Korea, Republic of

Resident corporations are taxed at normal CIT rates on their worldwide income, whereas non-resident corporations with a permanent establishment (PE) in Korea are taxed at normal CIT rates 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 2026:

* Korean won

** Excluding the local income tax.

Additional tax on corporate income

To encourage corporations to use their corporate retained earnings for facility investment and payroll increases, a 20% additional tax shall be imposed on the excess corporate earnings reserve of certain companies (excluding small and medium-sized enterprises [SMEs] and others) until 31 December 2028. Currently, this 20% additional tax  applies only to domestic companies within conglomerate groups that are subject to cross-shareholding restrictions under the Anti-Monopoly and Fair Trade Act. (see ’Tax measures to stimulate capital markets’ in the Tax credits and incentives section for details.)

Special Tax for Rural Development

When a corporate taxpayer claims certain tax credits or exemptions from its CIT liability under the Special Tax Treatment Control Law (STTCL), a 20% special tax for rural development (STRD) is levied on the amount of the reduction in, or exemption from, CIT liability, unless an STRD exemption applies. The application period for the STRD has been extended by ten years, until 30 June 2034.

Minimum tax

Corporate taxpayers (other than SMEs) are subject to the minimum tax, which is the greater of: (i) the amount calculated by applying 10% on the tax base of KRW 10 billion or less, 12% on the portion exceeding KRW 10 billion but not more than KRW 100 billion, and 17% on the portion exceeding KRW 100 billion, determined before certain tax deductions and credits pursuant to the STTCL, or (ii) the actual CIT liability after certain deductions and credits under the STTCL.

For SMEs, the minimum tax is the greater of: (i) the amount calculated by applying 7% on the tax base before certain tax deductions and credits or (ii) the actual CIT liability after certain deductions and credits. For companies that cease to qualify as SMEs for specific reasons, the applicable rates are 7% during the first six years after ceasing to qualify (or the first eight years for those listed on the Korea Exchange or the KOSDAQ), as extended from the previous first four years, 8% for the next three years, and 9% for the subsequent two years. This extension from four years to six years (or eight years) will apply if the reason for no longer qualifying as an SME first arises in the tax year that includes 31 December 2024, or thereafter.

New rules for global minimum tax

At the end of December 2022, Korea introduced new rules for the global minimum tax (the ‘GloBE Rules‘ or the ’Rules‘) into its domestic tax legislation, the Law for the Coordination of International Tax Affairs(‘LCITA’), effective for fiscal years beginning on or after 1 January 2024. Korea’s Rules are generally in line with the OECD Pillar Two Model Rules and related OECD guidance, and include the ‘Income Inclusion Rule’ (IIR) and the ‘Supplementary Rule for Income Inclusion’ (referred to as the Undertaxed Profits Rule or the UTPR). Under the LCITA, the IIR applies to fiscal years beginning on or after 1 January 2024, and the UTPR applies to fiscal years beginning on or after 1 January 2025. 

The Rules apply to all constituent entities (CEs) of a qualifying multinational enterprise (MNE) group with annual consolidated revenues of 750 million euros (EUR) or more in at least two of the four fiscal years immediately preceding the tested fiscal year. The Rules do not apply to excluded entities, including governmental entities, international organisations, non-profit organisations, pension funds, investment funds that are ultimate parent entities, real estate investment vehicles that are ultimate parent entities, and other prescribed entities directly or indirectly owned by one or more excluded entities, unless the filing CE elects not to treaty an entity as an excluded entity. 

For each jurisdiction, the effective tax rate (‘ETR’) is determined on a jurisdictional blending basis by dividing the amount of adjusted covered taxes for that jurisdiction by the aggregate GloBE income for all CEs located in that jurisdiction. If the jurisdictional ETR is below the minimum rate of 15%, top-up tax is calculated for the low-tax jurisdiction in accordance with the prescribed formula, unless an exclusion or safe harbour rule applies.  The top-up tax is generally imposed first on the relevant parent entity under the IIR, and any residual top-up tax may then be allocated to relevant CEs under the UTPR. 

Korea has adopted safe harbour rules that are consistent with OECD guidance. Under the transitional country-by-country reporting (CbCR) safe harbour rules, at the election of the filing CE, the top-up tax in a relevant jurisdiction may be deemed as zero if one of the prescribed CbCR safe harbour tests is satisfied during the transition period.  The transition period covers all fiscal years beginning before 31 December 2027 and ending before 30 June 2029, reflecting a one-year extension from the previous transition period under an amendment to the Presidential Decree of the LCITA in February 2026. In addition, effective 1 January 2025, a transitional UTPR safe harbour rule allows the UTPR top-up tax in the jurisdiction in which the ultimate parent entity is located, at the election of the filing CE, to be deemed to be zero if the statutory corporate tax rate of that jurisdiction is at least 20% during the UTPR transition period, which covers fiscal years beginning before 31 December 2025 and ending before 30 December 2026.

A GloBE information return and, where applicable, a top-up tax return must be filed, and any related payment must be made, by the later of 15 months (or 18 months for the first applicable year of the Rules) from the end of the fiscal year, or 30 June 2026. Failure to submit the information return, or the submission of a false return, triggers a fine of up to KRW 100 million. During the transition period, the fine may be waived if the measures prescribed in the Prescribed Decree of the LCITA, including full disclosure of the computation of GloBE income or loss, are taken.  In addition, failure to file or pay the top-up tax will trigger non-reporting or under-reporting penalties and late payment penalties. For the transition period, however, non-reporting or under-reporting penalties are fully exempt and late payment penalties are reduced by 50%.

Effective 1 January 2026, a domestic minimum top-up tax (DMTT) is also introduced as part of the Rules under the LCITA. A DMTT is a top-up tax, implemented and administered in a manner consistent with the outcomes produced by the GloBE rules, that is imposed by the Korean tax authorities on domestic CEs whose income in Korea is subject to an effective tax rate below 15%. A DMTT charged on domestic CEs in Korea will reduce the amount of top-up taxes that may otherwise be applicable and payable in another jurisdiction within the MNE group under the GloBE rules, whether under the IIR or the UTPR.

For more detailed information and the most recent updates, please visit PwC’s Pillar Two Country Tracker.

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 1.0% on the first KRW 200 million, 2.0% 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.