Understanding your tax obligations in Korea is non-negotiable for any foreign business owner. The good news is that Korea's tax system, while detailed, is well-structured and predictable. Here is a plain-English overview of what your Korean company will owe — and when.
Corporate Income Tax (법인세)
Korea's corporate income tax rates as of 2026 are progressive:
- Up to KRW 200 million: 9%
- KRW 200 million – KRW 20 billion: 19%
- KRW 20 billion – KRW 300 billion: 21%
- Over KRW 300 billion: 24%
Most small and medium foreign-owned companies will fall into the 9–19% brackets. The annual corporate tax return is due within 3 months of your fiscal year end. The standard fiscal year in Korea is January to December, meaning returns are due by March 31 of the following year.
Value Added Tax (부가가치세)
Korea's VAT rate is a flat 10% on most goods and services. Certain items are zero-rated (exports, certain medical services) or exempt (basic foodstuffs, education services). VAT is filed and paid quarterly:
- January 25: Q4 of previous year
- April 25: Q1
- July 25: Q2
- October 25: Q3
As a registered business, you collect VAT on your sales and can offset it against VAT paid on your purchases (input tax credit). The difference is remitted to the National Tax Service (NTS).
Withholding Tax (원천징수)
Any time you pay salaries, dividends, interest, or service fees to individuals or foreign entities, you are required to withhold tax at source and remit it to the NTS by the 10th of the following month. Key withholding rates:
- Employee salaries: progressive rates per income bracket
- Dividends to foreign shareholders: 20% (may be reduced by tax treaty)
- Service fees to foreign companies: 22% (may be reduced by tax treaty)
Tax treaties matter: Korea has tax treaties with over 90 countries including the US, UK, Australia, Canada, and all EU member states. These treaties typically reduce dividend and royalty withholding rates significantly — sometimes to 5–10%. Make sure your accountant is applying the correct treaty rates.
Local Income Tax (지방소득세)
In addition to corporate income tax, Korean companies pay a local income tax surcharge of 10% of the corporate tax liability. This is filed separately to your local district office at the same time as the corporate tax return.
Payroll and Social Insurance
If you employ staff in Korea, you must register for and contribute to the four major social insurance programs:
- National Health Insurance: 7.09% of salary (split equally employer/employee)
- National Pension: 9% of salary (split equally)
- Employment Insurance: 1.8% employer / 0.9% employee
- Industrial Accident Compensation: 0.7–35% depending on industry sector (employer only)
Common Mistakes Foreign Companies Make
- Missing quarterly VAT deadlines — penalties and interest accrue quickly
- Failing to withhold on payments to overseas service providers
- Not maintaining Korean-language accounting records (required by law)
- Confusing personal and corporate expenses — NTS scrutiny of this is high
- Overlooking transfer pricing rules if you transact with related overseas entities
At Turtle Partners, our accounting team handles all of the above — monthly bookkeeping, payroll, quarterly VAT, annual corporate tax, and foreign exchange reporting. Everything in English, with full transparency on what we've filed and why. Talk to us about your accounting needs.