Korea, Republic of

On 10 December 2024, Korea's National Assembly approved significant amendments to 13 tax laws, including the Corporate Income Tax Law (CITL). These changes are designed to bolster support for strategic high-tech sectors and promote future growth industries, improve tax transparency, combat tax evasion, and facilitate the development of the domestic capital market. The amended tax law expands the scope of national strategic technologies eligible for enhanced tax credits. It also expands the scope of technologies eligible for research and development (R&D) tax credits for new growth and source technologies, as well as national strategic technologies. These measures aim to enhance support for these vital sectors.

To enhance tax transparency and curb tax evasion, the amended law introduces enforcement fines on taxpayers who fail to provide necessary documents, such as books and records, during tax audits without justifiable reasons. It also expands the scope of the automatic exchange of financial transaction information to encompass crypto asset transactions. Moreover, it extends the existing obligation to submit quarterly transaction statements to non-residents or foreign corporations acting as sales agencies or intermediaries for online marketplace operators, payment gateway providers, and others as prescribed by law.

The latest amendments include provisions to eliminate the scheduled taxation of income from investment in financial instruments and streamline the tax exemption application process for interest and capital gains derived by non-residents or foreigners from investments in government bonds. This is intended to attract foreign corporations and individual investors to the domestic bond market. Additionally, it establishes a framework for taxing gains from fractional investment products, such as investment contract securities or non-monetary trust beneficiary securities, as dividend income, aligning their treatment with that of collective investment vehicles.

The amendments also reflect updates to the global minimum tax rules to align domestic rules with the Administrative Guidance released by the Organisation for Economic Co-operation and Development’s (OECD's) Inclusive Framework. Notably, a new transitional safe harbour provision related to undertaxed payments rules (UTPR) is set to apply for fiscal years beginning before 31 December 2025 and ending before 30 December 2026.