South Korea corporate tax - guide for international expansion

Are you considering expanding your business operations to South Korea? Understanding the country's corporate tax landscape is essential for making informed strategic decisions about entering this dynamic East Asian market.

South Korea offers a robust economy with advanced infrastructure and a skilled workforce, making it an attractive destination for international businesses. However, navigating the corporate tax system requires careful planning and compliance with local regulations to ensure your expansion is both successful and cost-effective.

Whether you're exploring market entry, planning acquisitions, or setting up operations, Wise Business can help streamline your financial operations with local account details and efficient cross-border payment solutions.

💡 Learn more about Wise Business

This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

South Korea Corporate tax rate in 2025

The corporate income tax rates in South Korea follow a progressive structure with rates ranging from 9% to 24%, plus local income tax. For companies with taxable income up to KRW 200 million, the rate is 9%; for income between KRW 200 million and KRW 20 billion, it's 19%; for income between KRW 20 billion and KRW 300 billion, it's 21%; and for income exceeding KRW 300 billion, the rate is 24%.¹

Additionally, South Korea imposes a local income tax that ranges from 0.9% to 2.4% depending on the tax base, effectively increasing the total corporate tax burden. When combined, the maximum effective corporate tax rate reaches 26.4% for the largest companies.¹

The progressive system is designed to support small and medium-sized enterprises (SMEs) whilst ensuring larger corporations contribute proportionally to the tax base. South Korea also implements a global minimum tax framework under the OECD Pillar Two rules, which became effective for fiscal years beginning on or after 1 January 2024¹

Read more about Corporate Tax Planning best practices

How to pay corporate tax in South Korea

Corporate tax payments in South Korea are administered by the National Tax Service (NTS) and must be made in Korean Won (KRW).² The payment process can be completed through the NTS's online system called Hometax, which operates 24/7 and supports electronic filing and payment.³

Companies must file interim tax returns for the first six months of the fiscal year and make payments within two months of that period's end. Annual corporate tax returns and payments are required within three months of the fiscal year-end (four months for a consolidated tax return). If an external audit is not completed, a one-month filing extension can be requested, which incurs a delinquent interest of 3.1% per annum.⁴

For companies with significant tax liabilities, payment can be made in installments. If the tax amount is between KRW 10 million and KRW 20 million, the excess over KRW 10 million can be paid within one month of the due date (two months for SMEs). If the tax amount exceeds KRW 20 million, up to 50% of the tax can be paid in installments.⁴

interest is charged at approximately 0.022% per day (about 8% annually), plus an additional 3% if tax remains unpaid after the due date. Penalties for failure to file or underreporting range from 10% to 60% of the tax due, depending on the severity and whether fraud or intentional misconduct is involved.⁵

Let's calculate the annual tax liability for a company with KRW 2 billion turnover (approximately £1.5 million) and a 10% profit margin, resulting in KRW 200 million taxable income:

At South Korea's progressive rates:

• KRW 200 million × 9% = KRW 18 million

• Plus local income tax: KRW 18 million × 10% = KRW 1.8 million

• Total tax liability: KRW 19.8 million (approximately £14,850)

When expanding your business to South Korea, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to manage international finances. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

Get started with Wise Business 🚀

Tax Compliance in South Korea

To comply with South Korea’s tax regulations, businesses must follow strict registration and reporting requirements.⁶

Business registration: To avoid penalties, companies must register with the local District Tax Office within 20 days of commencing operations.

Corporate income tax (CIT):

• Interim return is due within two months after the first six months of the fiscal year.
• Annual return due within three months of year-end (four months for consolidated returns).

Value-added tax (VAT):

• Registration is mandatory once annual revenue exceeds KRW 80 million.
• Returns are generally filed quarterly; large enterprises may be required to submit monthly.
• Proper reconciliation of input and output VAT is essential.

Withholding tax (WHT):

• Applies to payments such as salaries, dividends, and interest.
• Deductions must be remitted to the National Tax Service by the 10th of the following month.

Payroll obligations: Employers must meet related social security and contribution requirements.

Professional tax consultants can help businesses manage compliance, plan tax instalments, and minimise the risk of errors or penalties.

