ENFORCEMENT DECREE OF THE CORPORATE TAX ACT

영문법령 불러오는 중…

ENFORCEMENT DECREE OF THE CORPORATE TAX ACT — 법갈피

Article 3(Scope of profit-making business) #

(1) "Business specified by Presidential Decree" in Article 4 (3) 1 of the Act means a business that generates income, except for businesses falling under any of the following: <Amended Dec. 31, 1999; Dec. 31, 2001; Dec. 30, 2002; Dec. 30, 2003; Feb. 19, 2005; Feb. 9, 2006; Feb. 28, 2007; Feb. 22, 2008; Feb. 29, 2008; Jun. 5, 2008; Feb. 4, 2009; Feb. 18, 2010; Dec. 30, 2010; Dec. 8, 2011; Feb. 2, 2012; Aug. 3, 2012; Feb. 15, 2013; Jun. 28, 2013; Mar. 24, 2014; May 29, 2017; Feb. 13, 2018; Feb. 12, 2019; Feb. 17, 2021; Feb. 15, 2022; Feb. 17, 2022; Feb. 28, 2023; Feb. 29, 2024; Feb. 28, 2025>

1. The agricultural business, excluding the livestock business (including service business related to livestock industry);

2. Research and development (excluding rendering research and development services in return for a price under a contract, etc.);

2-2. Business rendering ship classification and survey services;

3. Educational service business provided at any of the following educational facilities pursuant to the curriculum prescribed in the relevant statutes:

(a) Kindergartens referred to in the Early Childhood Education Act;

(b) Schools referred to in the Elementary and Secondary Education Act and the Higher Education Act;

(c) Foreign educational institutions established under the Special Act on Establishment and Management of Foreign Educational Institutions in Free Economic Zones and Jeju Free International City (excluding where a school may remit or actually remits its surplus fund to its main school in a foreign country pursuant to its articles of incorporation, etc.);

(d) An international school operated by a non-profit corporation established under the Special Act on the Establishment of Jeju Special Self-Governing Province and the Development of Free International City;

(e) Lifelong educational establishment in the form of major colleges referred to in Article 31 (4) of the Lifelong Education Act; and distance college-type lifelong educational establishment referred to in Article 33 (3) of that Act;

4. Social welfare services provided by any of the following social welfare facilities, from among human health and social work activities:

(a) A social welfare hall, a facility for vagrants and the homeless, or a facility for those suffer from tuberculosis and Hansen's disease from among the social welfare facilities referred to in Article 34 of the Social Welfare Services Act;

(b) A Central Self-Sufficiency Center and a regional self-sufficiency center referred to in Articles 15-2 (1) and 16 (1) of the National Basic Living Security Act;

(d) A welfare facility for older persons (excluding geriatric hospital) referred to in Article 31 of the Welfare of Older Persons Act;

(e) A long-term care institution referred to in subparagraph 4 of Article 2 of the Long-Term Care Insurance Act;

(f) A welfare facility for persons with disabilities, established pursuant to Article 58 (1) of the Act on Welfare of Persons with Disabilities, or a facility operated by a welfare organization for persons with disabilities under Article 63 (1) of said Act to manufacture products by persons with severe disabilities under Article 2 (2) of the Special Act on the Preferential Purchase of Products Manufactured by Persons with Severe Disabilities;

(g) A single-parent family welfare facility referred to in Article 19 (1) of the Single-Parent Family Support Act;

(h) A childcare center referred to in Article 10 of the Infant Care Act;

(i) A supporting institution referred to in Article 9 (1) the Act on the Prevention of Commercial Sex Acts and Protection of Victims; a rehabilitation support center referred to in Article 15 (2) of that Act; and a counseling center for victims of commercial sex acts referred to in Article 17 (2) of that Act;

(j) A mental health sanatorium and mental health rehabilitation facility referred to in subparagraphs 6 and 7 of Article 3 of the Act on the Improvement of Mental Health and the Support for Welfare Services for Mental Patients;

(k) A counseling center for victims of sexual violence and a protection facility of victims of sexual violence referred to in Articles 10 (2) and 12 (2) of the Sexual Violence Prevention and Victims Protection Act;

(l) An adoption institution referred to in Article 20 (1) of the Act on Special Cases concerning Adoption;

(m) A counseling center related to domestic violence and a protection facility for victims of domestic violence referred to in Articles 5 (2) and 7 (2) of the Act on the Prevention of Domestic Violence and Protection of Victims;

(n) A support center for multi-cultural families referred to in Article 12 (1) of the Multicultural Families Support Act;

(o) A healthy family support center referred to in Article 35 (1) of the Framework Act on Healthy Families;

5. The following pension business or mutual aid business:

(a) The national pension services under the National Pension Act;

(b) Business operated by an organization established under any special Act or upon authorization or permission of the Government (limited to fundraising and benefit services);

(c) Business operating an SME retirement pension fund plan referred to in the Act on the Guarantee of Employees' Retirement Benefits;

6. Health insurance services under the National Health Insurance Act and industrial accident compensation insurance services under the Industrial Accident Compensation Insurance Act among social security insurance services;

7. Business of providing services exempt from value-added tax under Article 26 (1) 18 of the Value-Added Tax Act among services provided by religious organizations (including their affiliated organizations) registered with the competent authorities;

8. Any of the following businesses from among Activities Auxiliary to Financial Service and Insurance Activities:

(a) Business of operating deposit insurance systems, such as deposit insurance through the Deposit Insurance Fund and the Redemption Fund for Deposit Insurance Fund Bonds established under the Depositor Protection Act, and funding or debt settlement related thereto;

(b) Business of operating deposit protection systems, such as deposit insurances and funding, through the Mutual Finance Depositor Protection Fund established under the Act on the Structural Improvement of Agricultural Cooperatives and the Fisheries Cooperatives Act;

(c) Business of operating deposit protection systems, such as deposit insurance and funding through the Depositor Protection Reserve Fund established under the Community Credit Cooperatives Act;

(d) Any business related to the acquisition and liquidation of non-performing assets, etc. through the Structural Adjustment Fund established under Article 43-2 of the Act on the Establishment of Korea Asset Management Corporation;

(e) Business of operating deposit insurance systems, such as deposit insurance and funding through the Credit Union Depositor Protection Fund established under the Credit Unions Act;

(f) Business of operating deposit insurance systems, such as deposit insurance and funding through the Mutual Finance Depositor Protection Fund established under the Forestry Cooperatives Act;

9. Blood management business operated by a person who has acquired permission to open a blood center from the Minister of Health and Welfare pursuant to Article 6 (3) of the Blood Management Act;

10. Business of operating the guarantee system of reverse mortgage loan-backed old age pension through the account of guarantee on the reverse mortgage loan-backed old age pension pursuant to the Korea Housing Finance Corporation Act (limited to the guarantee business and business of paying reverse mortgage loan-backed old age pensions);

11. Business of lending money for business start-up, etc. to persons prescribed by Decree of the Ministry of Economy and Finance, such as eligible recipients and the second-lowest income bracket as defined in Article 2 of the National Basic Living Security Act, and which meet the requirements prescribed by Decree of the Ministry of Economy and Finance;

12. Any business conducted by a non-profit corporation (limited to a corporation established for the purposes of construction and expansion of private school buildings, expansion of facilities thereof and improvement of an educational environment) for providing school facilities to the operators of foreigners' schools;

13. Business of promoting test of Dan, Geup and Poom by sports organizations affiliated with the Korea Sports Council established under Article 33 of the National Sports Promotion Act and by the Kukkiwon established under the Act on the Promotion of Taekwondo and Creation of Taekwondo Park;

14. Any business related to treatment of waste which is conducted by Sudokwon Landfill Site Management Corporation established under the Act on the Establishment and Management of Sudokwon Landfill Site Management Corporation;

15. Student loan business operated by the Korea Student Aid Foundation established under the Act on the Establishment of Korea Student Aid Foundation using a student loan account referred to in Article 24-2 of that Act;

16. Other business similar to those referred to in subparagraphs 1, 2, 2-2, 3 through 15 and prescribed by Decree of the Ministry of Economy and Finance.

