It is the consistent stand of the DPRK to ceaselessly promote the relationship of the economic collaboration with other countries on the principles of perfect equality and mutual benefit, maintaining its independence.
President Kim Il Sung said.
“We encourage investments by foreigners in our Republic based on principles of full equality and mutual benefit, and have enacted and promulgated the Law on Foreign Investment and other relevant laws, in a bid to protect foreign investments and guarantee investors’ legal rights and interests.”
The DPRK, since the first day of its birth, has set forth an important policy to ceaselessly promote the economic collaboration relationship with other countries and consistently implemented it. The DPRK has not only developed continuously trade relations with other countries on the principle of mutual accommodation but also directed great efforts into the making of investment policy and its improvement as a chain to cement the economic and technical collaboration with other countries.
After enacting the Law of Joint Venture for the first time in 1984, the DPRK has prepared the investment-related law system and amended and added them several times, improving the environment favorable for the foreign investors.
At present, the DPRK protects foreign investment and definitely provides them legally with lawful rights and interests. The article 37 of the DPRK Socialist Constitution stipulated that it encourages the business joint venture and collaboration between the DPRK institutions, enterprises, organizations and the foreign juristic persons or individuals as well as various business establis
On the basis of its Socialist Constitution, the national standard law, the DPRK continuously developed its investment-related law system in order to extend investment ties with the other countries.
Now the DPRK has regular system for investment-related laws including the DPRK Law on Foreign Investment, the DPRK Law on Foreign Currency Management, the DPRK Law on Foreign Investment Bank, the DPRK Law on Land Rent, the DPRK Law on Foreign Investment Enterprise and Foreigner’s Taxation and other investment-related rules such as the Labor Rules of Foreign Investment Enterprise, the Financial Management Rules of Foreign Investment Enterprise, the Rules on Up-to-date Technology Introduction of Foreign Investment Enterprise.
Foreign investors are allowed to invest in the DPRK in many ways including the establis
The DPRK directs its efforts to the promotion of investment relations with other countries because it has fundamental purpose to further solidify the foundation of its independent national economy.
It is the consistent foreign economic policy of the DPRK to develop its foreign economic relations like trade, investment etc. on the basis of building its independent national economy.
Today, the DPRK makes the investment relations contribute to speed up the modernization and technical reformation of its economy by adopting other countries’ advanced technologies and good experiences and vitalize its production by introducing raw materials which are not or hardly available in it.
It’s important requirement to provide foreign investors with preferential treatment to extend the investment relations.
Generally, the investment relations are not formed only by economic factors like physiographical condition, the infrastructure conditions, labor cost and so on. In the present situation in which the countries are competing more severely wit
The DPRK sets forth it as one of the important matters of its investment policy to provide the foreign investors with preferentiality and provides them with the favourable investment environment.
The DPRK Laws on Foreign Investment stipulates that the sectors which develop the modern technologies like cutting-edge technology and manufacture goods with high competitive power in the international market, the sectors of developing natural resources and constructing infrastructure facilities and the sectors of conducting scientific research and development are specially welcome in investment and that the investment in these sectors are privileged to be provided with reduction of various taxes like income tax, guarantee of favourable land-use conditions, preferential offer of bank loan and so on.
Providing the foreign investors with privileges in the DPRK investment policy is intensively expressed in tax levy on them.
Tax is the item which the foreign investors give prior consideration in deciding investment in other countries, because the amount of tax levy serves as an essential factor which decides the amount of profit.
In January 1993, the DPRK enacted the DPRK Law on Foreign Investment Enterprise and Foreign Taxation and the rules for its enforcement. Since then it has improved the privileges for the foreign investors and foreign investment enterprises through several amendments.
The privileges for the foreign investors are firstly the minimum kinds of tax.
The tax levied on the foreign investment enterprises in the DPRK is divided into direct tax and indirect tax. The direct tax concludes enterprise income tax, individual income tax and property tax and inheritance tax, while indirect tax involves transaction tax, operating tax and local taxes (city management tax and car-use tax.)
