Origins
The U.S. began taxing corporations in 1909, and as companies came to dominate economies, governments everywhere followed; Korea enacted its Corporate Tax Act in 1949. The aims were to reach profits retained inside firms and to tax large entities by ability to pay. Yet companies are people in the end, so the burden spreads to shareholders, workers and consumers (Harberger, 1962; see tax incidence).
Rates and computation
The base is tax income, not book profit: add back non-deductible items such as excess entertainment costs, subtract exempt income, then deduct carried-forward losses. It starts from the financial statements.
| Tax base | Through FY2025 | FY starting 1 Jan 2026+ |
|---|---|---|
| Up to KRW 200m | 9% | 10% |
| 200m–20bn | 19% | 20% |
| 20bn–300bn | 21% | 22% |
| Over 300bn | 24% | 25% |
The National Assembly reversed the 2022 cut in December 2025, restoring every bracket by one point. With local income tax (10% of the national tax) the burden is 11–27.5%. December year-end firms file by the end of March.
Tax competition and the minimum tax
Firms choose locations by effective average rates (Devereux & Griffith, 2003), fueling decades of rate cuts. The OECD/G20 Inclusive Framework answered with a 15% global minimum tax for groups with revenue of EUR 750 million or more, which Korea applies from fiscal years starting in 2024. Whether cuts raise investment or only lose revenue connects to the Laffer curve debate.
Sole proprietor or company?
Sole proprietors pay progressive comprehensive income tax of 6–45%, while companies pay corporate tax and owners pay income tax again on salary and dividends. Weigh profit size, dividend plans and social-insurance costs before incorporating, and see VAT for transaction taxes.
FAQ
- What are Korea's 2026 corporate tax rates?
- For fiscal years starting from 1 January 2026: 10%, 20%, 22% and 25% across four brackets.
- Is book profit the tax base?
- No. Tax adjustments and loss carryforwards come first.
Sources reviewed: 2026-11-09
References
- 법인세법 제55조 (세율) [법률 제21217호, 2025. 12. 23. 일부개정, 2026. 1. 1. 시행]. Current Corporate Tax Act rates: 10/20/22/25% from fiscal years starting 2026.
- 국세청. (n.d.). 법인세 신고 안내. National Tax Service filing guide: deadlines, interim prepayment and procedures.
- 국제조세조정에 관한 법률 (글로벌최저한세 관련 규정). Korean rules implementing the 15% global minimum tax for large multinationals.
- Harberger, A. C. (1962). The incidence of the corporation income tax. Journal of Political Economy, 70(3), 215–240. Classic study of who really bears the corporate income tax.
- Fuest, C., Peichl, A., & Siegloch, S. (2018). Do higher corporate taxes reduce wages? Micro evidence from Germany. American Economic Review, 108(2), 393–418. Finds roughly half of local business-tax increases fall on wages.
- Devereux, M. P., & Griffith, R. (2003). Evaluating tax policy for location decisions. International Tax and Public Finance, 10(2), 107–126. Shows effective average tax rates drive firms' location choices.
- 국가법령정보센터. (2025). 법인세법 제·개정 이유 (법률 제21217호). Official reasons and history for the 2025 corporate tax amendment.