TKEG Expat ™ (HK SAR) South Korea Corporate Tax Guide

In Korea, Value-Added Tax (VAT) is imposed at a rate of 10% on the supply of goods and services. This tax covers various goods and services, including those for exportation, certain eligible services rendered to non-residents, and professional services such as legal, accounting, and management consulting. Some goods are zero-rated, such as basic life necessities and services, and international transportation services. VAT also applies to non-resident companies providing electronic services to consumers in Korea. The requirement for electronic VAT invoicing is strictly enforced, and failure to comply with electronic VAT requirements may lead to significant penalties. Foreign companies providing services through electronic platforms must register for VAT and adhere to filing requirements. This includes maintaining transaction records for five years, particularly in digital marketplaces and intermediary services.

Korea levies an annual property tax on the statutory value of various assets, including land, buildings, houses, vessels, and aircraft. The tax rate ranges from 0.07% to 5%, depending on the type of property. Factories that are newly constructed or expanded within designated metropolitan areas receive special attention, with a higher tax rate being applied for the first five years. This tax serves as a local tax, managed by local governments, ensuring that industrial and real estate developments contribute to the local infrastructure and economy.

Securities Transaction Tax in Korea applies to both listed and unlisted shares. For unlisted shares or interest, a rate of 0.35% is imposed on transfers. For listed shares, the tax rate is 0.23% for shares traded on the Korea Stock Exchange (including a special tax for rural development), 0.18% for shares traded on KOSDAQ, and 0.1% for shares traded on KONEX.

Corporate Income Tax (CIT) in Korea uses a progressive rate structure effective from fiscal years starting on or after 1 January 2026: 10% (up to 200 million KRW), 20% (200 million to 20 billion KRW), 22% (20 billion to 300 billion KRW), and 25% (over 300 billion KRW). Corporations are required to file an interim tax return within two months after the close of the interim six-month period and an annual tax return within three months from the end of the fiscal year.

Personal Income Tax (PIT) in Korea is levied at a rate of 45%. The tax return is due by 31 May of each year, and payment of the final tax can also be made in installments. The final payment is expected by the end of May, and those who need more flexibility in their payments can opt for the installment option. This system allows taxpayers to efficiently manage their tax obligations while adhering to the stipulated deadlines set by the Korean tax authorities.