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.  The 20% additional tax on the excess corporate earnings reserve shall apply only to domestic companies within conglomerate groups that are subject to cross-shareholding restrictions under the Anti-Monopoly and Fair Trade Act. (For details, see the section “Tax Measures to Stimulate Capital Markets.”)

Special Tax for Rural Development

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. The application period has been extended for ten years to 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 the companies that are disqualified from SMEs due to 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), which has been extended from the first four years, 8% for the next three years, and 9% for the subsequent two years. The extension from four years to six years (or to eight years) will apply when 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

Korea has introduced new rules for the global minimum tax (‘GloBE Rules‘ or ’Rules‘) at the end of December 2022. The Rules include the ‘Income Inclusion Rule’ (IIR) and the ‘Supplementary Rule for Income Inclusion’ (referred to as the UTPR). Under domestic tax law, the IIR is effective for fiscal years beginning on or after 1 January 2024 while the UTPR is effective for fiscal years starting on or after 1 January 2025. The Rules apply to all constituent entities of a qualified 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 shall not apply to entities that are excluded entities, which refer to a governmental entity, an international organisation, a non-profit organisation, a pension fund, an investment fund that is an ultimate parent entity, and a real estate investment vehicle that is an ultimate parent entity. In addition, the rules shall not apply to a prescribed entity that is directly or indirectly owned by an excluded entity. 

The effective tax rate is calculated by dividing the adjusted covered taxes incurred by the net global anti-base erosion (GloBE) income for all of the MNEs’ constituent entities that are located in the same jurisdiction (i.e. jurisdictional blending). If the effective tax rate is lower than 15% in a given jurisdiction, an additional top-up tax for the jurisdiction for the fiscal year is calculated in accordance with the prescribed formula and paid by other constituent entities within the group under the relevant law. 

Korea has adopted safe harbour rules, which are generally aligned with the guidance recommended by the OECD. Under the country-by-country (CbC) reporting safe harbour rules, a domestic filing constituent entity may elect to treat the top-up tax of a relevant jurisdiction as zero if it passes one of the prescribed CbC reporting safe harbour tests during a transitional period covering fiscal years beginning before 31 December 2026 and ending before 30 June 2028. Effective 1 January 2025, the amended domestic tax law also introduced a new provision for transitional UTPR safe harbour rules. The UTPR safe harbour rules allow the jurisdiction that the ultimate parent entity is located in, at the discretion of the filing constituent entity, to reduce the UTPR top-up tax to zero if the statutory corporate tax rate of that jurisdiction is at least 20% during a transition period covering fiscal years that begins before 31 December 2025 and ends before 30 December 2026.

Filing a tax return and payment shall be due 15 months from the end date of the tested fiscal year. However, for the first year, the due date extends to 18 months from the end date of the tested fiscal year. Failure to submit the GloBE information report or submitting a false report triggers a penalty of up to KRW 100 million, which shall not apply during the transition period if certain requirements are met.

Effective January 1, 2026, a domestic minimum top-up tax (DMTT) is introduced as part of the domestic pillar two rules under the Law for Coordination of International Tax Affairs.  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 constituent entities (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, either 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.