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FDI InformationAll about Investment in KoreaTaxationTaxes and contributions borne by an employer

Taxes and contributions borne by an employer

[1] Taxes and contributions borne by an employer (company)

< National Taxes >

(1) Corporate tax
(2) VAT
(3) Withholding tax

Foreign-invested corporations shall be subject to taxation such as for corporate tax and VAT as same as for domestic corporations.

1. Corporate Tax

(1) Tax rates for corporations (10% of local income tax to be applied separately)

(Tax rates to be applied from 2023)

Tax Bracket	Corporate Tax Rate	Progressive Deduction
200 million won or less	9%	-
more than 200 million won to 20 billion won or less	19%	20,000,000
20 billion won to 300 billion won or less	21%	420,000,000
3,00 billion won or more	24%	9,420,000,000

(2) Subject and period of corporate tax reporting

① All income obtained by a corporate is subject to taxation.
② Corporate tax reporting and payment shall be completed within 3 months from the date on which the business year ends with the corporate tax base reported and tax paid at the competent tax office.
③ Local income tax (10%) for the corporate tax shall be reported and paid to the competent mayor or governor within 4 months from the date on which the business year ends.

(3) Tax deductions or reductions for foreign-invested corporations (Article 121-2 of the Act on Restriction of Special Taxation)

Generally, tax credits for foreign investors have largely reduced compared to the past and increasingly being wiped out. However, reductions and deductions are applicable to special cases as follows:

1) Foreign-invested companies doing business that accompanies advanced technology

(as business belonging to the new growth engine industries that are crucial for the advancement of the domestic industrial structure and the reinforcement of the global competitiveness of Korea, invest in a business that accompanies advanced technology prescribed by the Presidential Decree;
Recently, tax reductions are only applicable to those who invest in industries that require highly-advanced technology or makes a large-scale investment in a certain region.
2) Foreign-invested companies that invest above a certain scale and settle in designated areas such ase

· economic free zones established and operated under the Special Act on the Designation and Operation of Economic Free Zones
· the Saemangeum Project area established and supported under the Special Act on the Promotion and Support of the Saemangeum Project
· the Jeju Free International City Investment Zone, etc.

2. VAT

(1) In Korea, the VAT is imposed on the supply of goods or services for the purpose of business.

In principle, the fixed rate of 10% is imposed on the Added Value (output value – input value) gained by a business operator.

(2) Calculation

① In Korea, the VAT rate is 10%. The VAT is generated by adding 10% of the supply price and collecting it from the purchaser in the form of transaction tax when a supplier provides goods or services.
② The supplier collects value-added tax from the purchaser during a certain period (taxation period) and pays it to the tax authority (tax office). During the same taxation period, the supplier calculates the value-added amount to be paid by deducting the input tax paid when purchasing from the sales tax amount.

VAT to be paid = Sales supply price x 10% - Input tax paid

(3) VAT Taxation Period

Tax period	Taxation Period		Reporting & Payment	Subject to Reporting
1st period Jan 1st – Jun 30th	Preliminary	an 1st- Mar 31st	Apr 1st - 25th	corporate business owner
1st period Jan 1st – Jun 30th	Final	Jan 1st-Jun 30th	Jul 1st - 25th	corporate‧individual business owner
2nd period Jul 1st - 7.1~12.31	Preliminary	Jul 1st – Sep 30th	Oct 1st - 25th	corporate business owner
2nd period Jul 1st - 7.1~12.31	Final	Jul 1st – Dec 31st	Jan 1st - 25th in the subsequent year	corporate‧individual business owner

3. Withholding Tax

(1) Withholding tax is applicable to the followings:

  1) salary of executives and employees;
  2) interest income and dividend income;
  3) royalty.

