8. Tax Rates and Credits

a. Tax Rates

(1)

The corporation tax rate will be lowered 2% point from 27%(15%, where the tax base

is not over 100 million won) to 25%(13%, where the tax base is not over 100 million

won) from 2005. The lowered rates will be applied to the corporate income arising in

the fiscal years, which start on and after January 1, 2005.

(2) Where a business year is less than one full year, the tax amount is computed as follows:

Tax Amount = (Tax Base * 12/NMBY ) * Tax Rate * ( NMBY / 12)

, where NMBY = number of months of business year

(3) Additional Tax imposed on Excessive reserved earnings of large businesses not

listed in the Korea Stock Exchange is abolished from the fiscal years, which start on and

after January 1, 2002.

b. Tax Credits

(1) Credit for tax paid abroad

(a) Where a domestic corporation has paid or is liable to pay foreign corporation tax

abroad, the tax amount paid or payable abroad is deducted from the corporation tax

up to an amount equivalent to the ratio of the income from foreign sources to the total

taxable income. If the foreign tax amount paid or payable exceeds the prescribed

creditable limit against the corporation tax payable for the year, the excess portion

may be carried over for 5 years.

(b) The foreign tax paid by a qualifying subsidiary is eligible for foreign tax credit

against the dividend income of a parent company if an existing tax treaty between

Korea and the country of which the foreign corporation is a resident allows it. A

qualifying subsidiary is one in which a domestic corporation owns 20% or more of its

shares for more then 6 consecutive months after the date of dividend declaration.

from tax in a source country, nevertheless the exempted amount of income will be

taken into account in calculating the foreign tax credit to the extent that the tax treaty

allows.

(2) Tax credit for loss caused by disaster:

Where a domestic corporation is deemed to have difficulties in paying tax because it

has lost 30% or more of the total value of its assets due to a natural disaster, a tax

amount equivalent to the ratio of the value of the asset loss to the value of total assets

is deducted from corporation tax. The amount of tax credit available is limited to the

value of the asset loss caused by disaster.