(2) "The revenues specified by Presidential Decree" in the proviso of Article 4 (3) 5 of the Act means income arising from the disposal of tangible or intangible assets that were directly used for the principal purpose business as prescribed in the statutes or regulations or the articles of incorporation (excluding the profit-making business referred to in paragraph (1); hereafter the same shall apply in this paragraph), which is classified in the following subparagraphs; and if the revenues fall under both subparagraphs 1 and 2, the greater amount among them shall apply. In such cases, ancillary income, such as admission fees or entrance charges, derived in connection with the maintenance or management of the relevant assets, shall not preclude such assets from being regarded as used directly for the principal purpose business: <Amended on Feb. 28, 2025>

1. Where, as of the date of disposal of tangible or intangible assets (or, in the case of a public institution relocated under Article 25 of the Special Act on Decentralization and Balanced National Development, referring to the date of relocation; hereafter the same shall apply in this paragraph), such assets have been used directly for the principal purpose business for 3 or more consecutive years: The income arising from the disposal of such assets shall be included. In such cases, where a non-profit domestic corporation transfers assets belonging to a profit-making business to the principal purpose business and subsequently disposes of them, the acquisition cost of such assets shall be deemed to be their fair market value as of the date of transfer to the principal purpose business;

2. Where tangible or intangible assets have been used directly for the principal purpose business for 10 years or more (including cases where, as of the date of disposal, such assets are no longer being used directly for the principal purpose business): The income calculated according to the following; in such cases, the acquisition cost of such assets shall be deemed to be their fair market value as of the time they were first transferred to the proper purpose business by the non-profit domestic corporation:

┌────────────────────────────────────┐

│ Income from the disposal of the relevant asset × Number of days the asset was directly used for the principal purpose business │

├───┼──────────┼──────────────┤

│ The number of days the asset is held │

└────────────────────────────────────┘

(3) "Revenues prescribed by Presidential Decree" in Article 4 (3) 7 of the Act means profits (referring to profits on sale of bonds, etc., less losses from sale of bonds, etc.) on sale of bonds, etc. (excluding interest income exempt from corporate tax) referred to in Article 46 (1) of the Income Tax Act; provided, excluded herefrom shall be profits on trading of the bonds, etc., devolved on the business referred to in paragraph (1) 8. <Amended on Dec. 30, 2002; Feb. 19, 2005; Feb. 4, 2009; Feb. 18, 2010; Jun. 8, 2010; Feb. 12, 2019>

[Moved from Article 2; Previous Article 3 Moved to Article 4 <Feb. 12, 2019>]

Article 4(Start date of business year) #

(1) The start date of the first business year of a corporation shall be any of the followings: <Amended on Feb. 19, 2005; Feb. 15, 2013; Feb. 12, 2019>

1. For a domestic corporation, the registration date of its incorporation; provided, it shall be any of the following dates with respect to an organization deemed a corporation under subparagraph 2 (c) of Article 2 of the Act (hereinafter referred to as "organization deemed a corporation"):

(a) For an organization established under statutes or regulations, the establishment date of which is prescribed by statutes or regulations, the establishment date;

(b) For an organization which requires permission or authorization of the competent authorities for establishment and an organization which has registered with the competent authorities under statutes or regulations, the date of permission, authorization, or registration;

(c) For an unregistered organization, which is a foundation having endowments donated for the public interest, the date such endowments are donated;

(d) For an organization which has obtained approval from the head of the tax office having jurisdiction over the place of tax payment under Article 13 (2) of the Framework Act on National Taxes, the date of approval;

2. For a foreign corporation, the date it establishes a domestic place of business (hereinafter referred to as "domestic place of business") under Article 94 of the Act (if it has no domestic place of business, the date on which it initially earns the income specified in Article 6 (4) of the Act).

(2) In applying paragraph (1), where profits and losses generated before the start date of the first business year actually have devolved on a corporation and there is no concern about tax evasion, such profits and losses may be included in the profits and losses for the first business year of the corporation, as long as the period of the first business year does not exceed one year. In such cases, the start date of the first business year shall be the date on which the earnings and losses that have devolved on the relevant corporation are first generated.

[Moved from Article 3, Previous Article 4 Moved to Article 5 <Feb. 12, 2019>]

Article 7(Scope of place of tax payment) #

(1) "Place prescribed by Presidential Decree" in the proviso to Article 9 (1) of the Act means the location of the place of business of an organization, but if it is an organization the main income of which is real estate rental income, it means the location of the real estate. In such cases, as for an organization with at least two places of business or real estate, it means the location of the main place of business or primary real estate, and for an organization with no place of business, it means the location of its main office stipulated in the articles of incorporation of the relevant organization (as for an organization that has not stipulated its main office in the articles of incorporation, it means the address of its representative or manager). <Jun. 3, 2011>

(2) "Location of the main place of business or primary real estate" in paragraph (1) means the location of the place of business or the real estate generating the largest amount of business revenue provided in subparagraph 1 of Article 11 (hereinafter referred to as "amount of business revenue") in the immediately preceding business year.

(3) "Location of the main place of business prescribed by Presidential Decree" in Article 9 (3) of the Act means the location determined by applying mutatis mutandis paragraph (2); provided, this shall apply only when the place of tax payment is first determined. <Amended on Dec. 30, 2002; Jun. 3, 2011>

(4) "Place prescribed by Presidential Decree" in Article 9 (3) of the Act means the place reported as the place of tax payment by a foreign corporation among places where domestic source income is generated. In such cases, the foreign corporation shall file a report on the place of tax payment in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment within one month from the date on which domestic source income is generated from at least two categories thereof. <Amended on Feb. 29, 2008; Jun. 3, 2011>

(5) Where it is impractical to determine the domestic place of business of a foreign corporation engaged in the construction industry, etc. as the place of tax payment because the domestic place of business of such corporation is on in the territorial waters or on other grounds, the place of tax payment of such corporation shall be its domestic location in the register; provided, no location is entered in the register, the place in which overall management of the business is performed in the Republic of Korea shall be the place of tax payment. <Added on Feb. 4, 2009>

(6) "The location of the relevant person liable for withholding prescribed by Presidential Decree" in the main sentence of Article 9 (4) of the Act means a place according to the following classification: <Added on Feb. 12, 2019>

1. Where the relevant person liable for withholding is an individual: the location provided in Article 7 (1) 1 or 2 of the Income Tax Act;

2. Where the relevant person liable for withholding is a corporation: the location according to the following:

(a) The headquarters or main office of the relevant corporation, and its actual business management place (hereinafter referred to as "headquarters, etc.") if its headquarters or main office is not located in the Republic of Korea (referring to the location provided in paragraph (1) in the case of an organization deemed a corporation; the location of the main domestic place of business in the case of a foreign corporation);

(b) Notwithstanding item (a), where a branch, business office, or other place of business of a corporation keeps separate accounting under the self-supporting accounting system, it means the location of the relevant place of business (excluding the location of the place of business if it is located in any foreign country); provided, if a corporation collectively computes the amount of tax withheld on the income paid through its branches, business offices, and other places of business by an electronic computer system in its headquarters, etc., has filed a report thereon with the head of the tax office having jurisdiction over its headquarters, etc., and has registered each of business establishments with the head of the competent tax office in accordance with Article 8 (3) and (4) of the Value-Added Tax Act, it shall be the location of the headquarters, etc. of the relevant corporation.

