Convention Signed at Seoul June 4, 1976; 　　Ratification Advised by the Senate of the United States of America July 9, 1979; 　　Ratified by the President of the United States of America July 25, 1979; 　　Ratified by the Republic of Korea December 16, 1976; 　　Ratifications Exchanged at Washington September 20, 1979; 　　Proclaimed by the President of the United States of America October 23, 1979; 　　Entered into Force October 20, 1979. GENERAL EFFECTIVE DATE UNDER ARTICLE 31: 1 JANUARY 1980 TABLE OF ARTICLES Article 1---------------------------------Taxes Covered Article 2---------------------------------General Definitions Article 3---------------------------------Fiscal Domicile Article 4---------------------------------General Rules of Taxation Article 5---------------------------------Relief from Double Taxation Article 6---------------------------------Source of Income Article 7---------------------------------Nondiscrimination Article 8---------------------------------Business Profits Article 9---------------------------------Permanent Establishment Article 10--------------------------------Shipping and Air Transport Article 11--------------------------------Related Persons Article 12 -------------------------------Dividends Article 13--------------------------------Interest Article 14--------------------------------Royalties Article 15--------------------------------Income from Real Property Article 16--------------------------------Capital Gains Article 17--------------------------------Investment or Holding Companies Article 18--------------------------------Independent Personal Services Article 19--------------------------------Dependent Personal Services Article 20--------------------------------Teachers Article 21--------------------------------Students and Trainees Article 22--------------------------------Governmental Functions Article 23--------------------------------Private Pensions and Annuities Article 24--------------------------------Social Security Payments Article 25--------------------------------Exemption from Social Security Taxes Article 26--------------------------------Diplomatic and Consular Officers Article 27--------------------------------Mutual Agreement Procedure Article 28--------------------------------Exchange of Information Article 29--------------------------------Extension to Territories Article 30--------------------------------Assistance in Collection Article 31--------------------------------Entry into Force Article 32--------------------------------Termination Notes of Exchange---------------------of June 4, 1976 Letter of Submittal---------------------of 14 August, 1976 Letter of Transmittal-------------------of 3 September, 1976 The "Saving Clause"-------------------Paragraph 4 of Article 4 　　　　　TAX CONVENTION WITH THE REPUBLIC OF KOREA 　　　　　　　　　　　　　MESSAGE 　　　　　　　　　　　　　FROM 　　　　　　THE PRESIDENT OF THE UNITED STATES 　　　　　　　　　　　TRANSMITTING THE CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF KOREA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND THE ENCOURAGEMENT OF INTERNATIONAL TRADE AND INVESTMENT, SIGNED AT SEOUL JUNE 4, 1976, TOGETHER WITH A RELATED EXCHANGE OF NOTES LETTER OF SUBMITTAL DEPARTMENT OF STATE, Washington, August14, 1976. The PRESIDENT, The White House. 　　THE PRESIDENT: I have the honor to submit to you, with a view to its transmission to the Senate for advice and consent to ratification, the Convention between the United States and the Republic of Korea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Encouragement of International Trade and Investment signed at Seoul June 4, 1976, together with a related exchange of notes. 　　The Convention with Korea is similar, in all essential respects, to other tax conventions entered into by the United States in recent years, such as the convention with Iceland which entered into force last year. 　　The Convention establishes maximum rates of withholding tax in the source country on income payments flowing between the two countries. The rate of withholding tax on portfolio dividends is limited to 15 percent, while on dividends paid by a subsidiary to a parent corporation the rate of tax may not exceed 10 percent. The maximum rate of withholding tax on interest is 12 percent except that interest derived by the Government of one of the Contracting States or by its local authorities or instrumentalities is exempt from withholding at the source. Royalties are subject in general to a 15 percent maximum rate of tax. However, the tax on literary and artistic royalties, including motion picture royalties, is limited to 10 percent. 　　The provisions of the Convention dealing with the taxation of business and personal service income are essentially the same as in our other recent conventions as are those dealing with definitional and administrative matters. For example, a resident of one country will not be subject to tax in the other country on business profits unless those profits are attributable to a permanent establishment which the resident maintains in the other country. Similarly, for business visitors from one country temporarily present in the other, the host country may tax his income only if certain tests in terms of time spent or amounts earned are met. 　　