The great leader Comrade
"Financial organizations must formulate correct regulations and rules of financial management on the basis of the Party policy and the state law and supervise institutions and enterprises on a regular basis so that they strictly abide by the state's financial law, regulations and rules, thus establishing a rigid system and discipline in financial management."
Thanks to the correct popular policy of the WPK, the tax system was abolished completely in our country on April first, Juche 63(1974). As a result, our people live happily without knowing even the term "tax".
But our government imposes tax on the enterprise of foreign investment (joint venture), foreign businesses and foreigners who get profit through their lawful business activity, because the foreign investors and foreigners are not Koreans in nationality but the business itself is of Korean business and their profit is obtained and distributed in our territory.
Today, in all the countries the different kinds of tax are imposed on domestic businesses, individual citizens, legal persons, natural persons, and their property and income obtained in their territories. But in our country the kinds and rate of taxation are less and lower, than in other countries respectively.
First of all, there are small number of kinds of taxation imposed on the foreign investment business and foreigners in our country.
Article 2 of the law of taxation imposed on the foreign investment business and foreigner regulates that "the taxation imposed on the foreign investment business and foreigner includes the business income tax, individual income tax, property tax, inheritance tax, transaction tax, business tax, resource tax, local tax and so on."
There are only 9 kinds of taxation imposed on the foreign investment business and foreigner; income tax, property tax, inheritance tax, business tax, transaction tax, resource tax and local tax.
In general, income tax is imposed by the state upon the foreign investment business or foreigner and classified into the enterprise income tax and individual income tax according to the target.
The enterprise income tax is imposed by the state on the income obtained by the foreign investment enterprise. In many countries, it is called corporate tax.
The individual income tax is imposed on the foreigner who obtains income while staying for more than one year in our territory. The foreigner who stays for more than one year in our territory is also obliged to pay its individual income tax for its income obtained outside our territory.
The property tax is known to be imposed on all the fixed assets but in our country it is imposed only on the buildings, ships and planes registered in our country in order to encourage the investment of property such as machine and equipment.
Here, the buildings include the houses, villa and attached buildings possessed by a foreigner. In the special economic zones, however, the property tax on the building is exempted by the state for 5 years. And the ship and plane refer to the private ones possessed by the foreigner.
The inheritance tax is imposed by the state on the property which foreigner is inherited from the interior and exterior rather than earned by him. The foreigners may inherit property from the interior and exterior while doing economic activity in our territory. In such case, they are obliged to pay their inheritance tax to the state.
The transaction tax is imposed on the business activity done by the foreign investment business of the production and construction sectors in our territory and the business tax is imposed on the foreign investment business of the service sector. The target of the transaction tax is the income from the sale of product and from the introduction of the construction project; the target of business tax is the service income from the transportation, power, commercial, trade, financial, tourist sectors and so on.
The natural resource tax is imposed on the resources mined for export, sales and self-consumption. In such cases, the natural resources include minerals, forests, animals, plants, fish, water and so on. The target of the natural resource tax is the income obtained through the export or sale.
The local tax is one of the sources of the local budgetary revenue for the development and maintenance of the locality and it is classified into the city administration tax and the vehicle use tax.
Here, the city administration tax is one paid to the local administrative organ as the cost for the management of the public facilities such as park, road and waste treatment facility and the vehicle use tax is one to pay for the management and maintenance of the road, the prevention of pollution and guidance of traffic. The target of the city administration tax is foreign investment business's total monthly wage and foreigner's monthly income.
When the foreign investment business and foreigner use vehicles, they must pay the vehicle use tax.
A seen above, our state imposes only 9 kinds of tax on the foreign investment business and foreigner.
Many countries impose more than 25 kinds of tax on foreign investment business and foreigner directly and indirectly. For example, there are business income tax, property tax, land use tax and so on. What is worse, some countries impose more than 39 kinds of tax on the foreign investment business and foreigner lawfully.
Next, the rate of tax imposed on the foreign investment business and foreigner is very low in our country.
Our government sets the rate of income tax imposed on the foreigners in such a way as to encourage the investment by them, and the rate of income tax imposed on the foreign investment business working in the special economic zones is specially low for the purpose of encouraging the local development and the rapid development of some sectors.
