Suggested citations
AGLC4 | 외국투자기업 및 외국인세금법 2011 [Foreign Country Investment Enterprises and Foreigner Taxation Law of the Democratic People's Republic of Korea (2011)] [tr Daye Gang].
Bluebook | Oegugtujagieob mit oeguginsegeumbeob 2011 [Foreign Country Investment Enterprises and Foreigner Taxation Law of the Democratic People's Republic of Korea (2011)] translated in Law and North Korea by Daye Gang, https://www.lawandnorthkorea.com/.
Adopted on January 31, Juche 82 (1993), as Decision No. 26 of the Standing Committee of the Supreme People’s Assembly
Amended and supplemented on February 26, Juche 88 (1999), as Directive No. 484 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on May 17, Juche 90 (2001), as Directive No. 2315 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on November 7, Juche 91 (2002), as Directive No. 3400 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on April 29, Juche 97 (2008), as Directive No. 2688 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on August 19, Juche 97 (2008), as Directive No. 2842 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on December 21, Juche 100 (2011), as Directive No. 2048 of the Presidium of the Supreme People’s Assembly
CHAPTER I. BASICS OF FOREIGN COUNTRY INVESTMENT ENTERPRISES AND FOREIGNER TAXATION LAW
Article 1 (Objectives of Foreign Country Investment Enterprises and Foreigner Taxation Law)
The Foreign Country Investment Enterprises and Foreigner Taxation Law of the Democratic People’s Republic of Korea shall serve to fairly levy tax from foreign country investment enterprises and foreigner, and ensure that taxpayers pay tax correctly and in time.
Article 2 (Principles of tax registration, amended registration, cancellation)
The tax registration of foreign country investment enterprises and foreigners shall be done by the given financial institution. In cases where an enterprise is established, combined, divided, or dissolved, they must do the tax registration, change, or cancellation procedure shall be done within 20 days of the day of registration.
Article 3 (Financial accounting calculations and document storage)
The financial accounting calculations of foreign country investment enterprises shall be done according to the financial accounting calculation regulations related to foreign country investment enterprises. Documents related to financial accounting calculations shall be stored for 5 years. The storage period may be extended as necessary.
Article 4 (Currency for calculating tax and party making the payment)
Tax being submitted by foreign country investment enterprises and foreigners shall be calculated in North Korean won and shall be paid directly by the person who made the profit, or the unit who pays the profits shall pay it as a deduction.
Article 5 (Guidance institution for tax affairs work)
Standardized guidance for foreign country investment enterprises’ and foreigners’ tax affairs work shall be done by the central financial guidance institution.
Article 6 (Subject of application)
This law shall apply to foreign country investment enterprises, foreigners, and overseas Koreans who do economic transactions or receive income in our country.
Article 7 (Application of given treaties)
In cases where an agreement entered into between our country and another country has decided differently to this law, it shall be followed.
CHAPTER II. INCOME TAX
Article 8 (Taxation subjects for income tax)
Foreign country investment enterprises must pay income tax in relation to sales income for produced goods, construction delivery income, and income obtained by doing business activities such as freight charges and fee income, as well as other income such as interest income, distributed income, fixed assets leasing income, property sales income, income due to supplying intellectual property rights and technical secrets, income due to supplying labour related to business administration, and gift income in our country. Foreign investment enterprises must also pay income tax for income obtained by installing a branch office, office, or agency in other countries.
Article 9 (Tax rate of income tax)
The tax rate of income tax for foreign country investment enterprises shall be 25% of net profits. The tax rate for income tax of foreign country investment enterprises established in special economic zones shall be 14% of net profits. The tax rate of income tax in encouraged sectors such as cutting edge techniques sectors, the infrastructure construction sector, and the scientific research sector shall be 10% of net profits.
Article 10 (Income tax for other income of a foreign country enterprise)
In cases where a foreign country enterprise has obtained other income such as distributed income, interest income, lease income, or patent usage fees in our country, the income tax shall be a 20% tax rate applied to the income amount. Income tax shall be applied at 10% in special economic zones.
Article 11 (Calculation of income tax)
Income tax shall be calculated by finalizing profits using the total income from 1 January to 31 December every year less the costs of things such as raw material and resources costs, fuel and power costs, labour costs, depreciation, purchasing supplies expenses, workplace and company management expenses, insurance premiums, and sales fees, then calculating net profits by deducting transfer tax or business tax and other expenditures from those profits, and then applying the designated tax rate.
