In the News – Kaesong Firms Start Paying Tax to N.Korea
South Korean firms in the Kaesong Industrial Complex in North Korea had to pay their first taxes there since it opened in 2004. Four companies paid a combined US$153,000 in corporate income tax on profits in fiscal 2011 this year, according to the Unification Ministry, and one of them was taxed $7,000 for fiscal 2010.
The tax regulations were agreed during the Roh Moo-hyun administration on Sept. 18, 2003. Under the rules, firms are exempt from corporate income tax for the first five years after they start making a profit and are given a 50-percent reduction on the 14-percent rate for the following three years.
That the four firms have started paying tax means that they have gotten into their stride. A ministry official said more firms are expected to pay income tax to the North from next year because most firms in the industrial park are now making profits.
There are 123 South Korean companies in the industrial park employing 51,518 North Korean workers as of last April. Their annual output rose from $14.91 million in 2005 to $400 million last year.
North Korean workers’ average monthly wage is about $110, but most of that goes straight to the regime. The total amount of wages paid out from 2004 to November last year was $193.58 million.