On December 30 2006 the National Assembly approved a package of tax law amendments for 2007. The majority of the amendments came into force on January 1 2007. In addition, on January 17 2007 the Ministry of Finance and Economy proposed additional amendments that may affect foreign investors investing in Korea.
Tax Deferral of Capital Gains
The amendment provides that if a foreign investment company established in order to develop an area within the free economic zones contributes appreciated land to a qualified domestic company in return for new shares of the domestic company, the capital gains arising from this contribution will be set at that time, but deferred until the foreign company disposes of the new shares. The free economic zones are designed to attract international business and are equipped with the necessary infrastructure for business activities. At present, there are three free economic zones in Korea: Incheon, Busan/Jinhae and the Gwangyang Bay area. This amendment