One unusual provision of the Convention is found in Article 25, which provides a special exemption from United States social security taxes for Korean residents who are temporarily present in Guam. A similar exemption is provided in the Internal Revenue Code for Philippine residents temporarily present in Guam. The Koreans argued that the Philippine exemption provides an unfair advantage to Philippine residents and the firms which hire them and asked that a similar exemption be written into the Convention for Korean residents. The Convention provides that Korean residents will be exempt from social security taxes only so long as the statutory exemption is in effect for Philippine residents. This provision has the approval of the Department of Health, Education and Welfare. 　　The Convention and exchange of notes will enter into force on the thirtieth day following the exchange of instruments of ratification. It shall have effect with respect to withholding taxes and with respect to the special exemption from social security taxes to amounts paid on or after the first day of the second month following the date on which the Convention enters into force. With respect to other taxes it shall have effect for taxable years beginning on or after January 1 of the year following the date on which the Convention enters into force. Once in force, the Convention will remain in effect for a minimum of five years and indefinitely thereafter subject to the right of either party to terminate it by giving six-months' notice for that purpose pursuant to the provisions of the Convention. 　　The exchange of notes is similar in effect to those exchanged in connection with our convention with Trinidad and Tobago in which the United States agrees, when feasible, to resume discussions with Korea with a view toward reaching agreement on a supplementary protocol providing a tax impetus to flows of United States capital and technology to Korea. 　　A technical memorandum explaining in detail the provisions and effect of the Convention is being prepared by the Department of the Treasury and will be submitted to the Senate Foreign Relations Committee for consideration in connection with the Convention. 　　The Department of the Treasury, with the cooperation of the Department of State, was primarily responsible for the negotiation of this Convention. It has the approval of both Departments. Respectfully submitted, CHARLES W. ROBINSON. Enclosure: Convention and exchange of notes. LETTER OF TRANSMITTAL THE WHITE HOUSE, September 3, 1976. To the Senate of the United States: 　　I transmit herewith, for Senate advice and consent to ratification, the Convention signed at Seoul on June 4, 1976, between the Government of the United States of America and the Government of the Republic of Korea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Encouragement of International Trade and Investment, together with a related exchange of notes. 　　There is no convention on this subject presently in force between the United States and Korea. 　　The Convention follows generally the form and content of most conventions of this type recently concluded by the United States. Its primary purpose is to identify clearly the tax interests of the two countries to avoid double taxation and to help prevent the illegal evasion of taxation. 　　For the information of the Senate, I also transmit a covering report of the Department of State with respect to the Convention. 　　This Convention would promote closer economic cooperation and more active trade between the United States and Korea. 　　I urge the Senate to act favorably at an early date on this Convention and its related exchange of notes and to give its advice and consent to ratification. 　　　　　　　　　　　　　　　　　　　　　　　　　　　　GERALD R. FORD. 　　　　　　BY THE PRESIDENT OF THE UNITED STATES OF AMERICA 　　　　　　　　　　　　　　A PROCLAMATION CONSIDERING THAT: 　　The Convention between the United States of America and the Republic of Korea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Encouragement of International Trade and Investment was signed at Seoul on June 4, 1976, together with a related exchange of notes, the texts of which are hereto annexed; 　　The Senate of the United States of America by its resolution of July 9, 1979, two-thirds of the Senators present concurring therein, gave its advice and consent to ratification of the Convention and related exchange of notes The Convention and related exchange of notes were ratified by the President of the United States of America on July 25, 1979, in pursuance of the advice and consent of the Senate, and was ratified on the part of the Republic of Korea on December 16,1976; 　　It is provided in Article 31 of the Convention that the Convention shall enter into force on the thirtieth day following the exchange of instruments of ratification and shall have effect as specified in Article 31; 　　The instruments of ratification of the Convention were exchanged at Washington on September 20, 1979, and accordingly the Convention, with related exchange of notes, entered into force on October 20, 1979, with effectiveness as specified in Article 31; 　　NOW, THEREFORE, I, Jimmy Carter, President of the United States of America, proclaim and make public the Convention, with related exchange of notes, to the end that they be observed and fulfilled' with good faith on and after October 20, 1979, by the United States of America and by the citizens of the United States of America and all other persons subject to the jurisdiction thereof. 　　IN TESTIMONY WHEREOF, I have signed this proclamation and caused the Seal of the United States of America to be affixed. 　　DONE at the city of Washington this twenty-third day of October in the year of our Lord one thousand nine hundred seventy-nine and of the Independence of the United States of America the two hundred fourth. By the President: JIMMY CARTER WARREN CHRISTOPHER, Acting Secretary of State