Article 12 (Scheduled payment of income tax)
Income tax for foreign country investment enterprises must be scheduled and paid every quarter. In these cases, an income tax payment document must be submitted to the given financial institution within 15 days of the month after that quarter ends.
Article 13 (Finalized payment of income tax)
Foreign country investment enterprises must finalize income tax according to the annual settlement and must make supplementary payments for unpaid amounts. In these cases, amounts paid in excess shall be repaid. In cases where an enterprise is dissolved, it shall adopt a tax payment guarantee with the given financial institution within 20 days of the declaration day for dissolution, and shall pay income tax within 15 days of the day settlement has ended. In cases where an enterprise is combined or divided, enterprise revenues shall be settled by that time, income tax shall be paid to the given financial institution within 20 days of the declaration day for combination or division.
Article 14 (Income tax payment for other income of foreign country enterprises)
Income tax for other income of foreign country enterprises shall be reported and paid by the person who made the profit, or the unit paying the profits shall pay them as a deduction, to the given financial institution within 15 days of the income arising.
Article 15 (Reduction and payment of income tax)
In the following cases, income tax shall be reduced.
1. In cases where a government of another country or an, international financial organisation has given our country a loan, or in cases where a bank of another country has granted a loan under profitable conditions to a bank or enterprise of our country, income tax shall be waived for that interest income.
2. In cases where foreign investment enterprises in encouraged sectors and in the production sector in special economic zones operate their enterprise for more than 10 years, income tax shall be waived for 3 years from the year it turns a profit, and may be reduced within 50% for 2 years after.
3. For foreign investment enterprises in the infrastructure construction sector such as railways, roads, airports, and ports, income tax shall be waived for 4 years from the year they turn a profit, and may be reduced within 50% for 3 years after.
Article 16 (Reduction and repayment of tax amount for reinvested portions)
In cases where a foreign investor reinvests profits distributed from an enterprise and operates it for more than 5 years, he or she may be repaid 50% of the income tax amount relevant to the reinvested portion, and in cases where it has been reinvested in the infrastructure construction sector, the whole of the income tax amount relevant to the reinvested portion may be repaid. In cases where the reinvested capital is withdrawn before the business administration period reaches 5 years, the repaid income tax amount shall be submitted.
CHAPTER III. INDIVIDUAL INCOME TAX
Article 17 (Duty to pay individual income tax)
A foreigner who has obtained income in our country must submit individual income tax. A foreigner staying or residing in our country for more than 1 year must also submit individual income tax for income obtained outside the territory of our country.
Article 18 (Taxation subjects for individual income tax)
Taxation subjects for individual income tax are as follows.
1. Income for labour remuneration
2. Interest income
3. Distributed income
4. Fixed assets leasing income
5. Property sales income
6. Income supplied for intellectual property rights and technical secrets
7. Income for labour supplied related to business administration
8. Gift income
Article 19 (Taxation rate for individual income tax)
The taxation rate of individual income tax is as follows.
1. The taxation rate of individual income tax for labour remuneration shall be 5~30% of the income amount according to what has been decided.
2. The taxation rate of individual income tax for interest income, distributed income, fixed assets leasing income, income for intellectual property rights and technical secrets supplied and for labour supplied related to business administration shall be 20% of the income amount.
3. The taxation rate of individual income tax for gift income shall be 2~15% of the income amount according to what has been decided.
4. The taxation rate of individual income tax for property sales income shall be 25% of the income amount.
Article 20 (Calculation of individual income tax for labour remuneration)
Individual income tax for labour remuneration shall be calculated by applying income tax determined for the monthly labour remuneration amount.
Article 21 (Calculation of individual income tax such as for distributed income)
Individual income tax for distributed income, property sales income, income for intellectual property rights and technical secrets, income for labour supplied related to business administration, or gift income shall be calculated by applying the taxation rate determined to the given income amount.
Article 22 (Calculation of individual income tax for interest income)
Individual income tax for interest income shall be calculated by applying the taxation rate determined on income obtained by a deposit in the bank.
Article 23 (Calculation of individual income tax for fixed assets leasing income)
Individual income tax for fixed assets leasing income shall be calculated by applying the taxation rate determined on the sum of money left after deducting 20% for expenses from the lease fee such as labour costs, packaging costs, and fees.
Article 24 (Payment of individual income tax)
Individual income tax shall be paid as follows.
1. Individual income tax for labour remuneration shall be deducted at the time the unit paying the labour remuneration pays the labour remuneration, and paid to the given financial institution within 5 days, or the person who made the profit shall receive the labour remuneration and pay the given financial institution within 10 days.
