Corporate Tax in South Korea
- Tax Base For Resident and Foreign Companies
- Taxation is based on the annual business income. Since most of the foreign investors are corporations and thus liable to pay it, corporate tax makes up the largest portion of the total taxes related to foreign investment. Under the tax agreement, only the income from the permanent establishment of a foreign company is taxable. Permanent establishments here refer to branches, warehouses, stores, or other establishments for installment or construction projects. A company which has a right to sign a contract or which conducts its business and trade through an agent who on behalf of the company buys or sells its stocks is also subject to tax. More information on Invest Korea website.
|Corporate tax||11% (up to KRW 200 million)
22% (More than KRW 200 million)
|Resident surtax||10% of the corporate income tax liability|
- Tax Rate For Foreign Companies
Foreign corporations with a permanent establishment in Korea must pay corporate income tax on income from Korean sources in the same manner as that applied to a domestic corporation.
In case of a branch in Korea, there maybe a branch profit tax (BPT), depending on tax treaties. the BPT is imposed on the adjusted taxable income of the Korean branch of the foreign corporation. This branch profit tax is levied in addition to the regular corporation tax under the Corporation Tax Law. The standard rate of BPT is 25%, although reduced rates of between 5% and 15% apply where provided for by a tax treaty.
- Capital Gains Taxation
- The capital gains tax applies to the income coming from the transfer of certain assets by an individual in a given year. A corporation is not subject to capital gains tax, and is instead taxed on income generated from this transfer in a form of corporate tax.
- Main Allowable Deductions and Tax Credit
- Tax deduction or exemption for farming cooperatives, fisheries cooperatives, forestry development income, small start-up businesses, start-up companies, foreign investment, disaster loss, Investment, R&D, etc. Consult Invest Korea website.
- Other Corporate Taxes
- Urban Planning Tax, Business Place Tax, Community Facility Tax, Local Education Tax, etc.
Country Comparison For Corporate Taxation
|South Korea||OECD||United States||Germany|
|Number of Payments of Taxes per Year||14.0||14.2||11.0||16.0|
|Time Taken For Administrative Formalities (Hours)||250.0||199.3||187.0||215.0|
|Total Share of Taxes (% of Profit)||29.8||43.0||46.8||48.2|
Source: Doing Business
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
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