Income from bonds is subject to a withholding tax for both resident and nonresident investors. However, domestic financial institutions are exempt from the tax under the Income Tax law, as are nonresidents receiving interest and fees related to foreign-currency denominated bonds issued by the Korean government, local governments, or domestic corporations.

The tax rate on interest income to nonresidents was reduced to 14% (from 25%) effective January 2007, to bring it in line with the tax rate for residents. Combined taxes would result in an effective tax rate of 15.4%.

A summary of tax rates on resident and nonresident interest income and capital gains is in the table below. The Ministry of Finance and Economy (MOFE) and the National Tax Service of Korea (NTS) sets the tax system for both residents and nonresidents. More detailed information is provided at the links below.