Resident Evil: Tax Edition

“Hello, I’m Peter Stein from Switzerland,” said the tall man with a polite smile as he stepped into the office. His light gray suit and neatly combed hair exuded professionalism. He carried a slim folder and a pen, his demeanor calm yet purposeful.

“Welcome, Mr. Stein. Please have a seat. What brings you here today?” asked Jihoon Oh, a Korean tax consultant, with a warm smile. Although he was used to dealing with foreign clients, the serious expression on Peter’s face told him this would be a detailed discussion.

“I’m planning to establish a company in Korea,” Peter began. “But I’m concerned about the tax implications. I’m unsure whether I’d be classified as a resident or a non-resident.”

Jihoon nodded knowingly. “That’s a common question, especially for foreign entrepreneurs. The classification isn’t based solely on how many days you’ve stayed in Korea. Let me ask you a few questions to clarify. How long have you been in Korea so far?”

Peter paused, calculating briefly. “Since last July. I returned to Switzerland for about a month in the middle, but overall, I’ve been here for around 200 days.”

“Hmm,” Jihoon responded, jotting down notes. “Based on your stay duration, you may qualify as a resident. However, residency isn’t determined solely by the number of days. It depends on where your life is centered. For instance, do you have family or significant assets in Korea?”

Peter hesitated for a moment before answering. “My family is in Switzerland, but I’ve rented an office in Seoul and started preparing for my new business. I’ve also opened a company bank account.”

Jihoon leaned forward slightly, tapping his pen against the notebook. “In that case, your business activities in Korea could influence the tax office’s decision. If your family and primary lifestyle remain in Switzerland, it might still be considered your life’s center. But if your business presence here grows, you might be classified as a resident. It’s something we’d need to evaluate carefully.”

Peter sighed, his concern evident. “If I’m classified as a non-resident, I’ll only be taxed on income generated in Korea, correct?”

Jihoon nodded. “Exactly. Non-residents are only taxed on Korea-sourced income. Residents, however, are subject to global taxation on all income, no matter where it’s earned. That’s why proper documentation and preparation are crucial.”

After a moment of thought, Peter asked, “What steps should I take to avoid being classified as a resident?”

Jihoon smiled reassuringly. “The key isn’t avoidance but clarity. If your life’s center is in Switzerland, you’ll need to provide supporting evidence. For example, documents showing your family ties, your economic activities in Switzerland, and your regular return trips. At the same time, make sure all your business-related activities in Korea are properly documented and reported.”

Peter leaned back, visibly more at ease. “Thank you, Mr. Oh. This makes things much clearer. Could you help me outline what documents I need?”

“Of course,” Jihoon replied with a smile. “I’ll summarize everything we’ve discussed and send it to you via email, including the documents you’ll need and any additional considerations. Once you’ve gathered everything, we can review it together.”

Peter stood, extending his hand. “I appreciate your help. You’ve made a complex issue much easier to understand.”

Jihoon shook his hand warmly. “It’s my pleasure, Mr. Stein. I wish you success with your business in Korea. Feel free to reach out if you have more questions.”

After Peter left the office, Jihoon returned to his desk and opened his email program. As he typed, he thought about the details of their discussion.“Business activities, family location, and necessary documentation… I’ll ensure this email covers everything clearly.”

With a satisfied nod, Jihoon hit save, ready to send his client the guidance he needed.