2. Individual income tax for property sales income or gift income must be reported and paid by the person who made the profit to the given financial institution within 10 days of the month after that quarter.
3. Individual income tax for interest income, distributed income, fixed assets leasing income, income supplied for intellectual property rights and technical secrets, and income supplied for labour related to business administration shall be calculated each quarter and paid as a deduction by the unit paying the profits to the given financial institution, or shall be reported and paid by the person who made the profit within 10 days of the following month.
CHAPTER IV. PROPERTY TAX
Article 25 (Subjects of payment and subjects of exemption of property tax)
Foreigners must pay property tax for buildings, ships, and airplanes registered in our country. In special economic zones, property tax for buildings shall be exempted for 5 years.
Article 26 (Property registration)
Foreigners must register property with the given financial institution in the following manner.
1. It must be registered at the evaluation price within 20 days of the property being owned.
2. In cases where the owner and the registration price of the property have changed, an amended registration must be done within 20 days.
3. Property shall be evaluated every year on the date of 1 January and must be re-registered within February.
4. In cases where property has been disposed of, the registration cancellation procedure must be done within 20 days.
Article 27 (Taxation amount of property tax)
The taxation amount of property tax shall be done at the registered price for the given financial institution.
Article 28 (Taxation rate of property tax)
The income tax of property tax shall be between 1~1.4% of the registered property price.
Article 29 (Calculation of property tax)
Property tax shall be calculated by applying the taxation rate determined to the price registered with the given financial institution from the month after the property is registered.
Article 30 (Payment of property tax)
Property tax shall be paid by the property owner to the given financial institution within 20 days of the month after the quarter ends.
CHAPTER V. INHERITANCE TAX
Article 31 (Duty to pay inheritance tax)
A foreigner receiving property in our country as inheritance must submit an inheritance tax. In cases where a foreigner residing in our country inherits property outside the territory of our country, inheritance tax must also be paid.
Article 32 (Subjects of taxation for inheritance tax)
The subject of taxation for inheritance tax shall be the amount left over after settling the debts of the person who gives the inheritance from the property inherited by the heir.
Article 33 (Evaluation of inheritance property price)
The evaluation of inheritance property price shall be done by the price at the time the given property was inherited.
Article 34 (Taxation rate for inheritance tax)
The taxation rate for inheritance tax shall be 6~30% of the sum of money received as inheritance.
Article 35 (Calculation of inheritance tax)
Inheritance tax shall be calculated by applying income tax determined for the taxation amount.
Article 36 (Payment of inheritance tax)
Inheritance tax must be reported and paid to the given financial institution within 3 months of the day the heir received the inheritance. In cases where the inheritance tax amount exceeds a designated sum of money, it may be paid in instalments.
CHAPTER VI. TRANSFER TAX
Article 37 (Duty to pay transfer tax)
Foreign country investment enterprises in the production sector and the construction sector must pay a transfer tax.
Article 38 (Subjects of taxation on transfer tax)
The subjects of taxation for transfer tax include things such as sales income for produced goods and income from construction handovers.
Article 39 (Taxation rate for transfer tax)
The taxation rate for transfer tax shall be 1~15% of the sales income for produced goods or income from construction handovers. The taxation rate of transfer tax for stimulants shall be 15~60% of the sales income for produced goods.
Article 40 (Calculation of transfer tax)
Transfer tax shall be calculated by applying the taxation rate determined to the sales income for produced goods or the income from construction handovers. In cases where a foreign country investment enterprise does production work and labour work together, transfer tax and business tax shall be separately calculated.
Article 41 (Payment of transfer tax)
Transfer tax shall be paid to the given financial institution every time sales income for produced goods or income from construction handovers is earned.
Article 42 (Exemption from transfer tax)
Transfer tax shall be exempted for export products. However, for products where export is restricted, transfer tax shall be paid according to what has been decided.
CHAPTER VII. BUSINESS TAX
Article 43 (Duty to pay business tax)
Foreign country investment enterprises in the labour sector must pay a business tax.
Article 44 (Subjects of taxation for business tax)
The subjects of taxation for business tax shall be the labour income in sectors such as traffic and transportation, power, commerce, trade, finance, insurance, tourism, advertising, inns, supplying with necessities, entertainment, and hygiene services.
Article 45 (Taxation rate of business tax)
The taxation rate for business taxes shall be 2~10% of the given income.