The state levies taxes on income, transaction and operation and local authorities levy on properties and local use.
The DPRK levies considerably limited and basic taxes on its foreign investment enterprises, and in particular greatly lowered the tax rates on enterprise income tax.
Now the DPRK levies 25% rate of tax on incomes gained in its territory and 14% in its special economic zones like Rason Economic Trade Zone, Hwangkumphyong-Wihuado Economic Zone etc.
Particularly, the sectors of developing cutting-edge technologies, constructing infrastructure facilities, conducting scientific study and manufacturing goods with high competitive power in international markets are privileged to pay only 10% tax of their clearing profit.
In addition, the DPRK levies tax by 20% in case of making other profits by the foreign enterprises in its territory such as dividend income, interests income, rent income and the use of patent and by 10% in special economic zones (SEZ).
Not only enterprise income tax but also the other kinds of taxes like property tax, inheritance tax etc. are favourably levied under the preferential conditions in the DPRK.
Privilege in tax system is expressed more vividly especially in reduction and refund of enterprise income tax. The DPRK exempts taxes on interest income in the case that the foreign governments or international financial institutions give loans to it and that the foreign banks give loans under the favourable conditions to its banks or enterprises. In case that the foreign investment enterprises operate in premium sectors and the SEZs for over 10 years, they will get exemption of their income tax for 3 years since the year of making profit and be exempted by a range of 50% for the next 2 years. Also, the foreign enterprises invested in the sectors of constructing infrastructure facilities like railways, roads, airports and ports will be exempted in income tax for 4 years since the year of making profits and by a range of 50% for the next 3 years.
The privilege of tax system is applied in reinvestment and export and import of the resources for production and management. First, if foreign investors reinvest their profits shared by the enterprise to manage it for more than 5 years, they will be refunded 50% of the enterprise income tax relevant to the reinvestment and if they reinvest to the sector of constructing infrastructure facilities, they will be refunded the whole of the income tax relevant to the reinvestment. Secondly, in case the joint-venture groups, corporations and foreign enterprises import the materials for their production and management from other countries or export the manufactured goods to other countries, they are privileged of tax exemption.
Like this, the privilege of tax system aims to inspire the foreign investors’ desire for investment and guarantee their interests by providing them with more favourable investment environment.
Next, the DPRK offers them the privilege in the use of land.
The relations of rent and loan of land are the formalities essentially needed in the investment relations. That is because the foreign investors and enterprises must hire the land for their production and management in the DPRK.
According to the DPRK laws on rent of land, the foreign investors and enterprises rights to hire and use the land through the hire relations, and the contracting parties can make an agreement on the length of use of the land in less than 50 years.
In case that the period of land-hiring is over 40 years, it compensates the relevant remnants for the building erected 10 years before the end of the period. And the fee for the use of land is reduced or exempted for 10 years for the encouraging objects.
Privilege of right to use land is intensively applied particularly in the SEZs. For instance, the land for business use is offered in prior according to the real demand, and they are privileged variously in terms of length, rental fee and method of payment according to the fields and use of land. Moreover, the enterprises that invested in the sectors of infrastructure facilities, public facilities and especially encouraging sectors are provided with priority in choosing the location of land and offered with privilege to be exempted form rental fee of the land during the set period.
Exploring enterprises are privileged to have priority not only in the right to use the land but also in obtaining the rights to manage the objects like tourism, hotels and so on. Also, they are privileged to be exempted from tax on managing their properties, infrastructure facilities and public facilities.
In addition, the foreign investors and enterprises invested in the SEZs are provided with preferential management conditions in many fields like sales of the products, labour hire and so on.
Like this, the DPRK provides the foreign investors with not only the lawful rights and interests but also various privileges, enabling them to conduct their production and management in the more favourable conditions and environments.
