The Income Tax, Corporation Tax, and Value Added Tax (national taxes) make up the bulk of the Korean tax revenue. There also exist three national earmarked taxes: the Transportation Tax, Education Tax, and Special Tax for Rural Development; the revenues from these sources go directly to pre-designated government programs.
Fiscal year
The fiscal year begins on January 1st and ends on December 31 of the same year.
Income & Corporate tax
South Korea has a high income tax rate but a moderate corporate tax rate. The top income tax rate is 38.5 percent (a 35 percent income tax rate plus a 10 percent resident surcharge), and the top corporate tax rate is 27.5 percent (a 25 percent income tax rate plus a 10 percent resident surcharge).
VAT
The standard rate of the value-added tax (VAT) is 10%. Certain favoured or essential supplies are exempted, as well as export goods and services.
Inheritance tax
A person or a company that acquires property through inheritance or bequest is liable to the inheritance tax. An inheritor that is a for-profit company is exempt from the tax.
|
Tax Base (won) |
Tax Rates |
|
Up to 100 million |
10% |
|
100 to 500 million |
10 million won + 20% X the excess over 100 million won |
|
500 million to 1 billion |
90 million won + 30% X the excess over 500 million won |
|
1 to 3 billion won |
240 million won + 40% X the excess over 1 billion won |
|
over 3 billion won |
1.04 billion won + 50% X the excess over 3 billion won |
Gift tax
- Resident donee is obligated to pay the gift tax.
- Non-resident donee is obligated to pay a gift tax on the property acquired in Korea.
- When the donee is a for-profit company, it is exempt from the gift tax.
Rates for the gift tax are the same as for the inheritance tax. A tax return must be filed within 6 months after the commencement of the inheritance or gift, together with detailed statements about the amount to be deducted. The government determines the taxable value based on the tax return filed.
Property acquisition tax
In the business year in which a corporation acquires real estate, a motor vehicle, heavy equipment or a vessel, property acquisition tax will be assessed. This is a one-time tax assessed at the rate of 2% of the value of the acquired article. However, in the case of the acquisition of articles for business purposes in certain major cities, the rate is 10%.
Property Tax
Property tax is assessed yearly by local tax authorities on the value of buildings, land, mining rights, aircraft and vessels. The purpose of the property in question will determine the tax rate applicable.
For factories located in certain geographic areas, tax is assessed at the rate of 0.6% of the value of the land and buildings. Otherwise, commercial property is taxed at the rate of 0.3% of the value of the land and buildings.
Other important taxes
|
Name of Tax |
Rate |
|
Wealth tax |
0.3 to 7% |
|
Interests and royalities |
They are subject to a restraint at the source at a maximum rate of 10%, giving right to a tax credit of an equivalent amount |
Tax Administration
The Office of Tax and Customs at the Ministry of Finance and Economy (http://english.mofe.go.kr ) is responsible for planning tax policies and drafting tax laws, while the National Tax Service carries out the administration enforcement, which includes tax assessment and collection.
National Tax Tribunal
The National Tax Tribunal was established as an independent organization under the former Ministry of Finance on April 1, 1975. It is now composed of a General Affairs Division, a Supreme Judge, 3 Judges, and 10 Examiners. It is responsible for examining and judging tax appellate cases.
Tax deductions & allowances
There are several types of deductions for the taxpayers in South Korea. For further details, you must contact local tax authorities or visit the homepage of the Ministry of Finance and Economy at http://english.mofe.go.kr .