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South Korea

Located between China and Japan, Korea is the centre of aviation and maritime logistics connecting the Asia-Pacific region, as well as Eurasia and the Americas. The Republic of Korea (South Korea or Korea) is divided into nine provinces, with Seoul as the capital. The official language of South Korea is Korean, and the currency is the won (KRW).




CIT = Corporate Income Tax 

SSC = Social Security Contribution  (Employee + Employer)


Since the 1960s, South Korea has achieved an incredible record of growth and global integration to become a high-tech industrialised economy. In 2006, South Korea joined the trillion-dollar club of world economies. In 2022, Korea was the 13th largest economy in the world by the nominal gross domestic product (GDP) according to the World Bank. Korea’s economic fundamentals are solid, with its trade volume ranked ninth in the world as of 2020. Initially, a system of close government and business ties, including directed credit and import restrictions, made this success possible. The government promoted the import of raw materials and technology at the expense of consumer goods and encouraged savings and investment over consumption. Korea adopted numerous economic reforms following the global crisis, including greater openness to foreign investment and imports.

More recently, the Korean government’s policy has focused on expanding investment and strengthening digital infrastructure in the country through its Digital New Deal policy. According to the World Economic Forum (WEF), the dissemination of information and communication technologies (ICT) in Korea has ranked first in the world. Korea succeeded in commercialising the world’s first 5G network (April 2019), proving that the country is a global leader in the ICT field.  During 2021, the Korean economy recorded a growth rate of 4.1%.  The growth rate declined to 2.6% in 2022 and is estimated to further decline to 1.4% in 2023.  South Korea’s per capita gross national income was 29.7 times the level of North Korea in 2022.




Taxation of individuals

A taxpayer in Korea, who is liable to pay the income tax on their income, is classified into resident and non-resident for income tax purposes.

A resident is subject to income tax on all incomes derived from sources both within and outside Korea. Foreign residents who have stayed in Korea for longer than five years during the last ten-year period are taxed on their worldwide income. However, foreign residents who have stayed in Korea for five years or less during the last ten-year period are taxed on Korea-source income, and foreign-source income is reportable only in the case where foreign-source income is paid by a Korean entity or transferred to Korea.

A non-resident is subject to income tax only on income derived from sources within Korea. When a non-resident who does not have a domestic place of business has Korea-source income to report through an annual tax return, most provisions concerning the tax rates and the filing procedures of residents shall apply to them. However, in calculating taxable income and tax amount, a non-resident is not entitled to claim any personal exemptions for their dependants (except for themselves), income deductions, and tax credits.

Personal income tax (PIT) rates

The following tax table summarises the basic global income tax rates applicable for the income received from 1 January 2023 and thereafter.

Local income tax

Besides the above PIT, there is also a local income tax that is assessed at a rate of 10% of the PIT rates.

  • PIT is paid to the National Tax Service (NTS).

  • Local income tax is paid to the city or the province that is the domicile of the taxpayer.

Alternative minimum tax (AMT)

The AMT, with exceptions, will be calculated at the greater of 45% of income tax liability (35% applied to income tax liabilities of up to KRW 30 million) before exemptions or actual tax after exemptions.

The AMT is applied to business income of a resident individual and Korean-source business income of a non-resident individual, but it is not applied to employment income.

Social Contribution  

There are four types of social security contributions in Korea, namely: National Pension (NP), National Health Insurance (NHI), Employment Insurance (EI), and Worker’s Compensation Insurance (WCI).

National Pension (NP)

Assuming the employee is enrolled as a 'workplace-based insured person' under the NP scheme, employers are required to contribute an amount equal to 4.5% of salaries to the national pension fund. Employees are also required to contribute an amount equal to 4.5% of their salaries. As such, the total contribution rate is 9% of salaries per annum with both the employer and the employee splitting the 9% contribution equally. The employee contributions to the NP scheme are deductible in calculating taxable income.

National pension contribution is capped at a monthly salary of KRW 5,900,000, and the maximum monthly pension contribution to be paid by an employee is KRW 265,500 (subject to change every July) for the period from July 2023 to June 2024.

Foreigners working in Korea are required to contribute to the NP scheme unless there is a social security agreement between Korea and their home country and the individual remains under the home country social security scheme.

Foreign participants (with few exceptions) withdrawing from the NP scheme due to a permanent departure cannot get a refund unless their home country has a social security agreement with Korea, or applies the same treatment to Koreans on a reciprocity rule in the absence of a social security agreement. Social security contributions paid to a foreign country are not deductible against Korean income under the Korean income tax law.

National Health Insurance (NHI)

In general, foreigners working in Korea are required to subscribe to the NHI program, which is mandatory for all foreign expatriates and employees who earn employment income in Korea.

Assuming the employee is enrolled as a 'workplace-based insured person' under the NHI scheme, as of 1 January 2024, the applicable premium rate, including long-term care insurance, is approximately 8.008% of the monthly wages (currently capped at a monthly contribution of KRW 9,579,760 in total, subject to change in 2025); split equally between employers and employees at approximately 4.004% each. The employee contributions to the NHI program are deductible in calculating taxable income.

By submitting relevant documents, certain foreigners can exempt themselves from the mandatory NHI scheme if they are already covered by insurance from their home country, foreign insurance company, or an employer that provides them with the equal or higher level of medical coverage as prescribed in the Korean NHI Law.

Employment Insurance (EI) 

The obligation to contribute EI differs depending on the taxpayer's nationality and visa type. In general, a foreigner who holds a D-7, D-8, and D-9 (trade management) visa is required to participate in EI. Foreigners from certain countries are exempt from the EI obligation under a reciprocity principle, if the foreigner's home country does not require mandatory participation by Korean nationals' in the country's equivalent social security contribution.

