Korea: Tax reform for 2023

Tax measures in the 2023 tax reform

09 January 2023

The National Assembly on 23 December 2022, approved tax reform measures for 2023 and most of the approved tax law amendments will become effective on 1 January 2023, unless otherwise specified. The Ministry of Economy and Finance had announced tax reform proposals for 2023 in July and submitted them to the National Assembly in September.,

Major changes between the tax reform proposal submitted in September and the final tax reform measures for 2023 approved by the National Assembly are summarized below.

Item	Tax reform proposal announced on 21 July 2022	Final tax reform approved on 23 December 2022
Change in corporate income tax rates	Elimination of the highest tax rate bracket (25%)	Maintain the current tax bracket and reduce corporate income tax rate by 1% for each taxable income bracket
Accumulated earnings reserve tax	Expiration of accumulated earnings reserve tax	Extend sunset date of accumulated earnings reserve tax and limit the application of the tax to companies belonging to business groups subject to restrictions on cross-shareholdings.
Application of flat income tax rate to foreign employees	Expiration of application of flat income tax rate	Extended application period of flat income tax rate to 20 years and deletion of sunset date

Tax measures in the 2023 tax reform also include:

An income exclusion of dividend received from foreign subsidiary
A revised domestic dividend received deduction
An increased net operating loss utilization rate
Relaxation of ownership requirement for tax consolidation
Introduction of integrated employment tax credit
Introduction of accelerated depreciation for energy-saving facilities
Additional supporting document requirement to apply tax exemption granted under the tax treaty
Expansion of exemption threshold to submit international transaction-related information
Introduction of tax on income attributed to overseas pass-through entity
A reduction of securities transaction tax
Mitigation of conditions to issue revised import value added tax (VAT) invoices
Introduction of purchaser-issued VAT invoices
Extension of income tax exemption period for foreign engineers
A two-year postponement of tax on financial investment income
An extension of retention period for offshore transaction documents
New requirement to maintain transfer pricing-related documents domestically
Introduction of global minimum tax rule (BEPS 2.0 Pillar Two)

Read a January 2023 report [PDF 394 KB] prepared by the KPMG member firm in South Korea

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