Korea Mulls Stock Option Tax Deductions For Multinational Firms

by Mary Swire, Tax-News.com, Hong Kong

28 March 2002

In response to recommendations made by the American Chamber of Commerce (AMCHAM) in Korea, the country's government has announced that it is considering the introduction of tax deductions for multinational companies located in Korea which provide stock options for their employees.

Currently, there are no tax regulations concerning the provision of stock options to employees of multinational companies, and only domestic firms are eligible for tax deductions for their employee stock options.

However, talking to the Korea Times newspaper on Tuesday, an unnamed Ministry of Finance and Economy official revealed that changes to the tax regime for international companies are under serious consideration.

The Korean government is reportedly also considering allowing workers with subsidiaries of foreign firms increased tax deductions on fringe benefits such as rental and tuition fees.

However, it has rejected outright an AMCHAM request to slash the personal income tax ceiling on foreign workers from 36% to 20%, arguing that lower tax rates for foreigners would lead to harmful tax competition, which is forbidden under OECD regulations.

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