By Xu Aiying and Yoon Sojung

The European Union (EU) has removed Korea from its tax haven blacklist, the Ministry of Economy and Finance said on March 12.

The Economic and Financial Affairs Council, the EU’s top legislative body for economy and finance, decided to remove Korea from its list of non-cooperation tax jurisdictions, the ministry said. The decision came after the EU reviewed Korea’s tax system after the country on Dec. 24 last year revised its Act on Tax Reduction and Exemption Control and eliminated corporate tax breaks for foreign investors this year.

In December 2017, the council had added Korea to its list of countries categorized as “non-cooperative jurisdictions for tax purposes,” judging that Korea’s corporate tax exemptions for foreign investors failed to meet fair tax principles as it applied only to non-residents.

In the wake of the EU’s decision, the Korean government conducted a thorough review of the effectiveness of its tax benefits for foreign investors, and decided to abolish such breaks granted to foreign investor funding. It also shifted the focus of such benefits to new growth industries, investment and job creation.

The ministry said the EU’s removal of Korea from its list shows global recognition of Korea’s drive to follow international standards, adding that the government will strive to ensure balanced taxation on both domestic and foreign capital.

xuaiy@korea.kr