Currently, the employee contribution rate for EI is 0.90% starting from July 2022, but the EI rate for employers varies starting from 1.15% to 1.75% depending on the number of employees and type of industry. In other words, in addition to the 0.90% contributions to EI, employers are required to make 0.25%~0.85% contributions to employment stabilisation insurance and occupational competency development insurance.

Worker’s Accident Compensation Insurance (WCI) 

WCI is a state-run social security program for workers with work-related injuries, disease or disability, or any circumstance exposed to danger that can result in death while at work. Making contributions to WCI is compulsory only for employers. The contribution rate is imposed by the social security office considering working environments (currently from 0.7% to 18.6% of total wages and payroll, depending on the type of industry). 


There is also a severance pay system that requires no employee contribution. Severance pay, or retirement income, is taxed separately from global income.

Taxation of legal persons

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.

The following tax table summarises the CIT rates applicable for the fiscal year starting on or after 1 January 2023:

Additional tax on corporate income

To facilitate the use of corporate retained earnings to fund facility investment and payroll increases, 20% additional tax shall be applied for excess corporate earnings reserve of a company (excluding small and mid-size enterprises [SMEs], etc.) by 31 December 2025. Companies should elect one of the following methods in computing excess corporate earnings reserve subject to the additional tax:

  • ([adjusted taxable income for the year x 70%] - the total amount of facility investment, wage increases, and expenditures for mutual growth of large corporations and SMEs) x 20%, or

  • ([adjusted taxable income for the year x 15%] - the total amount of wage increases and mutual growth expenditures) x 20%.

The rule for 20% additional tax was scheduled to sunset at the end of December 2022 although a company having untaxed excess corporate earnings reserve carried over from prior years from 2021 and 2022 shall be subject to additional tax in a current year according to the former rule if qualifying expenditures, such as facility investment, salary increase, etc., in a current year is less than the prior year’s excess corporate earnings reserve.  The sunset date has been extended by additional three years until December 31, 2025.   In extending the sunset, the application of the additional tax has been refined to only include those within a conglomerate group which are subject to restrictions on cross-shareholdings as specified in the Anti-Monopoly and Fair Trade Act.

Minimum tax

Corporate taxpayers (except SMEs) are liable for the minimum tax, which is defined as the greater of 10% (if the tax base is KRW 10 billion or less, 12% on the tax base exceeding KRW 10 billion but not more than KRW 100 billion, 17% on the tax base exceeding KRW 100 billion) of the taxable income before certain tax deductions and credits pursuant to the STTCL or the actual CIT liability after certain deductions and credits under the STTCL.

For SMEs, the minimum tax is the greater of 7% of taxable income before certain tax deductions and credits or actual CIT liability after the deductions and credits. For the companies that are disqualified from SMEs due to specific reasons, the applicable rates are 7% during the first four years after ceasing to qualify, 8 percent for the next three years, and 9 percent for the subsequent two years.

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 0.9% on the first KRW 200 million, 1.9% for the tax base between KRW 200 million and KRW 20 billion, 2.1% for the tax base between KRW 20 billion and KRW 300 billion, and 2.4% for the excess.

Value Added Tax - VAT

VAT is levied at a rate of 10% on the supply of goods and services, except zero-rated VAT on certain supply of goods and services (e.g. goods for exportation, certain eligible services rendered to non-residents or foreign corporations earning foreign currency, international transportation service by ships and aircraft) and exemption on certain goods and services (e.g. basic life necessities and services, such as unprocessed foodstuffs and agricultural products; medical and health services; finance and insurance services; duty-exempt goods). The zero-rated VAT only applies to the supply of certain services that are provided to a non-resident or a foreign corporation without having a PE in Korea on a reciprocal basis. They include professional services (e.g. legal, accounting, tax, advisory, market survey, management consulting), business support services (e.g. human resources outsourcing, office support, employment placement agency), and investment advisory services.

Electronic VAT invoicing by the supplier of goods or services is a compulsory requirement. If a taxpayer fails to issue the electronic VAT invoice or report electronically to tax authorities, the relevant penalties shall be imposed.

If a foreign company or a non-resident without a PE in Korea or without regard to a PE in Korea provides certain electronic services to a consumer (excluding the person having Korean VAT registration) in Korea via an information and communication network (as defined under relevant Korean act), it shall comply with the requirements of a simplified VAT registration and VAT return filing, together with VAT payment for the provision of the electronic services.  With effect from January 1, 2024, a penalty of 1% the supply price of electronic services for the period up to the date preceding the simplified registration date will be levied for non-compliance with the simplified registration requirement.  The electronic services of a foreign company or non-resident includes games, audio/video files, electronic documents, etc. that are supplied in an electronic format through an information and communication network, as well as cloud computing, advertising placement services, and intermediary services that include mediating activities of renting, using, consuming, supplying, or purchasing goods or services in Korea. If the foreign electronic services are supplied to Korean consumers through third parties, such as electronic marketplaces or intermediaries who transmit payment from the purchaser to the seller, the third party must register and account for the VAT. With effect from 1 July 2022, a foreign company or non-resident engaging in electronic services through the simplified VAT registration is required to comply with documentation of keeping transaction details for five years from the due date for VAT returns for the taxable period to which the transaction belongs.



Our office in Seoul can count on the support of a firm of Accountants and Auditors founded in 2000 made up of 4 Partners as well as a staff of 8 people who work daily in the areas of auditing, payroll processing, accounting, tax assistance and compliance.  

Do you need support in South Korea?

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0363 360254

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