South Korea legal and accounting and tax considerations in 2023
Healy Consultants Compliance Department guides our Client through legal and tax obligations.
- South Korea taxes on Corporate Income are 10% on the first 200 million won of income, 20% for income between US$180,000 and US$20m, and 22% for income in excess of that;
- Each entity must register for VAT at the National Tax Service within twenty days before the commencement date of business. Healy Consultants will be happy to assist you with tax and VAT registration;
- VAT in South Korea amounts to 10% on sales and transfers of goods and services. Electronic VAT invoicing is compulsory, and failure to report electronically may result in penalties;
- South Korea non-resident companies without permanent establishments (PEs) in South Korea are subject to a withholding tax on each income item;
- Resident foreigners are taxed on their worldwide income if they have stayed in South Korea for more than 5 years out of a 10-year period. Those who have stayed for a shorter period are only taxed on their locally sourced income and foreign-sourced income;
- There is a special concession for foreigners working in South Korea, where foreign expatriates and employees can apply for a flat tax rate of 16.5% on their income employment;
- Quarterly VAT filling is compulsory even though the company is dormant;
- Before 31 March of every financial year, annual tax returns must be filed at the National Tax Service of South Korea after setting up a business in South Korea.
- There are no export duties in South Korea;
- Following South Korean company formation, annual external audits must be conducted if a company has more than US$1million total assets;
- All goods being imported to Korea from foreign countries must have their customs duties prepaid. The tax amount is dependent on the type of imported goods and quantity;
- Non-resident individuals are only liable to personal income tax on income derived in Korea;
- To attract foreign direct investment (FDI), the Korean government provides tax incentives for small and medium-sized enterprises (SME): i) A SME investing in industrial equipment or advanced office equipment may enjoy a 5% tax credit of the invested amount ii) The tax credit for developing technology and manpower increased from 10% to 15%;
- Korea boasts 85 double taxation treaties, materially reduce local withholding tax on payments to non residents;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
- Resident individuals are also liable for personal income tax on Korea-sourced and global income remitted into Korea.
- From the fiscal year January 2021 onwards, the tax loss carry forward period will be extended by 10 years to 15 years
Legal and compliance
- Before company incorporation is complete, the Korea Government must review and approve a lease agreement for office premises. If your Firm requires this service from Healy Consultants, our one-time fee amounts to US$950. The monthly rent thereafter will be paid independently and directly to the landlord by our Client. An estimate of such a rental for a space of 10 sq. m. for one employee is US$600 per month;
- A corporate seal will be issued to the company representative director. This seal authorizes him/her to act on behalf of the company, for all corporate and South Korea banking matters. To avoid the corporate seal of being stolen and misused, It is important for the company to safeguard the seal well during South Korea company formation;
- Bank approval is required for every incoming fund that hits a Korean bank account;
- The Foreign Investment Promotion Act (FIPA) is designed to regulate South Korea investment. The legislation states that foreign investors must file a report with the government if they wish to invest in Korea through merging or acquiring a company;
- Starting a business in certain sectors requires government registration in South Korea;
- Each South Korean company must file a quarterly VAT report and an annual tax return to meet the requirements of the Republic of Korea company law;
- A corporation must file an interim tax return with the Korean Government, comprising i) balance sheet ii) income statement and iii) a trial balance.