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North Korea: Foreign-Funded Business and Banking Laws Amended

(Feb. 17, 2012) The Democratic People's Republic of Korea (North Korea) amended its law on registration of businesses that have foreign funding. The change came via a decree issued on December 21, 2011, by the Presidium of the Supreme People's Assembly. The 34-article law covers registration of the founding, residence, taxation, and customs payments of foreign-funded enterprises. In addition, laws on the businesses themselves, their tax payments, and insolvency procedures were also revised. (Law on Registration of Foreign-Funded Businesses Amended, KOREAN NEWS (Feb. 10, 2012) [click on “Past News,” scroll down to February calendar, and click on relevant day].)

Furthermore, according to a February 9, 2012, report, the law on foreign banks has also been amended. This law, which has 32 articles, establishes rules for foreign-funded banks on the classification, residence, property rights, and independent management of these institutions. It provides that banks that have sustained banking activities in North Korea for ten or more years need not pay income tax on their first profitable year, nor must they pay taxes on the interest income they earn on loans to local businesses and banks. (Law on Foreign-Funded Banks Amended, KOREAN NEWS (Feb. 9, 2012) [see note above].)

Details on the nature of the amendments of these laws were not available. In January, North Korea reportedly made revisions to its general laws on banking, labor, and financial management. One report speculated that the motivation for the amendments was to reassure China that businesses would not be expropriated. (Kim Tae Hong, NK Investment Laws Get Another Makeover, DAILY NK (Feb. 13, 2012).)