South Korea Budget – Introduction
The South Korean government passed a proposed bill in December 2022 that includes some changes to tax laws and enforcement decrees.
Here are the key changes that may affect foreign businesses and investors in South Korea.
Lower corporate income rate
Starting on January 1, 2023, the tax rate for each of the four corporate income tax brackets is cut by 1% to promote investment and job creation by businesses.
Wider consolidated tax return
Starting on January 1, 2024, a parent company may consolidate its subsidiaries in Korea in its tax return if the parent directly and indirectly holds 90% of the issued and outstanding shares (excluding treasury shares). Before the amendment, the shareholding requirement was 100%.
Longer flat income tax rate for foreign workers
Starting on January 1, 2023, a foreign worker may elect to apply the flat 19% rate (20.9% including local income tax) on his/her personal income tax for 20 years from the date he/she first started working in Korea.
Previously, it was limited to 5 years.
Increased loss carry forward
Starting on January 1, 2023, loss carry forward is increased to 80% of the net loss in a given fiscal year.
For small and medium-sized enterprises, it remains the same at 100%.
Income exclusion for dividends from subsidiaries
Starting on January 1, 2023, any dividends received by a company from another domestic company may be excluded from its taxable income according to the rates provided in a table.
In addition, any dividends received by a company from another foreign company may be excluded from its taxable income instead of getting a foreign tax credit if it meets certain criteria.
Simplified and more generous employment tax credit system
Starting on January 1, 2023, the five existing employment tax credits will consolidate into two employment tax credits.
For a new regular hire, a higher tax credit is given for hiring the young, the old, the disabled and career-interrupted women.
Foreign workers are excluded.
Delayed securities transaction tax reduction
The timeline of the securities transaction tax reduction has been adjusted.
Delayed imposition of tax on digital assets
The imposition of 20% tax on income from transferring or lending digital assets has been postponed by two years and is scheduled to begin on January 1, 2025.
If you have any queries relating to the South Korea Budget, or Korean tax matters more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.