Article 46 (Calculation of business tax)
Business tax shall be calculated by applying the taxation rate determined for incomes from each type of business. In cases where foreign country investment enterprises conduct operations in several types of business, business tax shall be calculated by type of business.
Article 47 (Payment of business tax)
Business tax shall be paid to the given financial institution every time labour income is earned.
CHAPTER VIII. RESOURCES TAX
Article 48 (Duty to pay resources tax and classification of resources)
In cases where a foreign country investment enterprise gathers resources for the purpose of exporting or selling them, they must pay a resources tax. In cases where resources are gathered for the purposes of own consumption, a resources tax shall also be paid. Resources include naturally existing things such as mineral resources, forest resources, animal and plant resources, marine resources, and water resources.
Article 49 (Taxation subjects for resources tax)
The subjects of taxation for resources tax shall be the income arising from exports or sales, or a designated price.
Article 50 (Taxation rate for resources tax)
The taxation rate for types of resources shall be determined by Cabinet.
Article 51 (Calculation method for resources tax)
A resources tax shall be calculated by applying the given taxation rate to income arising from exporting or selling resources, or to the designated price. In cases where different resources are extracted together during the gathering process, they shall be separately calculated by type.
Article 52 (Payment of resources tax)
Resources tax shall be paid to the given financial institution every time income arises from exporting or selling resources, or every time resources are consumed.
Article 53 (Reduction of resources tax)
Resources tax may be reduced in the following cases.
1. For enterprises developing resources such as crude oil or natural gases, they may be exempted for 5~10 years.
2. In cases where resources are not sold as they are and are made into manufactured products that have high value and are based on modernized technical processes and exported, or resources are sold to institutions, enterprises and organizations of the Republic as a result of State measures, resources tax may be reduced.
3. For underground water used for production by a foreign country investment enterprise in an encouraged sector, resources tax may be reduced.
CHAPTER IX. LOCAL TAX
Article 54 (Duty to pay local taxes and types)
Foreign country investment enterprises and resident foreigners must pay local taxes to given financial institutions. Local taxes include municipal administration taxes and car use taxes.
Article 55 (Duty to pay municipal administration tax)
Foreign country investment enterprises and resident foreigners must pay municipal administration taxes to manage public facilities such as parks, roads, and garbage treatment facilities.
Article 56 (Taxation subjects for municipal administration taxes)
The subjects of taxation for municipal administration tax shall be the total cost of monthly wages for foreign country investment enterprises, and the monthly income amount of resident foreigners.
Article 57 (Calculations and payment of municipal administration tax)
The calculation and payment of municipal administration taxes shall be as the following.
1. Foreign country investment enterprises shall apply 1% in taxation rate to the total cost of wages every month to calculate the tax and pay it to the given financial institution within 10 days of the following month.
2. Resident foreigners shall apply 1% in taxation rate to their income amount every month to calculate the tax, and report and pay it himself or herself to the given financial institution within 10 days of the following month. According to the circumstances, the unit paying the wages may pay as a deduction.
Article 58 (Duty to pay car use taxes)
In cases where foreign country investment enterprises and foreigners use cars, car use taxes must be paid.
Article 59 (Registration of cars)
Foreign country investment enterprises and foreigners must register a car with the given financial institution within 30 days of the time the car is owned.
Article 60 (Car use tax amount)
The use tax amount following each category of car shall be determined by the central financial guidance institution.
Article 61 (Payment of car use taxes)
Car use taxes shall be paid by the car user to the given financial institution within February of every year. During periods when the car is not used, car use taxes may be exempted.
CHAPTER X. SANCTIONS AND COMPLAINTS
Article 62 (Levy of arrears charges)
In cases where foreign country investment enterprises and foreigners have not paid taxes within the determined time limit, financial institutions shall impose arrears charges amounting to 0.3% for every day the tax amount is not paid, from the day after the time limit for payment passes.
Article 63 (Levy of a penalty)
A penalty shall be imposed in the following cases.
1. In cases where tax registration has not been done during the period determined, or the income tax payment document or financial settlement document has not been submitted
2. In cases where less tax has been deducted or deducted tax has not been paid
3. In cases where tax has intentionally not been paid
Article 64 (Administrative or criminal responsibility)
In cases where grave consequences have been caused by violating this law, administrative or criminal responsibility shall be imposed depending on the gravity.
Article 65 (Complaints and their treatment)
In cases where foreign country investment enterprises and foreigners have an opinion related to the payment of tax, they may make a complaint to the authorities concerned. Institutions that have received a complaint must investigate and resolve it within 30 days.
Last updated 1 December 2020