Resident corporations are taxed on their worldwide income, whereas non-resident corporations with a permanent establishment (PE) in Korea are taxed only to the extent of their Korean-source income. Non-resident corporations without a PE in Korea are generally taxed through a withholding tax (WHT) on each separate item of Korean-source income (see the Withholding taxes section).
The following tax table summarises the CIT rates applicable for the fiscal year starting on or after 1 January 2018:
|Tax base (KRW million)
||Tax rate *
|Over (column 1)
||Tax on column 1 (KRW) *
||Marginal tax rate (%)
* Before applying the local income tax.
Additional tax on corporate income
The tax reform has provided that the 10% additional tax provision introduced in 2015 to facilitate the use of corporate retained earnings to fund facility investment, payroll increase, and dividend payment, which was supposed to be terminated by the end of December 2017, has been extended for three additional years until the end of December 2020 and raised tax rates to 20%. The additional tax shall apply to companies whose net assets exceed KRW 50 billion (excluding small and medium-sized enterprises [SMEs]) and companies belonging to business groups subject to restrictions on cross-shareholdings under the Act on Monopoly Regulation and Fair Trade.
Companies should elect one of the following methods in computing the additional tax:
- ([adjusted taxable income for the year x 65%] - the total amount of facility investment, wage increases, and mutual cooperation payments) x 20%, or
- ([adjusted taxable income for the year x 15%] - the total amount of wage increases and mutual cooperation payments) x 20%.
Agriculture and fishery surtax
When a corporate taxpayer claims certain tax credits or exemptions under the Special Tax Treatment Control Law (STTCL), a 20% agriculture and fishery surtax is levied on the reduced CIT liability.
Corporate taxpayers are liable for the minimum tax, which is defined as the greater of 10% (if the tax base is KRW 10 billion or less, 12% on the tax base exceeding KRW 10 billion but not more than KRW 100 billion, 17% on the tax base exceeding KRW 100 billion) of the taxable income before certain tax deductions and credits pursuant to the STTCL or the actual CIT liability after various deductions and credits.
For SMEs, the minimum tax is the greater of 7% of taxable income before certain tax deductions and credits or actual CIT liability after the deductions and credits. For middle market companies that exceed the size of SMEs (so-called ‘medium-scale companies’), an 8% minimum tax rate is applicable for the first three years, starting from the year when the size exceeds an SME for the first time, and a 9% rate is applicable for the next two years.
Local income tax
The local income tax is a separate income tax that has its own tax base, tax exemption and credits, and tax rates. The local income tax rates for corporations are 1% on the first KRW 200 million, 2% for the tax base between KRW 200 million and KRW 20 billion, 2.2% for the tax base between KRW 20 billion and KRW 300 billion, and 2.5% for the excess.