ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

A Study on the Taxation System of Retirement Pension

  • Tae Hwa Yoon Kyungwon University
  • Il-Lyuck Park Certified Public Accountant

Asian Tax Journal Vol. 5 No. 2 (2004), pp. 135-171

Abstract

The Retirement Pension Plan has not been introduced in Korea, but its introduction plan is discussed as the alternative to overcome the problem of the existing retirement pay system. The Retirement Pension, that is essentially the means to substitute for the existing retirement pay is largely divided into Defined Benefit Pension Plan and Defined Contribution Pension Plan. Two types of Retirement Pension are formed differently in benefits method, operational responsibility and pension payment. Therefore, the taxation methods on these have also been prescribed differently. It is raised as the core topic in the field of the taxation how corporate income tax · income tax · value added tax and inheritance tax are imposed on each retirement pension type in the steps of payment, operation and receipt. This study analyzes Korean tax rules relevant to the current retirement pay and pension, and the tax systems on retirement pension in Japan and United States. In addition, it seeks the most suitable taxation method in Korean circumstances concretely when retirement pension plan is introduced. This study inspects the necessity and significancy of the introduction of the retirement pension plan, the type of the retirement pension, and the general taxation system on the retirement pension. Also, it looks into essentials of Employee retirement income security bill ministry of labor introduced recently as the bill relevant to the retirement pension and the current Korean tax system of the retirement pay and pension. And it inspects the kind of the retirement pension and relevant tax system in the US whose retirement pension plan is the most advanced and Japan which recently complemented its retirement pension plan remarkably. The major advanced countries such as the US and Japan adopted EET taxation system in relation to the retirement pension, and Korea also adopts EET taxation system in relation to current pension system. Therefore, it is desirable to plan the taxation method based on EET taxation system when the retirement pension plan is introduced in Korea. However, the range of deductions that are not expenses and deductions from income and others have to be provided differently in accordance with the types of the retirement pension, and when income tax is imposed in the step of receipt, global taxation or scheduler taxation has to be decided in accordance with the receiving types.

Keywords

  • Retirement pension
  • Individual retirement account
  • Provision for severance benefits
  • Tax system on Retirement pension

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