International Expansion to South Korea

South Korea has transformed from one of the “Asian Tiger” economies into a fully developed nation and now ranks as the 15th largest economy in the world.^{7 8} Its GDP continues to show resilience, expanding by 2.0% in 2024, supported by strong consumer demand and trade.⁹ The country’s population of 51.68 million provides businesses access to a sizable consumer base, making it an attractive market for international expansion.¹⁰

Its foreign investment conditions have steadily improved since market liberalisation in the 1990s. Today, foreign portfolio investment accounts for over 33% of the Korea Composite Stock Price Index (KOSPI) capitalisation.¹¹ South Korea has also established itself as a global trade hub, holding the sixth position in worldwide trade rankings.¹² Companies benefit from its 21 free trade agreements with 59 countries, including the United States, and 87 bilateral investment treaties.¹¹ These agreements allow businesses to operate in regional and global markets without major trade barriers.

Moreover, South Korea’s financial market offers robust opportunities for international investors. The private equity fund (PEF) and venture capital (VC) markets reached record levels recently, with total PEF investments growing to KRW 136.4 trillion by the end of 2023. This will be an 8.9% increase from the previous year.¹³ Ample liquidity ensures businesses can secure financing for expansion, supported by a sovereign credit rating of Aa2 that signals stability and low risk.¹²

The country’s infrastructure also reinforces its appeal. Incheon International Airport handled over 34 million passengers in the first half of 2024, reflecting its role as a major global hub.¹⁴ This connectivity, paired with South Korea’s skilled workforce and innovative business environment, makes it a strategic location for international growth.

Businesses can begin their expansion into South Korea by following these steps:

1. Conduct thorough market research to understand consumer needs and competition.
2. Develop a solid business plan tailored to the local market.
3. Decide on a business location and structure.
4. Choose and register a company name through the South Korean Business Registry.
5. Register with the District Tax Office to meet Korea’s corporate tax rate obligations and ensure compliance with tax due dates.
6. Open a local business bank account and set up bookkeeping systems.

Learning about the cultural sentiments surrounding businesses, tax requirements, and top banks in South Korea can help businesses make a strong entry into its corporate waters. When planning long-term growth strategies, you can also explore options such as corporate tax extension.

Discover the top 5 best Corporate Tax softwares

Incorporation of Business in South Korea

To incorporate a business in South Korea, foreign investors must follow a structured process overseen by government agencies such as KOTRA (Korea Trade-Investment Promotion Agency).¹⁵ The first step is submitting a Foreign Investment Notification, which can be filed through KOTRA’s overseas offices, designated domestic banks, or foreign bank branches in Korea. After notifying, investment funds are remitted to South Korea, and the business secures an office lease or property purchase.

Next comes corporate registration, which requires essential documents such as a residence certificate, proof of share capital, articles of incorporation, company name, and details of shareholders. Depending on the type of business activity, additional authorization may be required from local district offices.

Once corporate registration is complete, the company must proceed with business registration at the relevant district tax office. This step involves submitting the business registration application, a copy of the corporate register, a lease agreement, the ID of the representative, and proof of incorporation. At this stage, compliance with the South Korea corporate tax rate becomes critical, and engaging corporate tax solicitors is often advisable to ensure filings are accurate and deadlines for the corporate tax bill are met.

Business Entities in South Korea

Listed below are some of the most common business entity types available for foreign and domestic investors under Commercial Law:^{16 17}

• Chusik Hoesa (Joint Stock Company): The most widely used entity, similar to a corporation. It is suitable for medium to large-scale businesses, requires a board of directors, and allows for public or private shareholding.
• Yuhan Hoesa (Limited Liability Company): A private entity often chosen by small and medium-sized businesses. Shareholders’ liability is limited to their capital contributions, and no board requirement exists.
• Hapja Hoesa (Limited Partnership): A mix of general and limited partners. General partners have unlimited liability, while limited partners are liable only up to their contributions.
• Hapmyong Hoesa (General Partnership): This type of partnership involves two or more partners with unlimited liability, and it is generally less common for foreign investors.
• Branches and Liaison Offices: Foreign companies can establish a branch for profit-making activities or a liaison office for non-commercial functions like market research.