(2) Monthly withholding for invested corporation (company) employees' salaries

When paying monthly salaries to the employees of the invested corporation, the business operator must withhold income tax on the monthly salary received by the employee and pay it to the relevant tax office by the 10th of the following month. (Withholding tax on employee salaries)"
In this case, the company must prepare a labor contract when hiring an employee and calculate the monthly salary according to the labor contract and deduct the withholding tax amount before paying.
(Examples of deductible amounts: income tax, four major insurances (health insurance, national pension, employment insurance, occupational health and safety insurance)

(3) Withholding tax on interest and dividend

When an invested corporation provides interest or dividend, it shall deduct the withholding tax from the interest and dividend to be paid and pay the withholding tax to the relevant tax office by the 10th day of the following month. In particular, in the case of interest or dividend to be paid abroad, since the withholding tax rate varies depending on the tax treaty, you need to check accurately and pay after deducting the withholding tax. (The same 15.4% applies in Korea, but in the case of paying to overseas countries, the tax treaty shall be checked in advance.)

(4) Withholding tax on royalties

Often, foreign-invested companies are required to pay royalty abroad, to which limited tax rate is applied according to tax treaty, so that the withholding tax rate varies depending on the country it needs to be paid to. Therefore, you need to check the withholding tax rate of the counterpart country before deducting the tax amount and paying the royalty.

< Local Tax >

(1) Acquisition tax (registration tax)
(2) Property tax

1. Acquisition tax to be paid when acquiring real estate

(Real estate transfer tax rate))

Type of real estate acquisition		Area	Acquisition tax	Special tax for rural development	Education tax	Total	Applicable period
house (paid acquisition)	600 mn won or less	85㎡ or less	1.0%	-	0.1%	1.1%	[in effect] Jan 1st 2014 applicable to both multi-house owner and single house owner
	600 mn won or less	more than 85㎡	1.0%	0.2%	0.1%	1.3%
	more than 600 mn won	85㎡ or less	2.0%	-	0.2%	2.2%
	900 mn won or less	more than 85㎡	2.0%	0.2%	0.2%	2.4%
	more than 900 mn won	85㎡ or less	3.0%	-	0.3%	3.3%
	more than 900 mn won	more than 85㎡	3.0%	0.2%	0.3%	3.5%
paid acquisition of property other than house		-	4.0%	0.2%	0.4%	4.6%	[in effect] Jan 1st 2011
paid acquisition of farmland		-	3.0%	0.2%	0.2%	3.4%
paid acquisition of farmland	buy and sell	new	3.0%	0.2%	0.2%	3.4%
paid acquisition of farmland	buy and sell	more than 2 years	1.5%	-	0.1%	1.6%
original acquisition (preservation registration)		-	2.8%	0.2%	0.16%	3.16%
inheritance acquisition		farmland	2.3%	0.2%	0.06%	2.56%
inheritance acquisition		other than farmland	2.8%	0.2%	0.16%	3.16%
gift acquisition		-	3.5%	0.2%	0.3%	4.0%
acquisition from share transfer for division of common property or dissolution of common right of real estate		-	2.3%	0.2%	0.06%	2.56%
aquisition through division of joint and total assets		-	2.3%	0.2%	0.06%	2.56%
preliminary registry		-	0.2%	-	0.04%	0.24%

2. Tax arising from the possession of property

Property Tax

(1) What is property tax ?

Property tax is imposed on owners of land, buildings, houses, ships, and aircraft.
(2) Tax base

It refers to the value calculated by multiplying the fair market value ratio prescribed by Presidential Decree within the range set forth in any of the following items, taking into consideration trends in the real estate market and local financial conditions.
1) Land and buildings : From 50% to 90% of the standard market value
2) Housing : From 40% to 80% of the standard market value
(3) Tax rate

1) Land
   ① and subject to general aggregate taxation : 0.2%~0.5%(non-business land such as idle land)
   ② land subject to special aggregate taxation : 0.2%~0.4%(business land such as building, commercial property, office attached land, etc.)
   ③ land subject to separate taxation :
      - Paddy field, orchard : 0.7/1000
      - Golf course, ski resort : 401/1000
      - Other land : 2/1000
2) Building
   housing : 0.1%~0.4%
   villa and other similar properties : 4%
   golf course and luxurious entertainment parks : 4%
   buildings for factories : 0.5%
   Other buildings: 2.5/1000

(4) Date of taxation & Payment

Property tax is imposed on individuals who own real estate on June 1st of each year (the property taxation date).
In addition to property tax, local education tax (20% of the property tax) and urban planning tax and communal facility tax are also imposed.