(2) "The place prescribed by Presidential Decree" in the proviso to Article 9 (4) of the Act means places according to the following classification: <Added on Feb. 12, 2019>

1. Where domestic-sourced real estate transfer income referred to in subparagraph 7 (b) of Article 93 of the Act or other income specified in any subparagraph of Article 132 (8) of this Decree accrues: the location of the domestic place of business of a domestic corporation or foreign corporation which has issued the relevant securities;

2. In cases other than those under subparagraph 1: the place designated by the Commissioner of the National Tax Service.

(8) Matters necessary for the procedures for batch calculation and reporting pursuant to the proviso of paragraph (6) 2 (b) shall be determined by Decree of the Ministry of Economy and Finance. <Added on Feb. 12, 2019>

[Moved from Article 6 <Feb. 12, 2019>]

Article 10(Deduction of losses) #

(1) "Corporations specified by Presidential Decree, such as ... enterprises performing a rehabilitation plan" in the proviso, with the exception of its subparagraphs, of Article 13 (1) of the Act; the part, with the exception of the subparagraphs, of Article 45 (5) of the Act; the part, with the exception of the subparagraphs, of Article 46-4 (5) of the Act means corporations falling under any of the following: <Added on Feb. 12, 2016; Apr. 29, 2016; Feb. 3, 2017; Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021; Feb. 29, 2024>

1. A corporation in the course of performing a rehabilitation plan for which a court decides to authorize pursuant to Article 245 of the Debtor Rehabilitation and Bankruptcy Act;

2. A corporation in the course of performing a corporate improvement plan under an agreement concluded to perform the corporate improvement plan pursuant to Article 14 (1) of the Corporate Restructuring Promotion Act;

3. A corporation in the course of performing a business normalization plan under an agreement concluded to perform the business normalization plan with any financial company, etc., as defined in subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality, among those that have claims against the corporation or an institution prescribed by Decree of the Ministry of Economy and Finance among public institutions defined in the Act on the Management of Public Institutions that conduct the financial business or corporate restructuring business pursuant to any other Act;

4. A corporation who meets all the following requirements, among corporations established with an objective to issue securities under the Financial Investment Services and Capital Markets Act or to borrow funds (hereafter in this paragraph referred to as "securitization"), based on receivables, real estate, or other property rights (hereafter in this paragraph referred to as "securitized assets"):

(a) The corporation shall be either a stock company or limited company under the Commercial Act or any other statute;

(b) The corporation shall be established for a limited duration with no full-time executive officer or employee;

(c) The corporation's articles of incorporation, etc., shall limit its business operations to those necessary for securitization and shall prohibit a merger, liquidation, or dissolution not prearranged in securitization;

(d) A contract for outsourcing business process and a contract for outsourcing asset management shall be signed to manage and operate the company's assets for securitization;

(e) The acquisition of securitized assets shall be completed by December 31, 2015;

5. A domestic company that falls under any subparagraph of Article 51-2 (1) of the Act or a domestic corporation referred to in Article 104-31 (1) of the Act on Restriction on Special Cases concerning Taxation;

6. A corporation that has obtained approval for a business reorganization plan pursuant to Article 10 of the Special Act on the Corporate Revitalization.

7. A non-profit domestic corporation which may include income from profit-making business of a juristic person in deductible expenses as the proper-purpose business reserve pursuant to Article 74 (1) (excluding subparagraphs 4 through 6) or (4) of the Act on Restriction on Special Cases concerning Taxation.

(2) In deducting losses under subparagraph 1 of Article 13 of the Act, the losses shall be deducted sequentially beginning with the losses first generated in the relevant business year. <Amended on Feb. 12, 2016; Feb. 12, 2019>

(3) In applying subparagraph 1 of Article 13 of the Act, any of the following losses shall be deemed deducted when calculating the tax base for each business year: <Amended on Feb. 9, 2006; Mar. 31, 2011; Feb. 12, 2016; Feb. 12, 2019; Feb. 15, 2022>

1. Losses appropriated under Article 17 (2) of the Act;

2. Losses carried forward that is appropriated by the value of assets gratuitously acquired or the amount of reduced debts due to exemption from or expiration of debts under subparagraph 6 of Article 18 of the Act;

3. Losses deducted under Article 72 (1) of the Act and Article 8-4 of the Act on Restriction on Special Cases concerning Taxation.

(4) Losses referred to in Article 13 (1) 1 of the Act shall include any amount within the limit of succeeded losses referred to in Articles 81 (2) and 83 (2). <Amended on Jun. 8, 2010; Feb. 12, 2016; Feb.12, 2019>

(5) Where any loss incurs in a business year of a corporation which has included a loss exceeding the allocation limit referred to in Article 100-18 (3) of the Enforcement Decree of the Restriction of Special Taxation Act in deductible expenses, the loss additionally allocated or the loss of the business year, whichever is smaller, shall be deemed the loss incurred in the business year in which the last day of the business year of a partnership enterprise which has generated a loss exceeding the allocation ends, falls for purposes of paragraph (2). <Added on Feb. 4, 2009; Feb. 12, 2016; Feb. 29, 2024>

Article 11(Scope of earnings) #

Except as otherwise provided for in the Act and this Decree, profits or earnings specified in Article 15 (1) of the Act (hereinafter referred to as "earnings") shall include each of the following: <Amended on Dec. 29, 2000; Feb. 9, 2006; Feb. 28, 2007; Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Feb. 18, 2010; Feb. 2, 2012; Feb. 12, 2019; Feb. 28, 2023; Feb. 29, 2024; Feb. 28, 2025>

1. The amount of business income [excluding the amounts of sales overcharge and sales discount calculated under the corporate accounting standards (referring to the accounting standards provided in any subparagraph of Article 79; hereinafter the same shall apply), and where a domestic corporation sells or provides goods or services it produces or supplies to its executive officers or employees at a price lower than the fair market value, the difference between the transaction price and the fair market value shall be included in the business revenue; hereinafter the same shall apply], generating from each business prescribed in the Korean Standard Industrial Classification prepared and publicly notified by the Commissioner of the Statistics Korea under Article 22 of the Statistics Act (hereinafter referred to as the "Korean Standard Industrial Classification"); provided, the amount of income from security deposits or deposit money in real estate rent when making estimations under the proviso of Article 66 (3) of the Act shall be calculated by multiplying the interest rate prescribed by Decree of the Ministry of Economy and Finance in consideration of the term deposits of financial companies, etc. (hereinafter referred to as "term deposits interest rates");

2. The amount of assets transferred;

2-2. The amount of treasury stocks (including where a surviving corporation acquires the stocks of the surviving corporation held by a merged corporation following a merger). In such cases, where shares are transferred according to the exercise of stock options pursuant to the main clause, with the exception of the items, of subparagraph 19-2 of Article 19, it shall be an amount calculated at the market price at the time of the exercise of stock options;

3. Property rental fees;

4. Marginal profits from the evaluation of assets;

5. The value of assets gratuitously received;

6. The amount (including the amount computed under the proviso to Article 17 (1) 1 of the Act) of debts reduced due to exemption from, or expiration of debts;

7. The returned amount included in deductible expenses;

8. Profits distributed from a specially related party through capital transactions referred to in any of the items of Article 88 (1) 8 and subparagraph 8-2 of the same paragraph;

9. Any of the following provisional payments as referred to in Article 28 (1) 4 (b) of the Act and interest thereon (hereafter referred to as "provisional payment, etc." in this Article); provided, where any justifiable grounds prescribed by Decree of the Ministry of Economy and Finance exists, such as where collection is impossible due to litigation about claims or debts:

(a) Provisional payment, etc. (excluding the interest included in the gross income under item (b)) not collected until the date of termination of the special relationship referred to in Article 2 (8);

(b) Interest accrued where the special relationship under Article 2 (8) is not terminated and where the interest on the provisional payment referred to in Article 28 (1) 4 (b) of the Act is not collected by the first anniversary of the end date of the business year in which the interest accrual date falls;

10. The amount of a decrease in the liability reserve fund accumulated by an insurance company defined in the Insurance Business Act (hereinafter referred to as "insurance company") pursuant to Article 120 of that Act (excluding a decrease in the assessed value of the liability reserve fund due to changes in the discount rate), which is appropriated as earnings in accordance with the accounting standards referred to in paragraph (3) of the same Article (hereinafter referred to as "insurance supervisory accounting standards");

10-2. The decrease in the liability reserve (excluding the decrease in the appraised value of the liability reserve due to changes in the discount rate), which is accumulated by the Housing and Urban Guarantee Corporation under the Housing and Urban Fund Act pursuant to Article 24 of the Enforcement Decree of that Act, which is accounted for as revenue in accordance with the Insurance Supervisory Accounting Standards;

11. Other earnings reverted or to be reverted to a corporation.

Article 12(Scope of surpluses untaxed upon capitalization) #

(1) "An amount prescribed by Presidential Decree" in Article 16 (1) 2 (a) of the Act means the amount specified in any subparagraph of Article 17 (1) of the Act; provided, the following amounts shall be excluded therefrom: <Amended on Apr. 13, 2012; Feb. 15, 2013; Feb. 12, 2019; Feb. 29, 2024>

