Company Formation & Tax in South Korea
A trillion-dollar advanced economy — progressive corporate tax from 9%, a flat 10% VAT, and a formal FDI framework that brings incentives once investment passes ₩100 million.
South Korea taxes corporate income on a progressive scale from 9% to 24%, topped by a 10% local surtax — so effective rates run roughly 9.9% to 26.4% depending on profit. VAT is a flat 10%. For foreign investors, the Foreign Investment Promotion Act (FIPA) creates a formal FDI track: invest at least ₩100 million for 10%+ of a Korean company and you gain registered foreign-invested-company status, with access to incentives, cash grants in targeted industries and the D-8 investor visa.
The headline numbers
| Tax | Rate (national) |
|---|---|
| Corporate tax — first ₩200 million | 9% |
| ₩200 million – ₩20 billion | 19% |
| ₩20 billion – ₩300 billion | 21% |
| Above ₩300 billion | 24% |
| VAT (flat) | 10% |
A local income tax of 10% of the corporate tax liability is added at each bracket, taking combined effective rates to about 9.9–26.4%. Exports are zero-rated for VAT, and dividend withholding on outbound distributions (20% domestic rate) is commonly reduced to 5–15% by Korea's wide treaty network.
The FDI framework
- FIPA registration — a minimum ₩100 million investment acquiring at least 10% of voting shares qualifies as recognised FDI, registered through a foreign-exchange bank or KOTRA.
- Incentives — tax reductions, cash grants and site support for investment in advanced technology, materials/parts/equipment and designated foreign-investment zones.
- D-8 investor visa — FDI registration underpins the investor visa for founders and seconded executives.
- Open economy — nearly all sectors permit 100% foreign ownership; a short negative list (broadcasting, some agriculture, power) carries caps.
Forming the company
A foreign-invested subsidiary is established by notifying the FDI through a designated bank or KOTRA, remitting the investment, registering incorporation at the commercial registry and completing business registration with the NTS — realistically two to four weeks. There is no residency requirement for directors or shareholders, and no general minimum capital beyond the ₩100 million FDI threshold if registered status is wanted. Annual obligations include the corporate tax return, quarterly VAT filings and, above size thresholds, statutory external audit.
Frequently asked questions
What is South Korea's corporate tax rate in 2026?
Progressive: 9%, 19%, 21% and 24% by profit bracket, plus a local surtax of 10% of the tax — combined effective rates of roughly 9.9% to 26.4%.
What is the VAT rate in South Korea?
A flat 10%, with exports zero-rated. Returns are filed quarterly.
Can a foreigner own a Korean company fully?
Yes — nearly all sectors are open to 100% foreign ownership. Investing at least ₩100 million for 10%+ of the company earns registered FDI status and access to incentives and the D-8 visa.
What company form should a foreign investor choose?
Most subsidiaries use the Yuhan Hoesa (limited company) for its governance simplicity; the Chusik Hoesa (joint-stock company) suits businesses raising capital locally or requiring maximum market prestige.
Official sources
- National Tax Service — corporate tax and VAT
- Invest KOREA (KOTRA) — FDI procedure
- Internet Registry Office — commercial registration
This guide is general information prepared by ARM Management and is current as at July 2026. It is not legal or tax advice; brackets, incentives and FDI conditions change. Confirm against the NTS and Invest KOREA, or with an advisor, before acting.
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