South Korea: corporate tax guide

What the tax system covers

A company with its head office, principal office or effective place of management in Korea is domestic for corporate-tax purposes. Its worldwide income and foreign-tax treatment are separate from a foreign employee's personal election or short-term residence concession.

When a company becomes tax resident

Article 2 treats a company with its head office, principal office or effective place of management in Korea as domestic. A foreign registration therefore does not settle the company’s residence when its founder makes the real decisions from Seoul. Document who controls the company and where that authority is exercised.

Rates and the tax base

10%, 20%, 22% and 25% national bands. The 2026 ordinary national corporate schedule is progressive. Local corporate income tax is additional; special small-company, cooperative, property-disposal and incentive provisions require separate analysis. These rates replace the lower 2023–2025 national bands.

Outbound dividends, interest and royalties

Dividends: 20% national; local tax additional. The NTS domestic table gives 20% national withholding for a foreign company. Local income tax is separate and is not included in this displayed national rate; treaty treatment may alter the combined liability.

Interest: 20% national; 14% specified bond interest. The domestic NTS table distinguishes ordinary interest at 20% from bond interest at 14%, before additional local tax. Specific exemptions and treaty entitlement need separate assessment.

Royalties: 20% national; local tax additional. The NTS domestic nonresident table gives 20% national withholding for royalty income. Local income tax is separate; characterization, source and treaty relief can change the effective deduction.

CFC attribution uses ownership, relationships and a low-tax test

Current article 27 deems distributable retained income of specified foreign corporations to be a dividend attributable to the Korean investor. The low-tax condition compares actual foreign tax with income multiplied by 70% of the highest Korean corporate-tax rate. It is a formula tied to the applicable rate, so an old fixed percentage can become misleading.

The company must also satisfy the related-party condition. The investor scope includes direct or indirect holdings of at least 10%, with specified related-person interests included in that calculation. Foreign trusts similar to the statutory corporate-tax trust categories can be treated separately as foreign corporations. Apply the remaining statutory exclusions and computational rules before quantifying an attribution; retaining profits abroad alone does not prevent a charge.

Document continuing companies and accounts

If a foreign company was effectively managed in Korea, record how its actual decision-making changes. An owner’s flight does not prove that the company’s management moved on that day, especially if local staff or directors continue controlling it. Preserve accounts and ownership records needed for any final CFC computation.

Discuss continuing bank access, identity-document expiry, address changes and the documentation for outward transfers. Keep a functioning method of authentication until final payments and refunds are settled. For a Korean company that continues operating, appoint responsible people for filings, licences, payroll and banking. Shareholder departure, corporate closure and investment repatriation are different processes and should each have a clear owner and completion record.

A foreign company and a future departure require separate planning

Corporate Tax Act article 2 includes a company whose effective place of management is in Korea within domestic-company treatment. Separately, the international-tax statute can attribute a qualifying foreign company’s retained income to a Korean investor. Company residence and shareholder CFC attribution should be tested in that order rather than merged into a single offshore-company question.

A later departure can also bring a deemed disposal for specified substantial shareholders with the required residence history. Review this before establishing Korean residence if an eventual sale or relocation is part of the plan. Offshore Capitalist can connect the arrival, operating and departure work so immigration, banking and tax arrangements remain consistent with where the family and business actually function.

Foreign companies and income attribution

Article 27 covers related low-tax foreign entities and investors within the 10% scope; low-tax formula is 70% of the highest corporate rate, with remaining statutory exclusions and computations.

Departure, migration and continuing obligations

Personal article 118-9 deemed disposal applies to specified major shareholders with at least 5 of the prior 10 years of residence. Detailed decree-level asset/ownership tests and corporate consequences remain separate.