1. An excess referred to in the proviso to Article 17 (1) 1 of the Act;

2. Profits accruing by retiring treasury stocks or investment shares (excluding the capitalized amount after the secondary anniversary of the date of the retirement if the market price referred to in Article 52 (2) of the Act does not exceed the acquisition value at the time of retirement);

3. In the case of a qualified merger referred to in Article 44 (2) of the Act (including cases deemed a qualified merger pursuant to paragraph (3) of the same Article; hereinafter referred to as "qualified merger"), the aggregate of the following amounts (in the case of a corporation other than a stock company, referring to the amount computed by applying this mutatis mutandis). In such cases, an aggregated amount shall not exceed the amount prescribed in Article 17 (1) 5 of the Act (hereafter in this Article referred to as "merger gain"):

(a) As of the merger registration date, where the value of the property that a merging corporation succeeds to exceeds the book value (where tax settlement matters referred to in subparagraph 1 of Article 85 exist, such value shall be calculated by adding the amount not included in gross income and by subtracting the amount not included in deductible expenses, out of the tax settlement matters; hereafter in this paragraph the same shall apply) of such property of a merged corporation, the amount in excess;

(b) An amount equivalent to a surplus referred to in the main clause, with the exception of its items, of Article 16 (1) 2 of the Act (hereafter referred to as "capital surplus subject to fictious dividend" in this Article and Article 17) out of the capital surplus prescribed by Decree of the Ministry of Economy and Finance;

4. In the case of a qualified division prescribed in Article 46 (2) of the Act (hereinafter referred to as "qualified division"), the aggregate of the following amounts (in the case of a corporation other than a stock company, referring to the amount computed by applying this mutatis mutandis). In such cases, the limit shall be an amount prescribed in Article 17 (1) 6 of the Act (hereafter in this Article referred to as "marginal profits from a division"):

(a) As of the registration date of a division, where the value of the property that a corporation established through division, etc. (referring to a corporation established through division, etc. referred to in the former part, with the exception of the subparagraphs, of Article 46 (1) of the Act; hereinafter the same shall apply) succeeds to is greater than the book value of such property of a divided corporation, the amount in excess;

(b) Where a decrease in surplus other than the capital surplus subject to fictious dividend out of the capital of a divided corporation following a division and the capital surplus prescribed by Decree of the Ministry of Economy and Finance falls short of the book value of net assets as at the division registration date of the divided business division, such shortfall. In such cases, such shortfall shall be limited to the aggregate of the retained earnings before the division as at the division registration date of the divided corporation and the amount equivalent to the capital surplus subject to fictious dividends before the division;

(d) Deleted. <Feb. 12, 2019>

5. The amount repaid from retained earnings out of the excess amount, under the main clause of Article 17 (1) 1 of the Act, of the different classes of shares concerning redemption of shares pursuant to Article 345 (1) of the Commercial Act.

(2) In applying paragraph (1) 3 and 4, where some of marginal profits from a merger or marginal profits from a division is converted into capital or investment, the amount other than the amount pursuant to the relevant subparagraph shall be converted first. <Amended on Feb. 12, 2019>

(3) In applying paragraph (1) 3 and 4, although reserve funds are succeeded to under Article 459 (2) of the Commercial Act, surpluses shall be calculated, deeming such reserve funds are not succeeded.

(4) Where some of the revaluation reserve referred to in Article 16 (1) 2 (b) of the Act are converted into capital or investment, it shall be deemed that conversion is made based on the rate of the amount to which Article 13 (1) 1 of the Assets Revaluation Act applies and other amount.

[This Article Wholly Amended on Feb. 2, 2012]

Article 14(Evaluation of values of assets) #

(1) The value of an asset, other than cash, which has been acquired under any subparagraph of Article 16 (1) of the Act shall be determined as follows: <Amended on Dec. 29, 2000; Dec. 31, 2001; Dec. 30, 2003; Feb. 19, 2005; Feb. 4, 2009; Jun. 8, 2010; Feb. 2, 2012; Feb. 12, 2016; Feb. 3, 2017; Feb. 13, 2018; Feb. 12, 2019; Feb. 15, 2022>

1. Where the acquired assets are stocks or investment shares (hereinafter referred to as "stocks, etc."), the following amounts:

(a) In cases of stocks, etc., referred to in Article 16 (1) 2 and 3 of the Act: the par value or the amount of investment; provided, in cases of stocks, etc. acquired by a corporation referred to in Article 51-2 (1) 2 of the Act (hereafter referred to as "investment company, etc." in this Article, Articles 70, 75, and 86-3), the amount shall be deemed nil;

(b) In cases of stocks, etc., referred to in Article 16 (2) 1 and 2 of the Act: Where the requirements referred to in Article 44 (2) 1 and 2 (excluding the part related to holding of stocks, etc.) or Article 46 (2) 1 and 2 (excluding the part related to holding of stocks, etc.) are met or in cases falling under Article 44 (3) of the Act, the previous book value (it refers to the market value, if a portion of costs of a merger or a division under Article 16 (2) 1 or 2 of the Act is paid in cash or by any other asset and the appraised market price of the stocks, etc. acquired through the merger or division is smaller than the previous book value); provided, the amount of stocks, etc. acquired by an investment company, etc. shall be deemed nil;

(c) In cases of a stock dividend referred to in Article 462-2 of the Commercial Act: issued price (if an investment company, etc. is given with any stock dividend, such stock dividend shall be deemed nil);

(d) In other cases: the market price at the time of acquisition provided for in Article 52 of the Act (hereinafter referred to as "market price"); provided, where profits are distributed from an affiliated person under Article 88 (1) 8, it shall be the amount less the profits;

1-2. Where the acquired assets are stocks, etc. that meet all of the following requirements, the previous book value (it refers to market value, if costs of a merger under Article 16 (2) 1 of the Act is partially paid in cash or by any other asset and the appraised market value of the stocks, etc. acquired through the merger is smaller than the previous book value):

(a) Where a foreign corporation holds the total number of outstanding stocks of another foreign corporation or the total amount of investment and is merged to the latter foreign corporation; or where a domestic corporation holds the total number of outstanding stocks of, or the total amount of investment in, two separate foreign corporations and the separate foreign corporations are merged with each other (including cases where the sum of stocks, etc. of a foreign corporation held respectively by a domestic corporation and by another foreign corporation whose total number of outstanding stocks or whose total amount of investment is held by the domestic corporation equals to the total number of outstanding stocks of, or the total amount of investment in, the former foreign corporation and the two foreign corporations are merged with each other);

(b) The surviving corporation and the merged corporation are corporations in one and the same state with which the Republic of Korea has signed a tax treaty;

(c) The state referred to in item (b) does not levy corporate tax on any domestic corporation that is a stockholder of the merged corporation or defers the levying of corporate tax on such domestic corporation;

(d) The corporation shall submit the documents that can prove the matters referred to in items (a) through (c) to the head of the tax office having jurisdiction over the place of tax payment;

2. Where the acquired assets are not stocks, etc., the market price of the assets at the time of acquisition.

(2) Where stocks, etc. are acquired under the proviso to Article 16 (1) 2 of the Act, the book value of one stock or share of new or old stocks, etc. shall be as follows:

┌────────────────────────────────────────────┐

│ │

Book value of one stock or share=Book value of one stock or share of old stock, etc.

│ in which the date of supply of goods falls ÷ │

1 ＋ number of one stock or share of old stock, etc. allotted to one share of new stock, etc.

