41 of the Corporate Tax Act, profits from the sale or redemption of such security shall be calculated, treating the amount calculated under Article 41 of the Corporate Tax Act as the acquisition value. |
ADDENDUM <Presidential Decree No. 19339, Feb. 9, 2006>
This Decree shall enter into force on the date of its promulgation.
ADDENDUM <Presidential Decree No. 19898, Feb. 28, 2007>
| (1) | (Enforcement Date) This Decree shall enter into force on the date of its promulgation. |
| (2) | (Applicability to Amount of Revenue of Finance or Insurance Business and Forms) The amended provisions of Article 4 (1) 5-2 and the amendments to annex to the attached Form shall apply, beginning from the first education tax returns filed by the financial or insurance business entities in the first quarter of 2007. |
ADDENDA <Presidential Decree No. 20516, Dec. 31, 2007>
Article 1 (Enforcement Date)
This Decree shall enter into force on January 1, 2008.
Articles 2 through 7 Omitted.
ADDENDA <Presidential Decree No. 21296, Feb. 4, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on July 1, 2009.
Article 2 (Applicability to Specialized Credit Finance Companies, etc.)
Article 3 (Applicability to Forms)
The amended provisions of the attached Form shall apply, beginning from the first education tax returns filed by the financial or insurance business entities in the third quarter of 2009.
ADDENDA <Presidential Decree No. 22046, Feb. 18, 2010>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation
Article 2 (Applicability to Amount of Revenue from Finance or Insurance Business)
The amended provisions of Articles 4 (2) 3-2 and 4 (8) 2, and subparagraph 2 of Article 5 shall begin to apply from the taxable period in which the enforcement date of this Decree falls.
ADDENDUM <Presidential Decree No. 22570, Dec. 30, 2010>
This Decree shall enter into force on the date of its promulgation.
ADDENDA <Presidential Decree No. 23022, Jul. 14, 2011>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 (Applicability)
This Decree shall begin to apply from the taxable period in which the enforcement date of this Decree falls.
ADDENDA <Presidential Decree No. 25206, Feb. 21, 2014>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 (Applicability to Amount of Revenue from Finance or Insurance Business)
The amended Article 4 (1) 5 (a) shall begin to apply from the taxable period in which the enforcement date of this Decree falls.
ADDENDA <Presidential Decree No. 26076, Feb. 3, 2015>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 (Applicability to Amount of Revenue from Finance or Insurance Business)
The amended provisions of Article 4 (1) 5 and 4 (2) 12 shall begin to apply from the taxable period in which the enforcement date of this Decree falls.
ADDENDUM <Presidential Decree No. 26953, Feb. 5, 2016>
This Decree shall enter into force on the date of its promulgation.
ADDENDUM <Presidential Decree No. 27076, Mar. 31, 2016>
This Decree shall enter into force on the date of its promulgation.
ADDENDA <Presidential Decree No. 27511, Sep. 22, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on September 23, 2016.
Articles 2 through 8 Omitted.
ADDENDUM <Presidential Decree No. 27842, Feb. 7, 2017>
This Decree shall enter into force on the date of its promulgation.
ADDENDA <Presidential Decree No. 29529, Feb. 12, 2019>
Article 1 (Enforcement Date)
This Decree shall enter into on the date of its promulgation. (Proviso Omitted.)
Articles 2 through 18 Omitted.