Korea's Ministry of Finance announced last week that it had reached a tentative deal with the Thai government on revising various clauses of the DTAA, which was first signed in 1977. Chief among these amendments will be the exclusion of third country-based funds from the tax agreement with Korea.

The amendment to the tax treaty with Thailand comes amid a major crackdown by the Korean authorities on foreign firms, particularly in the investment fund sector, after it was found that several firms evaded tax on major property and equity transactions by using firms registered offshore.

The Korean government has been holding talks with Malaysia in order to try to exclude Labuan from the Korean/Malaysian DTAA. The Korean tax authorities believe that most of the firms avoiding tax on capital gains are doing so through offices registered in Labuan. However, it would appear that the Malaysian government is not being quite so accommodating to Seoul as the Thai government.

Observers point out that many other foreign governments in Korea's 62-nation tax treaty network will also be unreceptive to changing the texts of DTAAs to suit the Korean tax authorities.

The Korean government intends to submit the revisions to the DTAA with Thailand to the National Assembly after foreign ministers of both countries formally sign the revised tax treaty, which the Korea Times reports will be in the "near future".