│ │

└─────────────────────────────────────────┘

(3) In applying Article 16 (1) 1 of the Act, where stocks, etc. referred to in the proviso, with the exception of the items, of subparagraph 2 of the same paragraph are acquired within two years prior to the retirement of stocks, etc. (including the reduction of capital or financing; hereafter in this paragraph the same shall apply), such stocks, etc. shall be deemed retired first, and the initial acquisition value of such stocks, etc. shall be deemed nil, notwithstanding paragraph (2). In such cases, where some stocks, etc. are disposed of during this period, such stocks, etc. are deemed disposed of in proportion of such stocks, etc. to other stocks, etc., and the book value of one stock or share after the retirement of the stocks, etc. shall be the aggregate of book values after the retirement divided by the total number of stocks, etc. after the retirement, notwithstanding paragraph (2). <Amended on Feb. 12, 2019>

(4) In cases of paragraph (1) 1 (a), the value of non-par-value stocks shall be calculated by dividing the amount transferred to the capital on the date specified in any subparagraph of Article 13 by the number of the stocks newly issued in return for the amount transferred to capital. <Amended on Feb. 21, 2014>

Article 15(Amount in excess of par value of issued stocks) #

(1) "Amounts prescribed by Presidential Decree" in Article 17 (2) of the Act means the following amounts: <Added on Feb. 9, 2006; Jun. 3, 2011; Apr. 29, 2016; Feb. 3, 2017; Feb. 12, 2019>

1. The amount of stocks issued in excess of the market price of such stocks, etc. (or the par value if the market price is less than the par value), if any corporation whose rehabilitation plan to convert its debts to investments has been approved under the Debtor Rehabilitation and Bankruptcy Act converts its debts to investments;

2. An amount in excess of the market price (or the par value if the market price is less than the par value) of the relevant stocks, etc., if any enterprise that shows the sign of insolvency and has signed an agreement to implement a corporate improvement plan aimed at converting its debts into investments converts its debts into investments under the Corporate Restructuring Promotion Act;

3. An amount in excess of the market price (or the par value if the market price is less than the par value) of the relevant stocks, etc., if any corporation converts its debts to investments after having signed an agreement to implement a management normalization program aimed at converting its debts to investments with any financial company, etc. defined in subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality, which holds its claims against the relevant corporation;

4. An amount in excess of the market price (or par value, if the market price is less than par value) of the relevant stocks, etc., if a corporation that has a corporate restructuring plan approved under Article 10 of the Special Act on the Corporate Revitalization converts debts into investments.

(2) Where any domestic corporation discontinues its business or is dissolved before appropriating the total amount excluded from the gross income to cover losses under Article 17 (2) of the Act, the total amount that is not appropriated to cover losses shall be included in the gross income when calculating the amount of income of the business year in which the relevant grounds arise. <Added on Feb. 9, 2006; Feb. 12, 2019>

Article 17(Limitation on reduced distribution of revaluation reserve out of merger gain) #

(1) "Amount prescribed by Presidential Decree" in subparagraph 8 (b) of Article 18 of the Act means the amount calculated according to the following formula:

┌────────────────────────────────────────────────┐

A - (B - C)

A: Profit from merger

B: Amount calculated by adding up the capital of a merged corporation and capital surplus other than capital surplus subject to fictitious dividends

(excluding revaluation reserves under Article 16 (1) 2 (b) of the Act)

C: Increase in capital of a merging corporation

└────────────────────────────────────────────────┘

(2) "Amount prescribed by Presidential Decree" in subparagraph 8 (c) of Article 18 of the Act means the amount calculated according to the following formula:

┌─────────────────────────────────────┐

A - (B - C)

A: Division margin

B: The sum of reduction in the capital of a divided corporation and reduction in capital surplus other than the capital surplus subject to fictitious dividends

(excluding the revaluation reserve under Article 16 (1) 2 (b) of the Act)

└─────────────────────────────────────┘

(3) In applying paragraphs (1) and (2), if a merged corporation or a corporation newly established through division falls under any of the following subparagraphs, it shall be calculated as prescribed in the relevant subparagraph:

1. Where there is a reserve fund that has been succeeded pursuant to Article 459 (2) of the Commercial Act: It shall be calculated deeming that there is no succession thereto;

2. Where marginal profits from a merger or division is partially transferred to capital or investment: The calculation shall be made deeming the amount equivalent to the revaluation reserve under Article 16 (1) 2 (b) of the Act of the merged corporation or the divided corporation is transferred to the capital or investment in advance, including only the amount remaining after such transfer in the marginal profit from a merger or division.

(4) Where a merged corporation or a corporation newly established through division distributes reduced dividends on some of the profits from the merger or division, it shall be deemed that the relevant amount has been distributed in the following order:

1. Dividends provided for in subparagraph 8 (b) or (c) of Article 18 of the Act;

2. The amount equivalent to the retained earnings of the merged corporation or the divided corporation and the capital surplus subject to a fictitious dividend;

3. An amount equivalent to the capital surplus other than the capital surplus subject to a fictitious dividend of the merged corporation or the divided corporation.

[This Article Added on Feb. 29, 2024]

Article 17-2(Non-inclusion of domestic corporations' dividend income in gross income) #

(1) For the purpose of Article 18-2 (1) 1 of the Act, the ratio of investment made by a domestic corporation in another domestic corporation (hereafter in this Article referred to as "invested corporation") shall be calculated based on the latter's stocks, etc. that has been held for at least three months as at the ex-dividend date of the invested domestic corporation. In such cases, in calculating the number of the retained shares, etc., if some stocks of the same kind are transferred, the stocks, etc. first acquired shall be deemed the stocks, etc. first transferred. <Amended on Feb. 12, 2019>

(2) For the purpose of Article 18-2 (1) 2 of the Act, the borrowings and interest thereon shall not include the amount excluded from deductible expenses under Article 55. <Amended on Feb. 12, 2019>

(3) The amount calculated pursuant to Article 18-2 (1) 2 of the Act shall be the sum of deductions calculated according to the following formula: <Amended on Feb. 12, 2019>

┌───────────────────────────────────────┐

│ │

Amount deducted = A x B x D

│ ─────────────── │

│ C │

│ │

A = Interest on the borrowings of domestic corporations

B = The accumulated amount during the corresponding period (referring to the total amount of the daily balances; hereinafter the same shall apply) of the book value of the stocks, etc.

(excluding stocks, etc. invested in kind by the State or local governments) of the invested corporation

C = The accumulated amount of the total assets during the corresponding period, as indicated in the statement of financial position, as of the end of the business year of the domestic corporation

D = The ratio of non-inclusion in gross income pursuant to the classification under Article 18-2 (1) 1 of the Act

└───────────────────────────────────────┘

(4) "Corporation prescribed by Presidential Decree" referred to in Article 18-2 (2) 4 means any of the following corporations: <Amended on Feb. 12, 2019; Feb. 29, 2024>

1. A corporation (limited to the business years during which the reduction or exemption rate is 100/100) to which Articles 63-2, 121-8 and 121-9 of the Act on Restriction on Special Cases concerning Taxation apply;

2. A corporation to which special taxation to partnership enterprises prescribed in Article 100-15 of the Act on Restriction on Special Cases concerning Taxation applies.

(5) "Amount of dividend revenue specified by Presidential Decree" in Article 18-2 (2) 8 of the Act means any of the following: <Added on Feb. 29, 2024>

1.The amount prescribed in Article 16 (1) 1 of the Act (limited to cases of a decrease in capital);

2. The amount specified in Article 16 (1) 3 of the Act.

(6) Any corporation that wishes to be governed by Article 18-2 (1) of the Act shall submit a detailed statement of dividend income prescribed by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, along with a report provided for in Article 60 of the Act. <Amended on Feb. 29, 2008; Feb. 12, 2019; Feb. 29, 2024>

[This Article Added on Dec. 29, 2000]

[Title Amended on Feb. 12, 2019]

[Moved from Article 17-3, Previous Article 17-2 Moved to Article 17-3 <Feb. 12, 2019>]

Article 18(Non-inclusion of dividend income of foreign subsidiaries in gross income) #

(1) "Corporation that meets the requirements prescribed by Presidential Decree" in Article 18-4 (1) of the Act means a domestic corporation that directly holds at least 10/100 (at least 5/100 in the case of a foreign corporation that engages in an overseas resources development project under Article 22 of the Act on Special Taxation Restrictions) of the total number of issued voting stocks or the total amount of investments of a foreign corporation for at least six months as of the dividend base date of the foreign corporation (where a domestic corporation succeeds to the stocks, etc. of a foreign subsidiary owned by another domestic corporation through a qualified merger, qualified division, qualified split-off, or qualified investment in kind, such domestic corporation shall be deemed to have held relevant stocks, etc. from the time when such another domestic corporation acquired the stocks, etc. of the foreign subsidiary before the succession).

