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Tax rates in South Korea

Tax Rates

Consumption Taxes

Nature of the Tax
Value Added Tax (VAT) - Boo-ga-ga-chi-se (also known as Boo-ga-se)
Tax Rate
10%
Reduced Tax Rate
A 0% rate applies to exported goods, services rendered outside Korea, international transportation services by ships and aircraft, and other goods or services supplied for foreign currency.
Other Consumption Taxes
Korea imposes excise duties on alcoholic beverages (volume-based) and tobacco.
Stamp duties ranging from KRW 50 to KRW 350,000 apply to agreements relating to the creation, transfer, or alteration of rights.
A company acquiring real estate, motor vehicles, heavy equipment, and certain other items must pay an acquisition tax ranging from 1% to 7% (generally at 4.6%, including the local surtax).

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Corporate Taxes

Company Tax
  • 10% (up to KRW 10 billion)
  • 12% (between KRW 10 billion and KRW 100 billion)
  • 17% (over KRW 100 billion)
  • 7% (for SMEs)
Tax Rate For Foreign Companies
Resident corporations are taxed on their worldwide income. Non-resident corporations with a permanent establishment in Korea are taxed only on their Korean-source income. Non-resident corporations without a permanent establishment in Korea are generally taxed through a withholding tax on each separate item of Korean-source income.

The transfer of accumulated profits or retained earnings from a Korean branch to its foreign head office requires reporting to a designated foreign exchange bank in Korea under the Foreign Exchange Transaction Act. If the tax treaty between Korea and the country where the foreign head office is located permits the imposition of a branch profits tax, this tax is imposed on the adjusted taxable income of the Korean branch. Additionally, when applicable, the branch profits tax is enforced alongside the regular corporate income tax, which is set at a rate of 20% or a reduced rate as stipulated in any applicable tax treaty.

A resident company subject to tax in Korea and overseas is entitled to a foreign tax credit for foreign tax paid in respect of income earned overseas (limited to the amount of tax payable in Korea). The excess foreign tax credit can be carried forward for up to 10 years from the fiscal year starting 1 January 2021.

Capital Gains Taxation
For resident companies, capital gains are treated as ordinary business income and taxed at the normal corporate tax rate. However, capital gains from the sale of non-business purpose real estate are subject to additional capital gains tax, at the rate of 10% (40% in the case of non-registered land or houses).
For non-resident companies, Korean-source capital gains are taxed at either 11% of sales or 22% of the gains realized (whichever is less). In general, no special taxes are levied on gains from mergers.
Main Allowable Deductions and Tax Credits
As a general rule, expenses incurred in the ordinary course of business are deductible, with those above KRW 30,000 needing to be supported by qualifying evidence.

A doubtful accounts reserve is permitted as a tax deduction, calculated as the greater of 1% of the tax book value of receivables at year-end or the actual bad debt ratio (does not apply to financial institutions). Entertainment expenses of more than KRW 30,000 on an event basis supported by corporate credit card vouchers, cash receipts, or tax invoices can be deductible (up to certain limits). With some exceptions, interest paid in the ordinary course of business is deductible as long as the related loan is used for business purposes. Insurance premiums paid to an insurance company are deductible if the business enterprise is the listed beneficiary. Premiums where the beneficiary is the employee are deductible as well, but they are considered part of the employees' salaries and are subject to withholding tax on earned income.

Start-up expenses, such as incorporation expenses, founders’ salary, and registration fees and taxes, are deductible if the expenses are recorded per the articles of incorporation and are actually paid. Goodwill can be amortised over a period of five years using the straight-line method.

Certain charitable contributions can be deductible at up to 50% of the total taxable income for the concerned fiscal year after the deduction of net operating loss (including donations to public interest entities like government bodies and social welfare organisations, or for academic research, technical development, etc.) or up to 10% of the total taxable income for the fiscal year after the 50% deduction of other donations and net operating loss. The amount in excess of such limits can be carried over for ten years.

