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  • Residence and basis for taxation

    A corporation formed in a ROK jurisdiction will be treated as a domestic corporation.

    Domestic

    Domestic corporations are obligated to pay corporate tax for all income generated domestically and in foreign countries.

    Foreign

    Foreign corporations are obligated to pay corporate tax for income from domestic sources.

    Last modified 2 Jul 2019

  • Taxable income

    Domestic

    Corporate tax for income from the business year is levied for taxable net income of businesses in each business year.

    Foreign

    Foreign corporations are subject to corporate tax at regular tax rates on a net income basis. A branch tax may be added on the corporate tax in accordance with the applicable tax treaty.

    Last modified 2 Jul 2019

  • Tax rates

    The basic rate on corporate income tax starts at 10% with a top rate of 25%. Corporate local income tax equivalent to approximately 10% of the corporate tax is also imposed.

    Last modified 2 Jul 2019

  • Tax compliance

    Corporate income tax returns must be filed for the taxable business activities of the corporations within 3 months from fiscal year end. An interim corporate income tax return should be filed within 2 months from the date of the entity's mid-fiscal year.

    Corporate local income tax return should be filed within a month from the due date of the corporate income tax return.

    Last modified 2 Jul 2019

  • Alternative minimum tax

    Every domestic corporation is subject to minimum tax. A corporation pays the greater of its regular tax liabilities or its minimum tax liability. Foreign corporations are subject to minimum tax on taxable income that is effectively connected with domestic source income.

    Last modified 2 Jul 2019

  • Tax holidays, rulings and incentives

    Tax holidays and incentives

    The corporate income tax exemption was effective on the application for foreign investments submitted on or before December 31, 2018, and it is abolished after January 2019.

    Tax rulings

    No broad-based rulings are available. Taxpayers can request a clear ruling with regard to a specific transaction of a taxpayer's business through the advance ruling system.

    Cash grant

    Effective from January 1, 2019, most tax incentives concerning corporate income tax and personal income tax for foreign investors nullified. To compensate this change, Korean government announced to dramatically increase cash grant in accordance with Foreign Investment Promotion Act. Cash grant should be provided by the central and local governments of Korea as matching fund basis.

    Last modified 2 Jul 2019

  • Consolidation

    Eligible corporations that are affiliated (generally based on 100% stock ownership) may elect to file corporate income tax returns on a consolidated basis.

    Last modified 2 Jul 2019

  • Participation exemption

    Not applicable for this jurisdiction.

    Last modified 2 Jul 2019

  • Capital gain

    Capital gain or loss recognized by a corporation is included in corporate ordinary income or loss.

    Last modified 2 Jul 2019

  • Distributions

    Distributions paid by a corporation are treated as dividends to shareholders within the limit of the amount obtained by subtracting the amount of capital from the amount of net asset value on the balance sheet.

    Last modified 2 Jul 2019

  • Loss utilization

    Net operating losses can be carried forward 10 years.

    Last modified 2 Jul 2019

  • Tax-free reorganizations

    Not applicable for this jurisdiction.

    Last modified 2 Jul 2019

  • Anti-deferral rules

    Not applicable for this jurisdiction.

    Last modified 2 Jul 2019

  • Foreign tax credits

    Foreign tax credits are available for foreign taxes paid. A "deemed" foreign tax credit may be available for reduced taxes by tax treaties, and an "indirect" foreign tax credit also may be available for taxes paid by foreign subsidiaries on profits repatriated to domestic corporations.

    Last modified 2 Jul 2019

  • Special rules applicable to real property

    A land transaction is not subject to VAT (value added tax). Property tax varies on the type of real property.

    Last modified 2 Jul 2019

  • Transfer pricing

    Where the price of an international transaction in which either party to the transaction is a foreign related party is lower or higher than the arm's length price, the tax authority may determine or rectify the tax base and tax amount of a resident (including a domestic corporation and a domestic place of business) based on the arm's length price.

    Last modified 2 Jul 2019

  • Withholding tax

    The payer of interest, dividends, business income, other income, etc. should withhold taxes in accordance with their respective withholding tax rates. Tax treaties can reduce or eliminate these taxes when the income is paid to a foreign person.

    Last modified 2 Jul 2019

  • Capital duty, stamp duty and transfer tax

    Inheritance tax, gift tax, stamp tax, securities transaction tax and capital duty may be imposed at national tax level.

    Last modified 2 Jul 2019

  • Employment taxes

    Employers must withhold wage income tax. Employers also must pay 4 compulsory social insurances which are pension, health, unemployment and industrial accident in respect of compensation paid to employees. These taxes are deductible by an employer for corporate income tax purposes.

    Last modified 2 Jul 2019

  • Other tax considerations

    Value added tax (VAT) is a tax levied on added value acquired in the process of the transaction of goods or the provision of services. VAT is imposed on value generated at each step of a transaction, and applies a VAT rate of 10%. Certain supplies are eligible for VAT zero-rating or VAT exemption. VAT zero-rating is the same as VAT exemption in that no VAT is charged. However, only VAT zero-rating allows input VAT deduction for VAT incurred in relation to the VAT zero-rating supplies. The VAT imposed on businesses is calculated by subtracting the input tax from the output tax.

    Value added tax should be reported and paid every 6 months, and the taxable period of 6 months is divided into 3 months for a preliminary report.

    Last modified 2 Jul 2019

  • Key contacts
    Roderik Bouwman
    Roderik Bouwman
    Partner DLA Piper Netherlands [email protected] T +31 (0)20 5419 894
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Other tax considerations

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South Korea

Value added tax (VAT) is a tax levied on added value acquired in the process of the transaction of goods or the provision of services. VAT is imposed on value generated at each step of a transaction, and applies a VAT rate of 10%. Certain supplies are eligible for VAT zero-rating or VAT exemption. VAT zero-rating is the same as VAT exemption in that no VAT is charged. However, only VAT zero-rating allows input VAT deduction for VAT incurred in relation to the VAT zero-rating supplies. The VAT imposed on businesses is calculated by subtracting the input tax from the output tax.

Value added tax should be reported and paid every 6 months, and the taxable period of 6 months is divided into 3 months for a preliminary report.

Last modified 2 Jul 2019

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