(2) "The amount of dividend income prescribed by Presidential Decree" referred to in Article 18-4 (4) 1 of the Act means each of the following amounts for the relevant business year in which a specific foreign corporation, to which Article 27 (1) of the Adjustment of International Taxes Act applies, has actual tax liability prescribed in subparagraph 1 of the same paragraph of up to 15 percent of its actual accrued income; provided, the following amounts shall be excluded in the case where an overseas resources development enterprise under the Overseas Resources Development Business Act (hereinafter referred to as "overseas resources development enterprise" in Article 19-2) makes a capital contribution to a foreign corporation under Article 104-15 (1) 2 of the Act on Restriction on Special Cases concerning Taxation, or makes an investment in a foreign subsidiary under subparagraph 3 of that paragraph, for the purpose of overseas resources development under that Act (hereafter referred to as "overseas resources development" in Article 19-2): :

1. Profit dividends (including interim dividends from disposing of retained earnings during the relevant business year) or surplus distributions out of the proceeds of disposing of retained earnings;

2. An amount deemed a dividend or distribution under Article 16 of the Act.

(3) "Financial instrument prescribed by Presidential Decree" referred to in Article 18-4 (4) 2 of the Act means financial instruments that meet the requirements according to the following classification:

1. In the case of the Republic of Korea: Pursuant to the tax law of the Republic of Korea, the relevant financial instruments are deemed capital, and the interest and discount fees paid to a domestic corporation by its foreign subsidiary, the counterparty to a transaction, following the transaction of the relevant financial instrument shall be treated as dividend income;

2. In the case of a country where a foreign subsidiary is located: Pursuant to the tax law of that country, the relevant financial instrument is deemed a liability, and the interest and discount fees paid to a domestic corporation, the counterparty to a transaction, by its subsidiary following the transaction of the relevant financial instrument shall be treated as interest expenses.

(4) A domestic corporation that intends to be governed by Article 18-4 (1) of the Act shall submit a detailed statement of dividend income of a foreign subsidiary prescribed by Decree of the Ministry of Economy and Finance when filing the tax base return under Article 60 of the Act to the head of the tax office having jurisdiction over the place of tax payment.

[This Article Added on Feb. 28, 2023]

Article 19(Scope of deductible expenses) #

Losses or expenses (hereinafter referred to as deductible expenses) referred to in Article 19 (1) of the Act include each of the follows, except as otherwise provided for in the Act and this Decree: <Amended on Dec. 29, 2000; Dec. 31, 2001; Dec. 30, 2002; Feb. 19, 2005; Feb. 9, 2006; Feb. 28, 2007; Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Feb. 18, 2010; Mar. 15, 2010; Dec. 7, 2010; Jan. 25, 2012; Feb. 2, 2012; Jun. 11, 2013; Jun. 28, 2013; Feb. 21, 2014; Feb. 3, 2015; Feb. 3, 2017; Feb. 13, 2018; Feb. 12, 2019; Feb. 11, 2020; Mar. 31, 2020; Feb. 17, 2021; Feb. 15, 2022; Feb. 28, 2023; Dec. 5, 2023; Feb. 29, 2024; Jul. 2, 2024; Feb. 28, 2025>

1. The purchase value (excluding the amount of purchase allowances and the discounted purchase amount computed according to the Korea Financial Accounting Standards) of raw materials of products or goods sold and incidental expenses;

1-2. Incidental expenses relating to sale, such as expenses for storage, packing or transportation, sales incentives, and sales allowances of products or goods sold (including payment of sales subsidies and sales allowances without a prior arrangement);

2. The book value of transferred assets as at the time of transfer;

3. Labor expenses (including labor expenses of executive officers or employees dispatched to overseas subsidiaries in which a domestic corporation has directly or indirectly invested 100/100 of the total number of its issued stocks or equity interest, and for which labor income tax has been withheld pursuant to Article 127 (1) of the Income Tax Act (limited to cases where the labor expenses paid by the relevant domestic corporation are less than 50/100 of the total labor expenses paid by the relevant domestic corporation and the overseas subsidiary));

3-2. The amount paid in accordance with the payment standards commonly applied to the relevant executive officers or employees for childbirth or childcare support of the executive officers or employees;

3-3. The amount equivalent to the benefits that the relevant executive officers or employees gain through support provided under Article 20 (1) 6 of the Income Tax Act and the subparagraphs of Article 38 (3) of the Enforcement Decree of that Act;

4. Repair expenses of tangible assets;

5. Depreciation costs of tangible and intangible assets;

5-2. An amount equivalent to the depreciation costs calculated by applying mutatis mutandisArticles 24 through 26, 26-2, 26-3, 27 through 29, 29-2 and 30 through 34 to the following amounts, if the value of assets recorded in the accounting books according to the Korea Financial Accounting Standards is lower than the market price, while such fixed assets are acquired from an affiliated person:

(a) The difference between the market price and the amount recorded in the accounting books, where the actual acquisition value is higher than the market price;

(b) The difference between the actual acquisition value and the amount recorded in the accounting books, where the actual acquisition value is lower than the market price;

6. Property rental fees;

7. Interest on loans;

8. Irrecoverable amount receivables of output value-added tax (limited to the one which has not been subject to bad debts tax credits under Article 45 of the Value-Added Tax Act);

9. Losses from evaluation of assets;

10. Various taxes and public charges (Including foreign corporate tax amount where both exclusion from gross income pursuant to Article 18-4 of the Act and tax credit pursuant to Article 57 (1) of the Act are not applied);

11. Membership fees paid to corporations, or associations or unions registered with the competent authorities, which are organizations established by business operators;

12. Exploring expenses in the mining industry (including expenses for developing areas for exploring);

13. The value of free medical examinations and treatment provided by free medical care vouchers or New Village medical care vouchers prescribed by the Minister for Health and Welfare;

13-2. The book value (the amount in this case shall not be included in the donations referred to in Article 24 (1) of surplus food donated by a domestic corporation engaging in the manufacturing, wholesale, or retail business of food and necessities of life defined in subparagraphs 1 and 1-2 of Article 2 of the Act on Encouraging the Donation of Food (hereafter in this subparagraph referred to as "food, etc."), where the domestic corporation gratuitously donates surplus food, etc., left over in the course of its business operations to a provider defined in subparagraph 4 of Article 2 of that Act, or a person designated by such provider;

14. Expenses for business-related overseas inspections and training;

15. Any of the following operational expenses or allowances:

(a) Expenses incurred in operating special classes or middle and high schools affiliated to industrial enterprises, which are established under the Elementary and Secondary Education Act for working teenagers;

(b) Expenses incurred in operating vocational training courses, departments, etc. on conditions that graduates are hired under agreements concluded between educational institutions and the relevant corporations under Article 8 of the Industrial Education Enhancement and Industry-Academia-Research Cooperation Promotion Act;

(c) Allowances paid to students participating in field training pursuant to Article 7 of the Vocational Education and Training Promotion Act;

(d) Allowances paid to students participating in field training classes pursuant to Article 22 of the Higher Education Act;

16. The book value of stocks of a company that contributes to an employee stock ownership association or money and goods contributed to such association;

17. The acquisition value (limited to the one worth less than 10 million won for each transaction) of an artwork, where the acquisition value of an artwork exhibited at all times in a space open to the public, such as an office and corridor, for the purpose of decoration or beautification, is counted as a deductible expense for the business year in which such artwork is acquired;

18. The purchase cost of articles donated for advertisement and publicity (up to 50 thousand won annually in cases of an article (excluding an article worth 30 thousand won or less per piece) donated to a specific person);

19. Where an executive officer or employee exercises any of the following stock options or receives the bonus, paid with stocks or money equivalent to the value of the stocks, which is prescribed by Decree of the Ministry of Economy and Finance (hereinafter referred as "share-based payment"), the amount compensated as the exercise or payment expenses to the relevant corporation that has offered stock options or made the share-based payment (hereinafter referred as "stock options, etc."):

(a) Stock options, etc. granted or offered from a financial holding company incorporated under the Financial Holding Companies Act (only applicable to stock options granted under Article 542-3 of the Commercial Act);

(b) Stock options, etc. granted or offered from an overseas parent corporation prescribed by Decree of the Ministry of Economy and Finance, which are prescribed by Decree of the Ministry of Economy and Finance;