Net operating losses (NOLs) can be carried forward for 10 years, up to 80% of a fiscal year's taxable income, or for 15 years if incurred in fiscal years starting on or after January 1, 2020. Small and medium-sized enterprises (SMEs) and certain qualifying companies undergoing a recovery process can deduct NOLs from prior years without limitation. Carryback of losses is generally not allowed, but SMEs can opt to carry back NOLs for one year if they have filed tax returns for the year when the loss occurred and the preceding year.

New start-up SMEs located in areas other than metropolitan and overpopulated regions are eligible for a 50% to 100% reduction in Corporate Income Tax (CIT) for the initial five years. This reduction is contingent upon their engagement in specified businesses, such as manufacturing, mining, restaurants, audio-video production, telecommunications, computer programming, advertising, and amusement facilities. Notably, companies engaged in cryptocurrency trading are excluded from this incentive.

Other Corporate Taxes
A capital registration tax of 0.48% (or 1.44% for the Seoul Metropolitan Area) is levied. A property tax ranging from 0.07% to 5% is levied on land and buildings for residential and commercial use, vessels, and aircraft. A comprehensive real estate holding tax, as a national tax, ranging from 0.5% to 5% is charged on a certain excessive aggregated statutory value of land and houses.

Nominal stamp duty is levied on agreements relating to the creation, transfer and alteration of rights. A securities transaction tax, currently set at 0.35%, applies to the transfer of unlisted Korean shares or interests. For listed shares traded on the Korea Stock Exchange in 2024 and 2025, flexible tax rates, as prescribed by the Presidential Decree, are 0.18% and 0.15%, respectively (including a special tax for rural development). Similarly, shares traded on the Korean Securities Dealers Automated Quotations (KOSDAQ) are subject to tax rates of 0.18% and 0.15% for the respective years. The tax rate remains unchanged at 0.1% for shares traded on the Korea New Exchange (KONEX).

Companies acquiring real estate, motor vehicles, heavy equipment, and certain other items must pay acquisition tax, with rates generally ranging from 1% to 7% (including the local surtax). A 12% acquisition tax rate is applicable to the acquisition of a residential house by a corporation.

Stamp duties ranging from KRW 50 to KRW 350,000 apply to agreements relating to the creation, transfer, or alteration of rights.

When a person receives a gift that increases their property or its value, they are subject to a gift tax. However, if the gifted property is already subject to CIT or individual income tax, the gift tax will not be imposed. The tax rate for gift tax varies, starting at 10% for a tax base of up to KRW 100 million and reaching the highest marginal rate of 50% for the excess over KRW three billion in the tax base.

The types of social security contributions in Korea are national pension (4.5% of salaries, capped at a monthly salary of KRW 5,900,000 until June 2024), national health insurance (4.004%, capped at KRW 4,789,880), and employment insurance. In addition to a 0.90% contribution to employment insurance, employers are required to make a 0.25% to 0.85% contribution to employment stabilisation insurance and occupational competency development insurance. Furthermore, contributions to the Worker’s Accident Compensation Insurance rates vary from 0.7% to 18.6% of total wages and payroll, depending on the type of industry.

