Korean Tax Law Changes in 2023


The government’s tax reform bill (“government’s bill”) was sanctioned by the National Assembly on December 23, 2022 with several amendments and additions. We summarized below some of the major tax law changes for 2023 to keep you updated. Most of the tax law changes we discussed below came into force from the fiscal year starting, or income earned, on or after January 1, 2023 unless indicated otherwise.

I. Corporate Income Tax

l Adjustment of corporate income tax rates

The marginal tax rate shall be lowered by one percentage point for each tax base bracket by revising the government’s bill.

Before revision

After revision

Tax base

(KRW in millions)

Tax rate *

Up to 200






Above 300,000


Tax base

(KRW in millions)

Tax rate *

Up to 200






Above 300,000


* Local (provincial) income tax is separately imposed at 10% on the corporate income tax liability.










l Adjustment of Dividend Received Deduction (DRD) ratios for dividends from domestic subsidiaries

The government’s bill proposed a simplification of DRD ratios which differ depending on the type of corporation (i.e., listed or unlisted subsidiary / holding company or other company) and the ownership percentage of the parent company on a subsidiary.

The DRD ratios shall be adjusted only based on the ownership percentage regardless of the type of corporation as follows.

Ownership percentage

DRD ratio

50% or more


20% ~ 50%


Less than 20%


The amended DRD shall be applied for dividends received on or after January 1, 2023. But taxpayers can apply the DRD regulation before revision for dividends received in 2023.

II. Individual Income Tax

l Change in the applicable period of flat income tax rate for foreign workers

Currently, individual income tax liabilities of foreign (non-Korean) workers (excluding daily employed workers) on earned income from the rendering of his/her services to companies in Korea can be finalized by applying the 19% flat income tax rate (excluding local income tax equal to 10% of income tax) on gross earned income without applying any other income deductions, tax exemption, and tax credits.

Before the revision, this special taxation for foreign employees could be applied only for five years from the first day of their work, but this five (5) years applicable period limitation is extended to 20 years by revising the government’s bill, which proposed to eliminate the limitation on the applicable period.

l Expansion of income tax reduction or exemption limitation for employees of small and medium enterprises (“SMEs”)

Currently, youth, a person aged at least 60, a person with disability, or a career-interrupted woman employed by a SME prescribed in relevant regulation is entitled to income tax reductions or exemptions for his/her earned income from the SME.

Before the revision, the limitation for the income tax reduction or exemption was KRW 1.5 million for each taxable period, but the limitation is increased to KRW 2 million for each taxable period.


III. Others

l New rules for special tax treatment on income attributed to overseas pass-through entities

In the amended International Tax Coordination Law (“ITCL”), there is a new provision to apply a special tax treatment to income attributed to an overseas pass-through entity invested by domestic investors.

The term ‘overseas pass-through entity’ which is eligible for the special tax treatment refers to an entity that meets the following two requirements:

- It should be a foreign corporation, an overseas investment vehicle or a non-corporate entity established in a foreign country

- A shareholder, an investor or a beneficiary in the foreign corporation, etc. rather than foreign corporation itself should be directly liable for tax on income derived by the foreign corporation under the tax laws of the jurisdiction governing the foreign corporation.

Under the new regulation, income attributed to an overseas pass-through entity above shall be treated as income attributed to the shareholder, etc. in the overseas pass-through entity and be subject to corporate or individual income tax accordingly.

l Exception to applying premium rate for the largest shareholder, etc.

In accordance with Article 63(3) of the Korean Inheritance and Gift Tax Law (“IGTL”), the premium rate of 20% shall be applicable and added for the largest shareholder and its related parties in calculating inheritance or gift taxes. However, a company which falls under the category of a SME or which suffered a loss continuously within three years before the fiscal year in that the date of transfer or acquisition falls shall not be subject to applying the premium rate.

After revision, the scope of the exception to applying the premium rate for the largest shareholder, etc. is expanded to shares issued by a medium-scale company defined in the Presidential Decree of the IGTL, in addition to a SME.