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Taxes in Korea

Corporate Tax

A corporate tax is a tax imposed on the net profit of a corporation, and many countries impose corporate taxes at the national level, and a similar tax may be imposed at state or local levels.

Concerning foreign investments, corporate tax may be abated or exempted as prescribed by the Restriction of Special Taxation Act.

Corporation Tax

Income Tax

Income tax is imposed on individuals only and not on corporations.

According to the Income Tax Act the term "resident" means any individual who has his/her domicile or has his/her place of residence in the Republic of Korea for not less than one year; the term "nonresident" means any individual who is not a resident; the term "domestic corporation" means any domestic corporation with its headquarters, main office or actual business management place located in the Republic of Korea; the term "foreign corporation" means a corporation (limited to where its actual business management place is not located in the Republic of Korea) with its headquarters or main office located in a foreign country.

Source: 「Income Tax Act」. www.law.go.kr

Liability of Tax

A domestic corporation including a foreign-invested corporation shall be liable to pay income tax on his/her income.

A foreign corporation that does not have any business place in the Republic of Korea, but its headquarters or main office in a foreign country shall be liable to pay withholding income tax.

For non-profit domestic corporations and foreign corporations, corporate tax shall be imposed only on income for each business year and capital gains on transfer of land, etc.

Source: 「Corporate Tax Act」. www.law.go.kr

Lease of State and Public Property

Where foreign-invested companies are allowed to use or profit from land, factories or other property owned by the State, local governments, public institutions or local public enterprises by a negotiated contract, the lease term may be set within a maximum period of 50 years in accordance with 「Foreign Investment Promotion Act」, and the rental period may be extended.

The rental charges for land shall be the amount computed by multiplying the value of such land by the rate of at least 10/1,000 in accordance with 「Enforcement Decree of the Foreign Investment Promotion Act」.

Source: 「Restriction of Special Taxation Act」; 「Foreign Exchange Transactions Act」. www.law.go.kr

Capital Gains Tax

A capital gains tax is e Tax refers to the income generated by individuals occurring from transfer or certain properties during a certain year. This transfer of assets to money may be due to sale, exchange, and in-kind investment in corporations. Regardless of the registrations or records of the involved properties, one has to pay transfer income taxes.

A capital gains tax is a tax on the profit realized on the sale of a non-inventory asset that was purchased at a cost amount that was lower than the amount realized on the sale.

Value-added Tax

A value-added tax (VAT) is a type of indirect tax that is levied at each stage in the chain of production and distribution from raw materials to the final sale based on the value added at each stage.

VAT is computed by deducting the input tax from the output tax, and is paid to the government.

All imported goods are charged VAT for their full price when they are sold for the first time, while necessities such as food, education, medicine, and shelter are exempted from any VAT payments.

Local Tax

Local taxes include province taxes (e.g. acquisition tax, registration tax, leisure tax, license tax, community facility tax, local development tax, local education tax) and city and county taxes (e.g. inhabitant tax, property tax, automobile tax, local income tax, slaughter tax, composite land tax, urban planning tax, business place tax).

A special rural development tax is imposed on acquisition tax and composite land tax, while a local education tax is on registration tax, property tax, and composite land tax.

Education Tax

An education tax is a surtax that is levied on those who are engaged in financial business or insurance business to improve the quality of education.

Tax Base and Tax Rate for Education Tax
Tax Base and Tax Rate for Education Tax
Tax Base Tax Rate Note
Revenue of financial and insurance business 0.5%
Individual consumption tax 30% 15% for kerosene, heavy oil, butane, and composite oil
Traffic, energy, and environment tax 15%
Liquor tax 10% 30% for the liquor for which the liquor tax is over 70%

Source: 「Education Tax Act」. www.law.go.kr

Special Rural Development Tax

As the Uruguay round of the general agreement on tariffs and trade was completed in 1988, a special rural development tax is first introduced in 1994 to secure financial resources necessary to strengthen the competitiveness of agriculture and fishery, expand infrastructure in the agricultural and fishing industries, and facilitate local development projects for agricultural and fishing villages.

Source: 「Act on Special Rural Development Tax」. www.law.go.kr

Securities Transaction Tax

The securities transaction tax shall be imposed on the transfer of share certificates or portions, and any person who falls under any of the followings shall be the taxpayer of securities transaction tax;

When stocks are listed and traded on the stock market, a clearing company or securities company shall be the taxpayer.

When unlisted stocks are transferred outside of the securities market, the transferor shall be the taxpayer.

When a non-resident or foreign corporation that does not have any business in Korea transfers share certificates, not through any financial investment business operator, the transferee shall be the taxpayer.