Tax compliance services in South Korea.

Corporate Income Tax (CIT) in South Korea is levied on a company’s net taxable income using a progressive rate structure. The applicable rates are:

• 10% on taxable income up to KRW 200 million
• 20% on taxable income between KRW 200 million and KRW 20 billion
• 22% on taxable income between KRW 20 billion and KRW 300 billion
• 25% on taxable income exceeding KRW 300 billion

Companies must file their annual CIT return and pay any tax balance due within three months of their financial year-end. Interim prepayments are also required. Foreign-invested companies are taxed on Korean-sourced income, with relief available under South Korea’s extensive network of double tax treaties. For a full breakdown of CIT filing requirements, see the guide to corporate income tax in South Korea.

VAT in South Korea is levied at a standard rate of 10% on the supply of goods and services. VAT-registered businesses collect output VAT on sales and can offset input VAT paid on qualifying business purchases, with the net amount payable to or refundable from the National Tax Service (NTS).

South Korea operates two main VAT return periods covering January to June and July to December, with a preliminary return also required for each half-year period, in April and October. This produces four VAT filing events per year, with returns and payments due by the 25th of the month following each period-end. There is no minimum turnover threshold for VAT registration, and any business making taxable supplies must register regardless of size. Companies with annual taxable turnover below KRW 80 million may qualify for simplified VAT taxpayer status, subject to conditions. Exports and certain international services are zero-rated. For a full overview of VAT registration and filing requirements, see the guide to VAT in South Korea.

Key annual and recurring deadlines for companies with a 31 December financial year-end are:

• Annual CIT return and final tax payment: 31 March
• Interim CIT prepayment: 31 August, based on estimated profits for the first six months of the year
• VAT returns: due by the 25th of April, July, October and January, covering each VAT period
• Withholding tax on salaries, dividends and other payments: remitted to the NTS by the 10th of the following month

All filings must be submitted electronically through the NTS Hometax system. Where a deadline falls on a public holiday, it is extended to the next working day. Companies whose financial year does not end on 31 December follow the same relative deadlines calculated from their own year-end date.

Payments made by Korean companies to non-resident entities are subject to withholding tax at the following standard rates, inclusive of local income tax:

• Dividends: 22%
• Interest: 22%
• Royalties: 22%
• Other Korea-sourced income: 22%

Where South Korea has a double taxation agreement (DTA) with the recipient’s country of residence, a reduced rate may apply. South Korea has treaties with over 90 countries, and reduced rates on dividends commonly range from 5% to 15% depending on the treaty and ownership threshold. From 1 January 2026, withholding agents must formally submit an Application for Reduced Tax Rate and supporting documentation to the NTS before applying any treaty rate. Failure to comply exposes the payer to the full statutory rate plus a 10% penalty on any under-withheld amount.

Penalties for late filing or underreporting in South Korea depend on whether the error is treated as negligence or deliberate underreporting. Negligent underreporting attracts a penalty of 10% of the unpaid tax, while deliberate underreporting carries a penalty of 40%. A separate failure-to-file penalty of up to 20% of the unpaid tax applies where no return is submitted, and both the filing penalty and late payment interest can apply simultaneously.

Interest accrues on outstanding tax from the original due date at a rate set periodically by the NTS. From September 2025, companies that fail to produce documents requested during an NTS audit face recurring enforcement penalties calculated as a percentage of daily revenue, levied every 30 days with no upper cap until the documents are provided. Companies that voluntarily correct errors before an audit is formally notified are treated more favourably and can reduce overall penalty exposure.

South Korea’s tax incentives focus on R&D tax credits and support for strategic industries. Companies can offset a percentage of qualifying R&D spend against tax liability, with rates varying by size and activity. Large firms typically receive 0–2% for general R&D and up to 20–40% for new growth and core technology research, while SMEs can access higher base rates of up to 25%.

Strategic sectors such as semiconductors, batteries, displays and biotechnology may qualify for enhanced incentives, including up to 25% credits on facility investments under national strategic technology programmes.

Additional benefits are available in Free Economic Zones and Opportunity Development Zones, including corporate tax reductions or exemptions for up to seven years, plus local tax relief and customs duty exemptions on capital equipment. Foreign investors may also access support through Invest Korea programmes, subject to eligibility criteria and periodic policy updates.