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August 1, 2022

Korea announces 2022 tax reform proposals

  • Korea's 2022 tax reform proposals, including a decrease in the corporate income tax rate, were announced on 21 July 2022.
  • The proposals, outlined in this Alert, will generally become effective for fiscal years beginning on or after 1 January 2023.
  • Taxpayers should review the proposals to determine their impact on their Korean operations.

Executive summary

On 21 July 2022, Korea's Ministry of Economy and Finance announced the 2022 tax reform proposals (the 2022 Proposals). Unless otherwise specified, the 2022 Proposals will generally become effective for fiscal years beginning on or after 1 January 2023.

This Alert summarizes the key proposals.

Detailed discussion

Changes in Corporate Income Tax Rate

The Korean Corporate Income Tax Law (CITL) decreases the headline corporate income tax rate from 25% to 22% effective for fiscal years beginning on or after 1 January 2023. In addition, qualified small- and medium-sized enterprises (SMEs) are entitled to receive a special corporate income tax rate of 10% on taxable income up to KRW500 million.

The following taxable summarizes the current and proposed rates:

Current taxable income (KRW)

Current rate

Proposed taxable income (KRW)

Proposed rate

Up to 200 million


Up to 500 million

20% (10% for qualified SMEs)

200 million to 20 billion


500 million to 20 billion


20 billion to 300 billion


20 billion and above


300 billion and above


Local income tax at a rate of 10% is imposed in addition to the above rates.

Expansion of annual deductibility limit for net operating losses (NOLs)

The 2022 Proposals expand the annual deductibility limit for NOLs from 60% to 80% of taxable income for domestic corporations. The deductibility limits for SMEs remain the same.1

Repeal of accumulated earnings tax regime

The current Korean tax law provides the accumulated earnings tax regime with the sunset clause due to expire as of 31 December 2022.

To reduce the regulatory tax burden on certain domestic large corporations,2 the 2022 Proposals repeal the accumulated earnings tax regime after the expiration of the sunset clause. However, the current tax rules remain to be applied to the accumulated earnings reserve.

Changes in Securities Transaction Tax Rate

The 2022 Proposals adjust the timing of reducing securities transaction tax rates on securities traded on Korea's stock exchange to revitalize the capital market.

The following taxable summarizes the proposed changes:

Stock exchange

Current rate

2023 — 2024

2025 and future years

KOSPI Market3








However, the current tax rules remain to be applied to securities transaction tax rates for KONEX and others (e.g., securities traded over the counter, non-listed securities traded).

Termination of the application period for special taxation for foreign workers

Under the current Restriction of Special Taxation Act, a foreign worker who starts to work in Korea before 31 December 2023, may elect to have the 19% flat tax rate (20.9% including local income tax) applied for five consecutive tax years, without deductions.4

The 2022 Proposals repeal the five-year application period starting from the wage income generated on or after 1 January 2023.

Deferral of taxation on virtual assets5

Under the current Korean tax law, gains derived from the disposal of virtual assets by a foreign individual or foreign corporation are categorized as "other income" subject to withholding tax at the lesser of 11% of the transfer price or 22% of the net capital gains.

The 2022 Proposals provide the deferral of taxation on virtual assets from 1 January 2023 to 1 January 2025.

Revival of tax relief on bonds

The 2022 Proposals reintroduce the tax exemption on interest and capital gains earned from transactions related to government bonds and monetary stabilization bonds by foreign individuals and corporate investors. This relief is available for both direct investments and indirect investments through qualified foreign financial institutions (to be defined under the Enforcement Decree).

The above rule will be applied to interest payments or relevant bonds sold on or after 1 January 2023.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Han Young, Seoul

Ernst & Young LLP (United States), Korean Tax Desk, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago


1 SMEs and certain other companies (for example, companies under court receivership) are eligible to use the tax losses carried forward to offset 100% of taxable income.

2 Korean domestic large corporations with equity capital (total assets minus total liabilities) of KRW50 billion (approx. US$41 million) or more and Korean corporations that are members of an enterprise group with restrictions on cross-shareholding.

3 Agricultural and fishery community special tax, a rate equal to 0.15%, would also be imposed in addition to the securities transaction tax.

4 Non-taxation, tax deductions, tax reductions/exemptions, and tax credits are forfeited.

5 Virtual assets are electronic certificates (including relevant rights) of economic value that can be traded electronically (e.g., digital currency such as bitcoin).