South Korea accounting and tax considerations

South Korea accounting and tax services

Many clients choose to outsource their South Korea accounting and tax obligations to Tetra Consultants after South Korea company registration. Tetra Consultants will timely complete your firm’s financial statements, corporate tax returns and manage auditors on your behalf and without the need to travel.

By outsourcing accounting and tax obligations to Tetra Consultants, you can reduce overhead costs while being ensured of timely reporting and filings. Our accounting team will explain to our clients all required deadlines and expectations before the start of the engagement.

Thereafter, our team will prepare the required fillings in advance to ensure we meet all stipulated deadlines. Tetra Consultants will send a weekly or bi-weekly update to you, ensuring all parties are aware of upcoming deadlines.

Contact us now for a free consultation. Our team of experts will revert within the next 24 hours.

What are the types of taxes levied in South Korea?

Taxes in South Korea, including taxes on corporate transactions, comprise:

• National taxes (corporate income tax, value-added tax, securities transaction tax, gross real estate tax, and education tax).
• Local taxes (acquisition tax, registration and license tax, property tax, and local income tax).

National taxes are administered and enforced by the South Korea National Tax Service (NTS), but local taxes are administered and enforced by the responsible local governments.

The main authorities responsible for enforcing taxes on corporate transactions are the NTS and each local government authority.

Overview of South Korea’s tax regime

According to South Korea National Tax Service,

Corporate tax

• Businesses in South Korea are subject to a corporate income tax rate of 10% for the first 200 million won of income. Thereafter, the corporate tax rate increases to 20%.
• A corporation must file an interim tax return with due payment for the first six months of the fiscal year, and the filing/payment must be made within two months after the end of the interim six-month period.
• A corporation must file an annual tax return with due payment for the fiscal year, and the filing/payment must be made within three months (four months for the consolidated tax return) from the end of the fiscal year. 

Withholding tax

Withholding tax is charged on each separate item of South Korean-sourced income for foreign corporations without PEs, and the applicable withholding tax rates on corporate transactions are as follows:

• Dividends paid to a non-resident are subject to a withholding tax of 22% unless the withholding tax rate is reduced by a tax treaty between Korea and the other contracting state.
• Royalties paid to a non-resident are subject to a withholding tax of 22% (or 2.2% on income arising from the rental of industrial, commercial, or scientific equipment), unless the withholding tax rate is reduced by a tax treaty between Korea and the other contracting state. 
• Interest paid to a non-resident is subject to a withholding tax of 22% (or 15.4% for interest on bonds issued by the State, local government, and a domestic corporation) unless the withholding tax rate is reduced by a tax treaty between Korea and the other contracting state.

Value-added tax (VAT)

• VAT, a representative indirect tax in South Korea, is payable by persons who receive goods or services for value and must be collected by those persons providing such goods or services at a flat rate of 10% of the value of the goods or services. Hence, the standard VAT rate is 10% in South Korea.
• All South Korean businesses are required to register for Value Added Tax (VAT) within 20 days before the start of business. 
• You are required to file VAT every quarter, regardless of whether the company is dormant. In addition, you are required to file an annual tax return as per South Korean company law.
• When a corporation provides services or sells goods in South Korea, it must collect VAT from the purchaser at the rate of 10% of the price paid for the services or goods. It must then remit, to the appropriate tax office, the difference between its input VAT and output VAT by filing returns on a bi-annual basis (that is, for the periods from 1 January to 30 June and from 1 July to 31 December), with preliminary returns filed at the end of each quarter period for each six-month tax period.
• If your business owns more than US$1,000,000 of assets, you are required to carry out annual audits, conducted by an external auditing firm.

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