According to the different targets, the rate of the income tax of the foreign investment business is 25% for settled profit, 10% for the encouraged sectors such as ultramost technological sector, infrastructure construction sector and scientific research sector, 20% for the dividend income, profit income, rental income and rental of patent.
The rate of the enterprise income tax is 25% in Vietnam, 30% in the Chinese normal regions, 25% in the Chinese special economic regions, 31% in Singapore, 40% in Japan and Poland, 50% in France, 52% in the UK and 66.6% in India.
This shows that our rate of the income tax imposed on the foreign investment business is very low.
The individual income tax is imposed on the income earned lawfully by the foreigner, such as the income from the remuneration for the labor, from the profit, from the lease of fixed property, from the sale of property and from the intellectual property rights. For the tax on the individual income from remuneration for the labor, in case the monthly wage is lower than that determined by the state, it is exempted and in case the monthly wage is more than that determined by the state, the progressive rate of tax is applied within 5-30% of income.
The progressive rate of tax is the rate that increases progressively according to the increase of income
The rate of tax on the income from interest, from the lease of fixed property and from the intellectual property rights and core technology is 20% of income. The income tax rate on the sale of property is 25%.
As seen above our government applies the low individual income tax to the foreigners, our taxation target is clear and our government is ensuring fairness in imposing tax according to the foreign investment activity and the tax source.
The property tax rate is imposed on the building by 1% of registered value and on the ship or plane by 1.4% of registered value. In China, it is 1.2% and in Japan 1.4 - 2.1%.
The inheritance tax rate in our country is 6 - 30% of inherited value whereas in Japan, it is 10 - 75%.
By lowering the property and inheritance tax rates, our government ensures the stability of the invested property to the foreign investors.
The transaction tax rate is 1-15% of income through the sale of product (for the rare product and luxury, their rate is 16 - 50% of income through the sale of product) and the business tax rate is 2 - 10% of income.
The rate of natural resource tax is 2 - 9% according to the income obtained through the export or sale of product or the kind of the self-consumed natural resources (for the natural resource whose export is limited by the state, it is 10 - 14%).
The city administration tax is 1% of the monthly total wage for the foreign investment business and 1% for the foreigner.
The vehicle use tax is determined by the central financial institution according to the type of vehicle. In the period when the vehicle is not used, it is exempted.
Like this, our government applies low rate of tax to the foreign investment business and foreigner.
That is because we want to encourage the foreign investors to invest more money in our economy in order to enlarge and develop our foreign economic relationship and improve our people's living standard. Here, the correct use of the taxation is very important, because it plays a great role in showing the foreign investors the right direction of investment and arousing their interest in investment.
The application of many kinds of taxes and of the high rate of tax to the legal person and natural person staying in the corresponding country and to their property reduces their income, does not make them obtain their economic profit and pours cold water on their enthusiasm for their investment. Reflecting the foreign investors' and foreigners' increasing enthusiasm for the investment in our country and the requirement of the time when the foreign investment activity is actively done, our government issued the "DPRK law on the foreign investment business and foreigner's tax" for the first time on January 31st, Juche 82(1993), and modified and supplemented it several times later. In particular, another modified version of "DPRK law on the foreign investment business and foreigner's tax" was issued on December 21st, Juche 100(2011), and the "Regulations for the implementation of the law on the foreign investment business and foreigner's tax" on August 20th, Juche 101(2012).
As the above law and its regulations have been corrected and supplemented continuously, the kinds of tax to be paid by the joint venture, foreigner's enterprise and foreigners and their rates become clearer.
This stimulates the foreign investment business and foreigner's enthusiasm for investment, and creates good lawful environment for the luring of the foreign investment.
The law and regulations are applied to the foreign investment businesses that obtain income through the economic transaction in our country and to the foreigners (including overseas compatriots) obtaining income while staying for more than 90 days in our country.
In particular, in the special economic zones, the tax is imposed on the foreign investment business and foreigner separately.
From the legal definition of the application target of tax law, tax payer is the foreign investment business established and operating according to the corresponding law and the foreign enterprise, foreigner and our overseas compatriots who organize their standing agencies in our territory and do their economic activity, or who do not organize their agencies but obtain their income by interest, dividend, rent, and so on.
Today, our revolution is still arduous and complex but we will have to activate the work to introduce the foreign investment from the Juche-oriented viewpoint to develop our country under the wise leadership of the respected Comrade
