North Korea enacts new tax regulations in Mt. Kumgang tourist zone

Institute for Far Eastern Studies (IFES)
2013-3-21

North Korea announced that it has instituted a new law to begin levying tax in the Mount Kumgang Tourist Zone which has been — until now — a tax-free zone. In addition, a personal protection regulation for tourists was also added to its tourism regulations. North Korea has been modifying laws pertaining to the Mt. Kumgang area in order to develop it as a special tourism zone.

Last week, Yonhap News reported that it had obtained from North Korea a book that was released last November on North Korea’s laws and regulations on international economic policy. According to the book, North Korea adopted in June 2012 a new tax regulation for the Special Zone for International Tour of Mount Kumgang. The law was passed by the Presidium of the Supreme People’s Assembly.

The new tax regulation stipulated that any companies or individuals (foreigners and oversees Koreans) who conduct business transactions or make profit from the Special Zone for International Tour of Mount Kumgang are subjected to tax.

The business income tax applied in the Mount Kumgang zone are on average about 14 percent of one’s yearly profit (infrastructure projects including airport, railways, roads, and port construction only pay 10 percent) and individual income tax ranges from 5 to 30 percent when monthly income is 300 euros (approximately 430,000 KRW).

The tax regulation also covers property, inheritance, transaction, business, and local tax. This comes as a subordinate law under the Special Law for International Tourism in Mount Kumgang, which was enacted in May 2011 and subsequently revoked the monopoly rights of Hyundai Asan.

As such, this law likely will impact South Korean investment in the Mount Kumgang tourism industry.

In the past, working closely with Hyundai Asan, North Korea designated the tourist area as a tax-free zone. There were also no separate laws regarding the levying of taxes on foreigners except for South Korean tourists, who were required to pay 50 USD per person.

In the ‘Tourism Regulations of Mount Kumgang International Tourism Zone,’ a clause was added that specified the special travel bureau for international tourism was responsible for the protection of personal safety and property of tourists in Mount Kumgang. The special travel bureau for international tourism is under the jurisdiction of the Guidance Bureau of the Special Zone of Mount Kumgang International Tourism.

North Korea’s decision to insert a clause ensuring the safety of tourists is likely due to the fact that this issue has continually been raised as a main concern since the death of a South Korean tourist in the zone in July 2008 and subsequent halt of inter-Korean cooperation in the Mount Kumgang project.

In addition to the new tax and tourism regulations, North Korea also made new regulations pertaining to the foundation and management of enterprises; customs; access, visitation, and housing; insurance, and environmental protection, among others.

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