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Korea (Rep.)- Saudi Arabia

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Treaty between Korea (Rep.) and Saudi Arabia – details

Details of the income tax treaty and protocol between Korea (Rep.)- Saudi Arabia, that was signed on 24 March 2007 and entered into force on 1 December 2008, have become available. The treaty was concluded in the Korean, Arabic and English languages, each text having equal authenticity. In case of divergence, however, the English text prevails. The treaty is effective from 1 January 2009 and generally follows the OECD Model Convention.

The maximum rates of withholding tax are:

-   10%, generally, on dividends, but 5% if the receiving company (other than a partnership) owns directly at least 25% of the voting power of the company distributing the dividends (Art. 10(2)(a) and (b));
-   5% on interest, with certain exceptions (Art. 11(2)); and
-   10% on royalties in general, but 5% if paid for the use of, or the right to use, industrial, commercial or scientific equipment.

Deviations from the OECD Model Convention include:

-   a permanent establishment includes a building site, construction, assembly or installation project, or supervisory activities in connection therewith, but only where such site, project or activities continue for a period of more than 6 months (Art. 5(3)(a)); and
-   a permanent establishment also includes the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating more than 183 days within any 12-month period (Art. 5(3)(b)).

Both contracting states apply the credit method to avoid double taxation. Korea (Rep.) grants an underlying tax credit where a Korean resident company owns at least 20% of the total shares of a Saudi Arabian resident company. A tax sparing provision applies for 5 years from the effective date of the treaty.

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