19-2. The price of stock options or an amount of money received pursuant to Articles 340-2 and 542-3 of the Commercial Act, Article 16-3 of the Special Act on the Promotion of Venture Businesses, or Article 56 of the Act on Special Measures for Strengthening the Competitiveness and Stabilizing of Supply Chain of Materials, Components, and Equipment Industries (limited to stock options granted to executive officers or employees of the relevant corporation under Article 542-3 of the Commercial Act; hereinafter referred to as "stock options" in this subparagraph), or employee stock option referred to in Article 39 of the Framework Act on Labor Welfare (hereafter in this subparagraph referred to as "employee stock option") in any of the following cases; provided, only cases where the value of stock options given or the amount of money paid does not exceed 10/100 of the total number of outstanding stocks of the relevant corporation are included herein:

(a) The price of stock options or employee stock option received in either of the following cases:

(i) The amount of money or the price of stocks of the relevant corporation, where the difference between the agreed purchase price of the stocks at the agreed time of purchase of the stocks and the market price of such stocks is paid in cash or by stocks of the relevant corporation;

(ii) The difference between the actual purchase price and the market price of stocks, where stocks are issued at a price lower than the market price in response to the exercise of stock options or employee stock option at the agreed time of purchase of the stocks;

(b) The amount of money if paid in shared-based payment;

20. Endowments made by small and medium enterprises defined in Article 2 (1) of the Framework Act on Small and Medium Enterprises and middle-standing enterprise referred to in Article 6-4 (1) of the Enforcement Decree of the Act on Restriction on Special Cases concerning Taxation under Article 35-3 (1) 1 of the Special Act on Support for Human Resources of Small and Medium Enterprises;

21. The amount of money paid temporarily to the bereaved family of an executive officer (excluding the controlling stockholder, etc. referred to in Article 43 (7)) or an employee for school expenses, etc. after the death of the executive officer or employee and that meets the criteria prescribed by Decree of the Ministry of Economy and Finance;

22. Money and other valuables contributed to the following funds:

(a) An intra-company labor-welfare fund established by the relevant domestic corporation under Article 50 of the Framework Act on Labor Welfare;

(b) A joint labor-welfare fund jointly established by the relevant domestic corporation and another domestic corporation under Article 86-2 of the Framework Act on Labor Welfare;

(c) An intra-company labor-welfare fund established by a small or medium enterprise requiring cooperation referred to in Article 8-3 (1) 1 of the Act on Restriction on Special Cases concerning Taxation under Article 50 of the Framework Act on Labor Welfare;

(d) A joint labor-welfare fund jointly established by small or medium enterprises requiring cooperation, which are referred to in Article 8-3 (1) 1 of the Act on Restriction on Special Cases concerning Taxation, of the relevant domestic corporation under Article 86-2 of the Framework Act on Labor Welfare;

23. An increase in the liability reserve funds accumulated by an insurance company pursuant to Article 120 of the Insurance Business Act (excluding an increase in the assessed value of the liability reserve funds due to changes in the discount rate), which is appropriated as expenses in accordance with the insurance supervisory accounting standards;

23-2. The increase in the liability reserve (excluding the increase in the appraised value of the liability reserve due to changes in the discount rate), which is accumulated by the Housing and Urban Guarantee Corporation under the Housing and Urban Fund Act pursuant to Article 24 of the Enforcement Decree of that Act, which is accounted for as expenses in accordance with the Insurance Supervisory Accounting Standards;

24. Other deductible expenses attributable or to be attributable to the relevant corporation.

Article 19-2(Non-inclusion of bad debts in deductible expenses) #

(1) "Irrecoverable claims ... due to grounds prescribed by Presidential Decree, such as bankruptcy of the debtor" in Article 19-2 (1) of the Act means any of the following: <Amended on Feb. 18, 2010; Dec. 30, 2010; Feb. 15, 2013; Jul. 26, 2017; Feb. 12, 2019; Jul 1, 2019; Feb. 11, 2020; Aug. 11, 2020; Feb. 17, 2021; Dec. 19, 2023>

1. Accounts receivables and outstanding amounts, the extinctive prescription of which has lapsed under the Commercial Act;

2. Bills, the extinctive prescription of which has lapsed under the Bills of Exchange and Promissory Notes Act;

3. Checks, the extinctive prescription of which has lapsed under the Check Act;

4. Loans and advance money, the extinctive prescription of which has lapsed under the Civil Act;

5. Claims determined as irrecoverable based on the determination to authorize a rehabilitation plan or a court ruling of discharge under the Debtor Rehabilitation and Bankruptcy Act;

5-2. Claims determined to be exempted from liability pursuant to the agreement on credit recovery support referred to in Article 75 of the Microfinance Support Act after going through debt settlement prescribed in that Act;

6. Seized claims for which auction on the property of a debtor is cancelled under Article 102 of the Civil Execution Act;

7. Claims arising from export of goods or provision of services in a foreign country, determined to be irrecoverable by the Korea Trade Insurance Corporation established under Article 37 of the Trade Insurance Act for falling under the grounds prescribed by Decree of the Ministry of Economy and Finance pursuant to the statutes pertaining to trade;

8. Irrecoverable claims because of bankruptcy of a debtor, compulsory execution, execution of punishment, discontinuance of business, or death, missing or unknown whereabouts of a debtor;

9. Checks, or bills in relation to which at least six months have passed since it was dishonored, or accounts receivable (limited to accounts receivable of small and medium enterprises, which have occurred before the date of dishonor); provided, this shall not apply where the relevant corporation has taken the property of a debtor as security;

9-2. Accounts receivables and uncollected amounts of small and medium enterprises (hereafter in this subparagraph referred to as "accounts receivables, etc."), the recovery date of which has passed by at least two years; provided, accounts receivables, etc. arising from transactions with a specially related person shall be excluded therefrom;

10. Claims that have the effect of a final and conclusive judgment, such as a judicial settlement, that have been determined to be uncollectible pursuant to Decree of the Ministry of Economy and Finance;

11. Claim, the value of which does not exceed 20 thousand won (based on the total value of claims by debtor) among the claims for which at least six months have passed since the deadline for collection;

12. The following claims (limited to claims to a new technology business operator in cases of a new technology financial business operator which is a specialized credit finance business company referred to in Article 61 (2) 13) among claims of a financial company, etc. referred to in the proviso to Article 61 (2), with the exception of its subparagraphs:

(a) What has been approved as bad debts by the Governor of the Financial Supervisory Service for a financial company, etc., according to the standards for bad debts disposition procedures determined by the Governor of the Financial Supervisory Service upon consultation with the Minister of Economy and Finance;

(b) What has been counted as bad debts by a financial company, etc., being claims requested by the Governor of the Financial Supervisory Service to dispose of as bad debts, because he or she recognizes that they meet the standards referred to in item (a);

13. Claims to the founder of a venture investment company defined in subparagraph 10 of Article 2 of the Venture Investment Promotion Act, which are recognized to meet the standards determined by the Minister of Small and Medium Enterprises (SMEs) and Startups upon consultation with the Minister of Economy and Finance.

(2) The date a check or bill is dishonored under paragraph (1) 9 is the date of payment (referring to the date of confirmation, if the relevant check or bill is presented to a financial company, etc. before the date of payment and confirmed as being dishonored) of a dishonored check or bill in possession. In such cases, the amount countable in deductible expenses as bad debts shall be an amount computed by subtracting one thousand won from the amount of the relevant claim uncollected as at the end of the relevant business year. <Amended on Feb. 18, 2010; Feb. 12, 2019>

(3) "Business year prescribed by Presidential Decree" in Article 19-2 (1) of the Act means a business year in which any of the following dates falls in: <Amended on Feb. 12, 2019; Jul. 1, 2019>

1. The date the relevant grounds have arisen in any case falling under paragraph (1) 1 through 5, 5-2 and 6;

2. The date such bad debts are counted as deductible expenses, because the relevant grounds have arisen in cases, other than those falling under subparagraph 1.

(4) Notwithstanding paragraph (3) 2, where a corporation merges with another corporation or splits off, but fails to count bad debts referred to in paragraph (1) 8 through 13 in deductible losses by the business year in which the registration date of the merger or the registration date of the division falls, such bad debts shall be deemed deductible losses for the business year under which the registration date of merger or the registration date of division falls. <Amended on Feb. 12, 2019>

(5) Where a domestic corporation counts the difference between the book value and the present value of claims following readjustment of claims according to the Korea Financial Accounting Standards, it shall be included in the deductible losses, and the amount counted in the deductible losses shall be included in the gross income by the method of transfer under the Korea Financial Accounting Standards.