South Korea has recently implemented corporate tax reforms to streamline compliance and encourage foreign investment. Businesses can successfully establish themselves in this competitive market by selecting the right entity type and ensuring proper registration. Professional support from corporate tax solicitors can further simplify the process and help stay compliant with corporate tax bills.

International corporate tax best practices

Managing corporate tax obligations across multiple jurisdictions requires a strategic approach that balances compliance with efficiency. Companies should establish robust record-keeping systems that track income, expenses, and tax obligations in each country where they operate.

Understanding double taxation treaties is essential for international businesses. South Korea has comprehensive tax treaties with 99 countries as of December 2024, which can significantly reduce withholding taxes on dividends, royalties, and interest payments. These agreements help prevent the same income from being taxed in multiple jurisdictions and provide mechanisms for resolving disputes through mutual agreement procedures.

Maintaining transparent and up-to-date financial records not only ensures compliance but also facilitates smoother audits and reduces the risk of penalties. Companies should also stay informed about changing international tax standards, including OECD guidelines and the global minimum tax framework under Pillar Two, which South Korea has implemented for large multinational enterprises.

Regular consultation with local tax advisors and leveraging technology solutions for tax compliance can help businesses navigate complex requirements whilst optimising their overall tax position across different markets.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to South Korea efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

Get started with Wise Business 🚀

FAQs - Corporate tax in South Korea

Who is liable for corporate tax in South Korea?

All companies incorporated in South Korea are liable for corporate tax on their worldwide income. A corporation is considered a Korean tax resident if it has its head office, principal office, or place of effective management in Korea. Foreign companies with permanent establishments in South Korea are subject to tax only on their Korean-source income, whilst non-resident companies without permanent establishments are generally taxed through withholding tax on specific types of Korean-source income.

Are there any tax incentives for businesses in South Korea?

Yes, South Korea offers various tax incentives under the Special Tax Treatment Control Law. These include tax credits for qualifying R&D expenditures, reduced rates for technology transfer income by SMEs, and acquisition tax credits for companies acquiring technology-innovative SMEs. Additionally, new start-up SMEs in designated areas outside metropolitan regions may receive 50% to 100% reduction in corporate income tax for the initial five years.

What is the tax treatment of dividends in South Korea?

Dividends paid to non-resident companies are generally subject to 22% withholding tax (inclusive of local tax), though this rate may be reduced under applicable tax treaties. The Korean tax authority takes a conservative approach to treaty benefits and requires careful documentation to establish beneficial ownership. Inter-company dividends between qualifying Korean companies may benefit from participation exemptions under certain conditions.

What is the process for registering for corporate tax in South Korea?

Companies must register with the National Tax Service within 20 days of incorporation or commencing business activities. The registration process requires submitting business registration applications, articles of incorporation, and supporting documents. Foreign companies establishing permanent establishments must complete additional registration requirements and may need to appoint a local tax representative to handle compliance obligations.

What are the common pitfalls to avoid regarding corporate tax in South Korea?

Common mistakes include failing to register within the required timeframe, inadequate transfer pricing documentation for related-party transactions, and misunderstanding the beneficial ownership requirements for treaty benefits. Companies should also be aware of the accumulated earnings tax that applies to large conglomerates, the requirement to maintain proper books and records, and the importance of timely filing to avoid substantial penalties.

Sources used in this article:

1. PwC Tax Summaries: Republic of Korea Corporate Income Taxes
2. National Tax Service (NTS): Official Website
3. Hometax: Online Tax System
4. PwC Tax Summaries: Republic of Korea Tax Administration
5. Mondaq: South Korea Tax Disputes Guide
6. Acclime Korea: Tax Compliance
7. Investasian: South Korea Country Guide
8. World Bank: Republic of Korea GDP
9. Bank of Korea: News and Research
10. IMF: Republic of Korea Profile
11. U.S. Department of State: 2024 Investment Climate Statements - South Korea
12. Invest Korea: Official Website
13. Invest Korea: Setting up a Company
14. Incheon Airport: Corporate Information
15. KOTRA: Doing Business in Korea (PDF)
16. KLRI: Commercial Act of Korea
17. Haeon Tax: Types of Companies in Korea

Sources last checked 23/09/2025