Korea, Republic of

Corporate - Significant developments

Last reviewed - 27 June 2023

The government’s bill to amend 15 kinds of tax laws, including the Corporate Income Tax (CIT) Law, was approved by the National Assembly on 23 December 2022. The approved bill includes measures aimed at enhancing corporate competitiveness, expanding tax support to facilitate corporate investment and job creation, revitalising capital markets, expanding tax revenue sources to enhance public finance sustainability, and easing the tax burden of low and middle-income families. To help enhance the competitiveness of domestic companies, the approved bill lowers the top marginal CIT rate by one percentage point. Other significant corporation tax amendments include excluding 95% of the dividend from a foreign subsidiary from taxable income, exempting tax on bond interest, etc. received by non-residents and foreign corporations, increasing the limit on the deduction of losses carried forward, and expanding the applicable scope of the consolidated tax return system.

The approved bill includes significant amendments concerning international tax affairs. One of the most significant parts of the amendments are new rules to implement the global minimum taxation for multinational groups and large domestic groups, which is aligned with the Global Anti-Base Erosion Model Rules (Pillar Two) released by the Organisation for Economic Co-operation and Development (OECD) in December 2021. These rules include an ‘Income Inclusion Rule’ (IIR) and ‘Supplementary Rule for Income Inclusion’ (referred to as the UTPR in the OECD Model Rules). Both rules will be effective for fiscal years beginning on or after 1 January 2024. In addition, the significant amendments include, among others, a new provision to allow a special tax treatment on income attributed to an overseas transparent entity to prevent the possibility that the overseas investment of residents or domestic corporations might be subject to foreign income tax that would arise due to the reverse hybrid entity rules in foreign countries where the overseas transparent entity is established.

Key special tax treatment provisions under the approved bill include measures expanding tax credits for facility investment in designated new growth and core technology as well as national strategic industrial technology sectors, reforming the existing employment tax credit and relief to facilitate employment and jobs from companies, and extending the special tax concession period available for foreign engineers and workers.