The South Korean parliament has approved a new measure which aims to prevent offshore-based foreign firms from avoiding taxes on income made in the country.
Under a proposal approved by the National Assembly on Tuesday and due to come into effect in July, a withholding tax will be imposed on the South Korean gains made by investors based offshore under certain conditions, such as when the company has owned shares in a domestic firm for more than six months.
Foreign investors will then be able to apply for refunds, if eligible under South Korean law.
The move comes amid a national outcry at the huge tax-free profits being made by certain foreign companies which snapped up distressed assets on the cheap in the aftermath of the Asian finacial crisis in the late 1990s.
"The revision is to prevent tax evasion in international deals by clearly stating that taxes will be imposed on actual profit earners in international transactions," a parliamentary statement explained.
"The revision will help reduce tax evasion in international deals by improving transparency in taxation," it added.
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