Exchange of Notes


In notes exchanged at the time of the signing of the treaty the United States noted that the Korean Government had stressed the need for provisions in the Convention which would constitute special incentives to promote the flow of United States capital and technology to Korea. While observing that the United States could not agree to such provisions, the United States did offer assurances that, when circumstances permit, the United States would be prepared to resume discussions with a view to incorporating provisions into the Convention which will minimize the interference of the United States tax system with incentives offered by the Government of Korea. These provisions would be consistent with income tax policies of the United States Government regarding other developing countries.

In the same exchange of notes, the Korean Government confirmed that the definition of Korean tax in paragraph (1) of Article 1 of the Convention includes the Korean Defense Tax assessed on the taxes referred to in that definition, i.e., the Korean income tax and corporation tax. The Defense Tax is levied as a surcharge on a number of Korean taxes including the income tax and the corporation tax. The treaty applies only to those parts of the Defense Tax levied with respect to the income and corporation taxes.