President
"Taxes should be assessed strictly in accordance with the tax law, and be strictly equitable."
Taxes should be assessed strictly in accordance with the tax law, and be strictly equitable.
The external tax law of the DPRK includes a body rules and regulations regulating external tax relation in our country. The main law on external tax is the Law of the Democratic People's Republic of Korea on Foreign-invested Businesses and Foreign Individual Tax. And the main regulation on external tax is the Enforcement Regulations for Foreign-invested Businesses and Foreign Individual Tax Law. The DPRK adopted the Law and the Regulations in 1993. Since then they have been revised several times to suit to the external economic relations of the country.
To ensure impartiality in the collection of taxes means that the definite kind and amount of taxes are determined and collected taking into account the taxpayer's capacity of tax payment and the profit earning process.
In order to guarantee impartiality in the collection of taxes, the tax laws must be equitable, because taxes should be assessed strictly in accordance with the tax laws.
The external tax law of the DPRK is impartial as it regulates that suitable taxes should be exacted on taxpayers without imposing excessive burdens.
First of all, the impartiality of the external tax law of the DPRK is expressed in that the kind and rate of taxes are determined in such a manner that does not impose excessive burdens over the taxpayers.
The external tax law of the DPRK defines the kinds of taxes applicable to foreign-invested businesses and foreign individuals.
Generally, the capitalist countries, in a bid to escape from economic crisis, are collecting the overweight taxes from taxpayers, and are imposing miscellaneous taxes and levies on taxpayers without the consideration of taxpayer's earning capacity and process. Kind of taxes are too many to count and they are increasing in number in the capitalist countries.
But the external tax law of the DPRK stipulates nine kinds of taxes (enterprise income tax, personal income tax, property tax, inheritance tax, turnover tax, business tax, resource tax, city management tax, automobile tax) applicable to foreign-invested businesses and foreign individuals.
The external tax law of the DPRK applies convenient tax rates to foreign investors and foreign individuals. In practice of taxation business, most countries are applying the high tax rates to foreign-invested businesses and foreign individuals. But in the DPRK, the enterprise income tax rate over foreign invested businesses is 25% of the taxable income. As for inheritance tax, if the inherited property doesn't reach a certain amount, inheritance tax isn't applied and if the inherited property is more than a certain amount, the tax rate is 6-30% of the value of the inherited property.
The tax laws of other countries regulate value-added tax, but there are no articles governing value-added tax in external tax law of the DPRK. This is owing to not only to the fact that the taxes of foreign-invested business and foreign individuals are very small in the state's financial sources but also to the fact that we provide favorable environment for foreign investors.
The impartiality of the external tax law of the DPRK also lies in that it enables the proper settlement of international double taxation so that taxpayers can avoid overtax.
Generally, tax laws of each state stipulate that the state can collect taxes of not only property of the legal person and individual but also income earned within its jurisdiction. The same holds true for the case in the DPRK external tax law.
Foreign investors, foreign individuals and foreign-invested businesses gain profits made within the territory of the DPRK. They, according to the external tax law of the DPRK, should pay taxes to the DPRK, and according to their country's tax laws, also should pay taxes to their country. Namely, the matters of international double taxation arise.
The matters of international double taxation cause foreign-investors and foreign individuals to get smaller amount of earning and dampen their investment desire.
In order to settle double taxation, the DPRK has concluded agreements for prevention of international double income taxation with more than 20 countries including Russia and Poland. The conclusion of such agreements enables peaceful settlement of the matters of double taxation on foreign investors between our country and these countries.
But, here, a problem arises as to which should be given priority and which should be considered as standard if the contents of external tax law of the DPRK conflict with the international agreements for the prevention of international double taxation.
The external tax law of the DPRK clarifies the ways to resolve such conflicts. Article 7 of Law of the Democratic People's Republic of Korea on Foreign-invested Businesses and Foreign Individual Tax and Article 7 of Enforcement Regulations for Foreign-invested Businesses and Foreign Individual Tax Law stipulate that if the external tax law of the DPRK differs from the agreements for the prevention of double taxation concluded between the DPRK and other countries, the agreement should be applied preferentially. Such regulations ensure impartiality as it prevents complexity in the interpretation and application of tax laws and also settles the matters of international double taxation.
Finally, the impartiality of the external tax law of the DPRK is expressed in that it stipulates the sanction and complaint against violations of fair taxation management.
All taxpayers in the same condition of taxation should pay the same amount of taxes, otherwise, the tax collection cannot be said to be impartial.
The external tax law of the DPRK regulates that if taxpayers do not obey fair taxation rules, and if tax collectors do not collect taxes in an impartial way, they should be imposed corresponding sanctions.
The external tax law of the DPRK stipulates the supervision of activities relating to taxation, and sanctions like fining, compulsory collection, business cessation in case of evasion of taxation, and criminal action in case of a serious violation of laws. For example, if foreign-invested businesses and foreign individuals do not pay taxes within a period fixed by law, they should pay the interest on arrears of 0.3% of the unpaid taxes every day; and if they do not conduct the tax registration, or do not present the statement of tax payment and the financial statement, or intentionally do not pay taxes, they should pay the fine; if their illegal acts are serious, they should receive the administrative and criminal sanctions according to the degree of a violation of laws.
The external tax law of the DPRK also regulates that if tax collectors collect taxes with partiality, he should receive suitable sanction. It also provides that if tax collectors misconduct the affairs of taxation giving rise to serious consequences on foreign investment and the international prestige of the country, they should take penal responsibility according to criminal law. In order to guarantee impartiality of tax collection, it regulates that if taxpayers have the opinion on tax collection, they can make an appeal to the organs concerned.
If foreign-invested businesses and foreign individuals have complaints regarding tax collection, they have the right to make an appeal to the organs concerned and the appeal should be conducted within 30 days from the day of appeal.
The external tax law of the DPRK will contribute to providing favorable environment for foreign investment for its impartiality.