Other Domestic Resources
National Tax Service

Country Comparison For Corporate Taxation

  South Korea OECD United States Germany
Number of Payments of Taxes per Year 12.0 10.1 10.6 9.0
Time Taken For Administrative Formalities (Hours) 174.0 163.6 175.0 218.0
Total Share of Taxes (% of Profit) 33.2 41.6 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Basic income tax
Up to KRW 14 million 6%
From KRW 14 to 50 million 15%
From KRW 50 to 88 million 24%
From KRW 88 to 150 million 35%
From KRW 150 to 300 million 38%
From KRW 300 million to 500 million 40%
From KRW 500 million to 1 billion 42%
Over KRW 1 billion 45%
Local income surtax
Up to KRW 14 million 0.6%
From KRW 14 to 50 million 1.5%
From KRW 50 to 88 million 2.4%
From KRW 88 to 150 million 3.5%
From KRW 150 to 300 million 3.8%
From KRW 300 to 500 million 4%
From KRW 500 million to 1 billion 4.2%
Over KRW 1 billion 4.5%
Alternative minimum tax
(business income of a resident individual and Korean-source business income of a non-resident individual - does not apply to employment income)
The greater of:
45% of income tax liability (35% applied to income tax liabilities of up to KRW 30 million) before exemptions
or
actual tax after exemptions
Allowable Deductions and Tax Credits
The Korean law provides for employment income deductions ranging from KRW 0 to 14,750 + 2% on the excess of KRW 100,000, according to the level of income. Standard personal deductions are also available: KRW 1.5 million per year per taxpayer plus KRW 1.5 million per year per spouse or dependant child when each of them has an adjusted gross yearly income of less than KRW 1 million. Additional deductions are available for handicapped persons (KRW 2 million), persons aged 70 or older (KRW 1 million), female taxpayers (KRW 500,000, conditions apply), and single parents (KRW 1 million).

Tax credits are available for medical expenses (15% with a limit of KRW 7 million, exclusively when they exceed 3% of total employment income), insurance premiums (12%, capped at KRW 120,000), donations (15% for the donation amount up to KRW 10 million and 30% for the excess; if donations made during 2024 surpass KRW 30 million, an extra deduction equal to 10% of the surplus will be granted) and education expenses (up to 15% with no cap for the taxpayer, limited to KRW 9 million for each dependant attending university or college, and KRW 3 million for each dependant attending preschool to high school). A tax credit of KRW 150,000 per child aged 8 or older for up to two children and KRW 300,000 per child for the third and more is also available (from 2024, it also applies to grandchildren).
National pension contributions paid by a taxpayer based on National Pension Law, Veteran Pension Law, Civil Service Pension Law et similia, are fully deductible.

All business-related expenses are tax-deductible. Business losses are deductible against employment income, pension income, other income, interest income, and dividend income; whereas rental losses can only be deducted against rental income. Capital losses are deductible only against capital gains.

Special Expatriate Tax Regime
Non-residents are taxed only on their Korea-sourced income. However, a non-resident is not entitled to claim any personal exemptions for their dependents (except for themselves), income deductions, and tax credits. Foreign residents who have stayed in the country for up to five years during the last ten-year period are taxed on Korea-source income. Nevertheless, foreign residents who have stayed in Korea for longer than five years during the last ten-year period are taxed on their worldwide income.

Foreign employees in Korea have the option to choose a flat tax rate of 19% for their employment income, instead of the progressive income tax rate with the highest marginal rate. This election is available for up to 20 years from their start date of employment in Korea, provided they began working in Korea by the end of December 2026.
Qualified foreign technicians/engineers providing services in Korea to a domestic entity are eligible for a 50% tax-exempt treatment on their wages for ten years from the start of their service in Korea, provided they commenced work in Korea by the end of December 2026. Additionally, a 70% tax reduction is applicable to wages received by qualified expatriates working in the categories of raw materials, parts, and equipment, for the initial three years, if they started working in Korea by December 31, 2022.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
List of Korea's International Tax Treaties
Withholding Taxes
  • Dividends: 0% for domestic companies, 15.4% for resident individuals (including the surtax), 22% for non-residents (including the surtax)
  • Interest: 15.4% for interests obtained from financial institutions (including the surtax), 27.5% for regular loans (including the surtax) paid to a resident company or individual, 22% if paid to a non-resident company or individual
  • Royalties: 0% for domestic companies, variable rates for resident individuals, 22% for non-residents (including the surtax)

Different withholding taxes may apply to non-residents of countries with which South Korea signed a tax treaty, with rates as low as 0%.

Bilateral Agreement
The United Kingdom and South Korea are bound by a double taxation treaty

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Sources of Fiscal Information

Tax Authorities
National Tax Service
Other Domestic Resources
Invest Korea - Fiscal Guide

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Latest Update: June 2024