South Korea-Chile Agreed On Tax Treaty

The Ministry of Finance and Economy said yesterday that the government and the Chilean government agreed on the tax treaty and initialed a 29-point tax accord in Santiago. The pact will go into effect after being ratified by each country`s parliament and president.

Under the agreed tax treaty, tax rate on interest income, which Korean banks receive from the Chilean financial organizations or companies for lending funds, will be cut from the current 15 percent to 10 percent. Tax rate on the royalty income from lending industrial and scientific equipments will be cut from 15 percent to 5 percent.

In Chile, the capital gains tax on stock transactions presently stands at 35 percent. But the rate is to be lowered to 20 percent when Korean investors possess a 20-percent share in a firm. Yim Sung-Kyun, director of the international tax department in the Ministry of Finance and Economy, said that ``since Chile has made concessions to Korea in reducing tax rates for interest income and capital gains, Korean investors in Chile will have less tax burden.``

Park Joong-Hyun sanjuck@donga.com