Gov't to Withdraw Planned Taxation on Foreign Banks' Welfare Loans

Article excerpt

The National Tax Service (NTS) has decided to withdraw its plan to impose taxes on foreign banks' loans to employees for housing purchases, a key fringe benefit they offer to workers.

According to the foreign banking circle, the local tax authority has delivered its intention to withdraw taxation on housing benefits.

``I heard that Korea's tax administration has sent a letter to the foreign banking group in favor of us,'' an operations manager of a foreign bank told The Korea Times yesterday.

The foreign banking community here welcomed the decision of the Korean tax authorities.``We believe that loans extended to employees should be considered as welfare, but not a taxable one. The taxation on foreign banks' welfare benefits is discriminatory as local banks also do not pay taxes on the low-interest loans to employees,'' he added. It is reported that the welfare loans carry a one to two percent interest rate per annum.

The Seoul Tax Office said last month that it would impose tax on staff loans of foreign banks after inspecting the housing loans to employees in the July to September period this year.

The tax authority said that customarily all foreign banks as well as local ban s have not paid taxes on fringe benefits.

With the revised laws imposing interest tax on housing loans exceeding 20 million won, the regional branch of the NTS came to a decision to charge tax on foreign banks' use of resources for subsidizing their employees. …