Subject	Payment Period	Payment Method	Competent Institution
• property tax for building portion • half of property tax for housing portion	Jul 16th to 31st	pay upon notice	Si ‧ Gun ‧ Gu
• property tax for land portion • half of property tax for housing portion	Sep 16th to 30th	pay upon notice	Si ‧ Gun ‧ Gu

※ If the property tax amount for the housing portion is no more than 50,000, a notice about the full amount will be made in July.

< Comprehensive Real Estate Holding Tax >

1. What is comprehensive real estate holding tax

(1) A tax imposed on owners who exceed certain ownership standards for national real estate, classified by property type and aggregated by household or individual

(2) Primarily, local governments in si, gun, and gu impose property taxes (local taxes) after classifying local real estate by tax type.

(3) Comprehensive real estate holding taxes (national taxes) are imposed by the tax office in charge of the address (headquarters location) when the amount exceeds a certain limit.

① Taxation date

The comprehensive real estate holding tax is based on the ownership of real estate as of June 1 of each year.
② Land subject to taxation

- housing (including attached land)
- comprehensively aggregated land (non-business land such as idle land, etc.)
- specially aggregated land by classifying business land into buildings, shops, and office attached land whose property value exceeds the standard amount for each category

③ Standard amount

The "taxable standard amount" is calculated by summing up the real estate values by household or individual, nationwide.
Taxation obligation arises only when the value exceeds this standard amount.

Subject to taxation	Summed up by	Taxation standard amount
housing (including housing-attached land)	household 합산	individual residential property assessed value: 900 mn won (for a single-household owner of one residential property: 1.2 bn won)
comprehensively aggregated land (non-business land such as idle land and mixed-use land)	household 합산	individual assessed land value 500 mn won
separately aggregated land (land attached to buildings, offices, and commercial properties, etc.	individual	individual assessed land value 8 bn won

※ Corporations (including other organizations) are taxed by combining the individuals.
※ "1 house per household" means that only one member of the household who is a resident owns a single house that is subject to property tax.
The standard amount for the comprehensive real estate tax of a jointly owned house by a married couple is (600 mn won + 600 mn won= 1.2 bn won.

2. Taxpayer

(1) Basic requirements (for those with property tax obligations)

the person who is considered to be the de facto owner as of the taxation date (June 1st of each year)

(2) In the case of individuals:

- The main homeowner or landowner who owns a house or non-business land that exceeds the taxable base amount calculated by combining the assessed values of all households nationwide is responsible for paying the property tax, and household members are obligated to jointly pay up to the assessed value of the house or non-business land they own.
- The owner of business land who exceeds the taxable base amount calculated by combining the assessed values of all individuals nationwide is responsible for paying the property tax.

(3) In the case of corporations (including organizations, groups, etc.):

The owner of a house or land who exceeds the taxable base amount calculated by combining the assessed values of all corporations nationwide is responsible for paying the property tax.

3. Assessment of disclosed value for housing and land

(1) During the 20-day period for viewing and submitting opinions prior to the price disclosure conducted by the mayor, county magistrate, or district office head, individuals can submit their opinions.

(2) If there are clear errors in the publicized price due to miscalculation, individuals can submit a written objection to the agency in charge of the individual price disclosure (housing: by April 30th, land: by May 31st) within 30 days from the disclosure date.

4. Application of comprehensive real estate holding tax rates

(1) housing : 0.5%~2.0%

(2) comprehensive aggregate land (non-business land such as idle land, etc.) : 0.75~2.0%

(3) special aggregate land (business land) : 0.5%~0.7%