[Tax Series: 05] Calculating Corporate Tax in South Korea

If you're at the helm of a corporate business in South Korea, understanding the intricacies of corporate tax is not just a requirement – it's a strategic advantage.

While the scale and sales of corporate entities can make tax calculations seem daunting compared to individual businesses, a solid grasp of the corporate tax calculation method and reporting procedures can unlock significant tax savings.

With the annual corporate tax filing deadline always on the horizon, now is the perfect time to demystify the process.

This guide will walk you through the essential steps of calculating your South Korea corporate tax rate, understanding the filing schedule, and identifying crucial documents. By understanding how your tax liability is determined, you can proactively explore opportunities for tax optimization.

After reading this article, you will:

• Understand the step-by-step process of how to calculate corporate tax rate in South Korea.

• Be familiar with the corporate tax filing schedule and the necessary documents for submission.

Step 1: Laying the Foundation - Calculating the Taxable Standard

Before diving into the numbers, it's crucial to understand the corporate tax base – the foundation upon which your tax liability is built. Think of it as the portion of your income that is subject to taxation. The formula for calculating the tax base is as follows:

Tax base = Income for the fiscal year - (deficit carried forward + income deduction + non-taxable income)

Essentially, you start with your company's net income for the fiscal year and then subtract several key elements:

• Loss carried forward: If your company experienced losses in previous years that haven't been fully deducted yet, these can be carried forward to reduce your current tax base.

• Income deduction: These are specific amounts that the tax law allows you to deduct from your income before applying the tax rate.

• Non-taxable income: Certain types of income are exempt from corporate tax altogether.

Accurately determining your income for the fiscal year is paramount. This involves a process called tax adjustment, which reconciles the net income reported for accounting purposes with the taxable income calculated according to tax regulations. This adjustment accounts for differences in how certain items are treated under accounting standards versus tax law.

Terminology Explained:

• Loss carried forward: The accumulated amount of losses from previous fiscal years that can be used to reduce taxable income in the current year.

• Income deduction: Specific allowances provided by tax law to reduce taxable income.

• Non-taxable income: Categories of income that are legally exempt from corporate tax.

Step 2: Applying the Rate - How to Calculate Corporate Tax Rates

Once you've calculated your tax base, the next step is to apply the relevant corporate tax rate in South Korea. The formula for this is straightforward:

Calculated tax amount = Tax base (income) X tax rate

The South Korea corporate tax rate operates on a progressive structure, meaning that as your company's taxable income increases, a higher tax rate is applied. As of 2025 (applicable after 2023), the corporate tax rate in South Korea are divided into four brackets:

Tax Base	2025 Corporate Tax Rate (After 2023)
200 million won or less	9%
Over 200 million won and under 20 billion won	19%
Over 20 billion won and under 300 billion won	21%
Over 300 billion won	24%

It's crucial to identify the correct tax bracket your company falls into based on its taxable income to ensure you're applying the appropriate South Korean corporate tax rate.

Step 3: Finalizing Your Liability - Deductions, Reductions, and Surtax

The final stage in calculating your corporate tax involves considering any applicable deductions, reductions, and potential surtaxes. This step determines the ultimate amount of tax your company owes:

Total tax payable = Calculated tax amount – Various deductions and reductions (+ surtax)

A key takeaway for business owners is that increasing the number of eligible deductions and reductions directly lowers your corporate tax liability. Therefore, it's essential to be aware of all available tax benefits your company can claim.

Conversely, failing to meet the corporate tax filing deadline, submitting an incomplete filing, or underreporting your tax liability can result in surtaxes being added to your final tax bill.

Understanding the Corporate Tax Filing Procedure

Navigating the filing process smoothly is just as important as accurately calculating your tax. Here's what you need to know about the corporate tax filing schedule and required documents:

1. Corporate Tax Filing Schedule:

Corporate tax returns must be filed annually within three months from the last day of the month in which your company's fiscal year ends. Here's a breakdown of typical deadlines based on the fiscal year-end month:

Classification	Deadline
March settlement	By June 30
June settlement	By September 30
September settlement	By December 31
December settlement	By March 31 of the following year

2. Documents to be Submitted When Filing:

Along with the corporate tax base and tax amount report, you'll need to submit several supporting documents, including:

• Financial Statements

• Statement of Comprehensive Income

• Statement of Tax Adjustment

• Statement of Retained Earnings

• Other attached documents and statement of cash flows

• Statement of assets or liabilities transferred through merger and division, etc.

Important Note: Submitting all required documents, with the exception of the statement of cash flows, is mandatory. Failure to do so will be considered as not having filed a report.

3. Online Filing Procedure:

The National Tax Service (NTS) provides an online platform, Hometax (https://www.hometax.go.kr), for convenient electronic filing. The general steps are:

• Log in to the National Tax Service Hometax website.

• Navigate to the "Report/Payment" section.

• Select "Corporate tax."

• For corporations with no business activity during the fiscal year, select "Simple corporate tax report."

Key Takeaway: Seek Expert Advice

Learning how to calculate the corporate tax rate in South Korea and filing procedures in the nation is a crucial step toward effective financial management for your business. Remember that identifying and leveraging various tax deduction benefits is key to optimizing your tax liability.

To ensure accurate filing and to explore all potential tax-saving opportunities, it is highly recommended to consult with a qualified tax expert before filing your corporate tax return. They can provide tailored advice based on your company's specific circumstances and help you navigate the complexities of the South Korean corporate tax rate system. If you are looking for the one, look no further than our taxation experts at J&J Korea. Get in touch so that we can help you with your corporate tax needs.