South Korea taxes residents on worldwide income and non-residents on Korea-source income only. South Korea operates a self-assessment system.
The South Korean tax year is the calendar year. The individual filing deadline is generally 31 May of the following year; corporate filing deadline follows the company's own fiscal year-end (commonly 3 months after year-end for calendar-year filers). South Korea's National Assembly enacted a sweeping tax reform package (effective for tax years beginning 1 January 2026) raising corporate tax rates across every bracket by one percentage point (the top marginal rate moving from 24% to 25% - see Corporate Tax Rate below) and tightening residency criteria for both entities and individuals.
South Korea's headline corporate income tax (CIT) rate is 25%.
The headline personal income tax (PIT) rate is 45%.
The standard VAT/GST (or equivalent consumption tax) rate is 10%.
Under Article 1-2 of the Income Tax Act, an individual is a Korean tax resident if they either have a domicile in Korea (their domestic "base of living" - center of family, occupation, and personal ties) or maintain a place of residence in Korea for 183 days or more in a tax year. Effective from 2026, the 183-day threshold applies on a rolling basis rather than strictly per calendar year, closing a prior gap that let individuals split stays across two years to avoid residency. Residents are taxed on worldwide income (with a limited exemption for foreign-source income of newly resident foreign nationals during their first five years); non-residents are taxed only on Korea-source income.
A non-Korean entity has a South Korea permanent establishment through a fixed place of business or a dependent agent habitually concluding contracts in Korea on the entity's behalf, following the OECD Model Treaty definition as applied under Korean domestic law and any applicable tax treaty; the 2026 reform package has introduced stricter documentation requirements for treaty-based exemptions and reduced withholding rates, with the NTS signaling more active enforcement.
A Korean resident (individual or corporation) holding 10% or more of a foreign corporation, directly or indirectly, is subject to CFC taxation where the foreign entity's average effective tax rate over the preceding three years is 70% or less of Korea's top statutory corporate rate - a threshold of approximately 17.5% following the 2026 reform's increase of the top CIT rate to 25% (previously approximately 16.8%, based on the pre-2026 24% top rate; confirm whether the CFC threshold itself has been formally updated to reflect the new 25% top rate, since the underlying 70%-of-top-rate formula and the top rate itself are governed by separate provisions). Where triggered, the CFC's undistributed earnings are deemed distributed and included in the Korean shareholder's taxable income in the tax year containing the 60th day after the CFC's fiscal year-end. The regime does not apply to a foreign branch of a Korean corporation.
Korea applies two layered interest restrictions. The thin capitalization rule denies deduction of interest on debt from a foreign controlling shareholder (or third-party debt it guarantees) once the debt-to-equity ratio exceeds 2:1 (6:1 for regulated financial institutions); excess interest is recharacterized as a dividend subject to withholding tax. Separately, since 2019 (implementing OECD BEPS Action 4), net interest paid to foreign related parties exceeding 30% of adjusted taxable income (EBITDA-equivalent) is non-deductible - where both rules could apply, the lower deduction cap governs.
South Korea does not use an elective check-the-box classification system; entity classification generally follows the entity's actual legal characteristics under Korean law. South Korea has implemented anti-hybrid provisions addressing double-deduction and deduction-without-inclusion outcomes involving related parties, aligned with OECD BEPS Action 2 principles.
A Korean resident (individual or corporation) with foreign financial accounts exceeding KRW 500 million in aggregate balance at the end of any month during the year must report those accounts to the National Tax Service by the following June. Penalties for non-reporting or under-reporting scale with the unreported amount and can include criminal referral for large-scale non-compliance (historically, unreported amounts above a high statutory threshold). This is South Korea's own domestic foreign-account reporting regime, distinct from South Korea's separate participation in CRS automatic exchange described under Treaty Network below.
South Korea provides a partial dividend exemption for qualifying foreign-source dividends received by a Korean resident company from a foreign subsidiary in which it holds at least 10% (a lower 10%-or-greater threshold applies for certain overseas subsidiaries), generally exempting 95% of the dividend from Korean corporate tax, subject to specified holding-period and anti-abuse conditions.
South Korea has a real foreign tax credit regime available to both individuals and companies for foreign tax paid on foreign-source income also taxed in Korea, capped at the Korean tax otherwise due on that income, computed on a per-country limitation basis.
Korea maintains income tax treaties with 97 countries as of January 2026. Korea has also concluded standalone tax information exchange agreements (TIEAs) with a number of low-tax jurisdictions, including Andorra, Bermuda, the British Virgin Islands, and the Cook Islands. Starting in 2026, Korean withholding agents face stricter documentation requirements before applying a reduced treaty withholding rate, including a current certificate of tax residence from the recipient's home tax authority.