SOUTH KOREA Law and Practice Contributed by: Heejun Choi, Kyoung-Ho Kim, Sungsok Yang, Eunjee Kim and Kwang-Chun Park, Dentons Lee
withholding tax, subject to any applicable tax treaty. Dividends and interest paid to residents are likewise generally subject to withholding tax. Other taxes may apply depending on the company’s activities and assets, including securities transaction tax, acquisition tax, property tax, stamp duty, customs duties and, where applicable, the special tax for rural development. Korea has implemented the OECD Pillar Two global minimum tax regime, generally applying to multina - tional enterprise groups with consolidated annual rev - enue of at least EUR750 million and a minimum effec - tive tax rate of 15%. The Income Inclusion Rule applies from fiscal years beginning on or after 1 January 2024. Korea has also introduced or is implementing, a Quali - fied Domestic Minimum Top-Up Tax regime, although its qualification for the OECD QDMTT safe harbour Korea offers a range of tax credits and incentives, pri - marily under the Restriction of Special Taxation Act. These are interpreted strictly and taxpayers must sat - isfy the applicable statutory requirements and retain supporting documentation. A principal incentive is the research and develop - ment (“R&D”) tax credit. Companies incurring quali - fying R&D or human resources development expenses may be eligible for corporate income tax credits, with preferential rates for SMEs and certain qualifying tech - nologies. Eligibility generally requires that both the activities and expenses satisfy the statutory criteria. Korea also provides incentives for SMEs, including partial reductions of corporate or individual income tax for qualifying businesses, depending on company size, business type and location. Investment-related incentives include tax credits for qualifying investments in facilities, equipment and other business assets, particularly those that promote productivity, strategic industries, energy efficiency, digital transformation and regional investment. remains subject to OECD peer review. 5.3 Available Tax Credits/Incentives
Employment-related incentives are available to com - panies that increase employment, convert non-regular employees to regular employees, retain employees returning from childcare leave or otherwise satisfy statutory employment requirements, generally sub - ject to maintaining employment levels for a prescribed period. Foreign-invested companies may qualify for incen - tives in limited circumstances, particularly where investments involve qualifying high-technology busi - nesses, industrial support services or operations in foreign investment zones or free economic zones. Benefits may include reductions or exemptions from certain national or local taxes, subject to statutory conditions. Additional incentives are available for start-ups, ven - ture companies, regional or environmental investment and certain strategic industries. Availability depends on the taxpayer’s status, business sector, investment, location and compliance with statutory requirements. The combined use of tax incentives is restricted. Where multiple incentives apply to the same income or investment, taxpayers may be required to elect one unless concurrent application is expressly permitted. Minimum tax and carry-forward rules may also affect the amount and timing of available benefits. Accordingly, although Korea offers a broad range of tax incentives, their availability is highly fact-specific and depends on the taxpayer’s activities, investment structure and compliance with statutory requirements. 5.4 Tax Consolidation Korea operates a consolidated tax return regime for qualifying corporate groups. Subject to statutory requirements and prior approval from the tax authori - ties, a Korean parent company and its qualifying Korean subsidiaries may calculate and file corporate income tax on a consolidated basis. The regime is available only to Korean domestic cor - porations. A foreign company cannot be the consoli - dated parent or subsidiary itself, although Korean sub - sidiaries of a foreign group may qualify if the statutory ownership requirements are met.
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