(6) "Debt guarantees prescribed by Presidential Decree, such as debt guarantees referred to in any of the subparagraphs of Article 24 of the Monopoly Regulation and Fair Trade Act" in Article 19-2 (2) 1 of the Act means any of the following debt guarantees: <Amended on Feb. 18, 2010; Feb. 3, 2017; Feb. 13, 2018; Feb. 12, 2019; Dec 28, 2021; Feb. 28, 2023; Feb. 28, 2025>

1. Debt guarantees provided for in any subparagraph of Article 24 of the Monopoly Regulation and Fair Trade Act;

2. Debt guarantees provided by a financial company, etc. referred to in any subparagraph of Article 61 (2);

3. Debt guarantees provided by a corporation engaging in credit guarantee business under any Act;

4. Debt guarantees provided by an entrusting enterprise provided for in the Act on the Promotion of Collaborative Cooperation between Large Enterprises and Small-Medium Enterprises for an entrusted enterprise, which is a member of the council of entrusted enterprises;

5. Debt guarantees provided by a domestic corporation engaging in construction business or telecommunications business for a person, other than an affiliated person in direct connection with a construction project (including securitization referred to in Article 10 (1) 4 based on unsold housing units); provided, debt guarantees for the persons specified by Decree of the Ministry of Economy and Finance, including a concessionaire defined in subparagraph 7 of Article 2 of the Act on Public-Private Partnerships in Infrastructure, shall include debt guarantees for affiliated persons;

6. Debt guarantees provided by an overseas resources developer for a corporation established overseas in direct connection with overseas resources development projects;

7. Debt guarantees provided by an overseas construction business operator defined in the Overseas Construction Promotion Act for a corporation established overseas in direct connection with overseas construction business for developing overseas resources.

(7) Deleted. <Feb. 29, 2024>

(8) A domestic corporation that intends to qualify for Article 19-2 (1) of the Act shall submit a detailed adjustment statement on appropriation for bad debts and on bad debts in the form prescribed by Decree of the Ministry of Economy and Finance, to the head of the tax office having jurisdiction over the place of tax payment, accompanied by the report referred to in Article 60 of the Act. <Amended on Dec. 30, 2010; Feb. 12, 2019>

[This Article Added on Feb. 4, 2009]

Article 24(Scope of depreciable assets) #

(1) "Tangible and intangible assets prescribed by Presidential Decree, such as buildings, machinery, equipment, and patent rights" in Article 23 (1) of the Act means any of the following tangible and intangible assets (excluding assets referred to in paragraph (3); hereinafter referred to as "depreciable assets"): <Amended on Dec. 31, 2001; Dec. 30, 2002; Feb. 19, 2005; Jun. 30, 2005; Jun. 8, 2010; Dec. 30, 2010; Feb. 2, 2012; Mar. 29, 2017; Feb. 13, 2018; Feb. 12, 2018; Feb. 12, 2019; Jul. 28, 2020; Aug. 26, 2020; Feb. 17, 2021; Feb. 28, 2025>

1. Any of the following tangible assets:

(a) Buildings (including auxiliary facilities) and structures (hereinafter referred to as "buildings");

(b) Vehicles or transportation equipment, instruments, tools and furnishings;

(d) Machinery and equipment;

(e) Animals and plants;

(f) Other tangible assets similar to the assets referred to in items (a) through (e);

2. Any of the following intangible fixed assets:

(a) Goodwill (excluding goodwill appropriated by a surviving corporation, etc. due to a merger or division), design rights, utility model rights, and trademark rights;

(b) Patent rights, fishing rights, aquaculture rights, extraction rights defined in the Submarine Mineral Resources Development Act, toll road management rights, railway facility management rights, irrigation rights, rights to use electricity and gas provision facilities, rights to use industrial waterworks, rights to use waterworks, and rights to use heating provision facilities;

(c) Mining rights, rights to use telephone and telegraph exclusive-use facilities, rights to use exclusive rail lines, rights to manage sewage treatment and disposal plants, and waterworks facility management rights;

(d) Dam usage rights;

(e) Deleted; <Dec. 30, 2002>

(f) Development costs: Costs incurred in applying the outcomes of research or related knowledge to planning or design in order to create or substantially improve the materials, apparatus, products, processes, systems or services prior to commercial production or use, which satisfy development cost requirements according to corporate accounting standards (including an amount expended by members of the Industrial Technology Research Cooperatives established under the Industrial Technology Research Cooperatives Support Act for research and development and the acquisition of research facilities, etc. to the relevant Cooperatives);

(g) The value of assets donated for use and profiting therefrom: The book value of assets, other than money, donated to the State or any local government, any corporation referred to in Article 24 (2) 1 (d) through (f) of the Act or any corporation provided in Article 39 (1) 1 of this Decree, if such assets are used or profits are generated therefrom;

(h) Rights to utilize frequencies under Article 14 of the Radio Waves Act, and rights to manage airport facilities under Article 26 of the Airport Facilities Act;

(i) Rights to manage harbor facilities under Article 24 of the Harbor Act;

(j) Other intangible assets similar to the assets referred to in items (a) through (i).

(2) "Intangible assets prescribed by Presidential Decree" in Article 23 (2) of the Act, with the exception of its subparagraphs, means any of the following: <Added on Dec. 30, 2010; Feb. 2, 2012; Feb. 12, 2019>

1. Intangible assets, the service life of which cannot be determined and applied when the depreciation costs are appropriated as deductible expenses among the intangible assets (hereinafter referred to as "service life for settlement of accounts") which meet all requirements prescribed by Decree of the Ministry of Economy and Finance;

2. Goodwill referred to in Article 24 (1) 2 (a) acquired before the business year in which the accounting standards referred to in Article 5 (1) 1 of the Act on External Audit of Stock Companies (hereinafter referred to as "Korean International Financial Reporting Standards") are first applied.

(3) Depreciable assets shall not include any of the following:

1. Those not used for business (excluding idle facilities);

2. Those under construction;

3. Those whose value does not decline over time.

(4) Where a corporation appropriates the total value of depreciable assets purchased on a long-term installment plan, etc. under Article 68 (4) as assets and uses them for business, they shall be included as depreciable assets, regardless of whether full payments have been made or ownership has been transferred. <Amended on Dec. 30, 2010; Feb. 12, 2019>

(5) In applying paragraph (1), among the assets (hereafter referred to as "lease assets" in this paragraph) lent by a person who runs a facilities leasing business (hereafter referred to as "lease corporation" in this paragraph), assets for financial lease prescribed by the corporate accounting standards (hereafter referred to as "financial lease" in this paragraph) shall be the depreciable assets of a lease user, and lease assets, other than those for financial lease, shall be the depreciable assets of a lease corporation. <Amended on Feb. 19, 2005; Feb. 28, 2007; Feb. 29, 2008; Dec. 30, 2010>

(6) In applying paragraph (5), where a special purpose company for the asset securitization defined in the Asset-Backed Securitization Act assumes charge of assets for financial lease under its asset securitization plan submitted under that Act, such assets shall be deemed the depreciable assets of a lease user. <Added on Dec. 29, 2000; Feb. 19, 2005>

Article 26(Calculation of allowable depreciation) #

(1) "Amount computed, as prescribed by Presidential Decree" in Article 23 (1) of the Act means the amount computed by the method (hereinafter referred to as "allowable depreciation") reported by a corporation to the head of the tax office having jurisdiction over the place of tax payment, among the following depreciation methods for respective depreciable assets: <Amended on Dec. 31, 2001; Dec. 30, 2002; Feb. 19, 2005; Feb. 4, 2009; Feb. 2, 2012; Feb. 3, 2015; Mar. 29, 2017; Feb. 12, 2019; Jul. 28, 2020; Feb. 28, 2025>

1. Buildings and intangible assets (excluding assets referred to in subparagraphs 3 and 6 through 9): The straight-line method;

2. Tangible assets, other than buildings (excluding any tangible assets used for mining under subparagraph 4): The declining balance method or the straight-line method;

3. Mining rights (including an extraction right granted under the Submarine Mineral Resources Development Act) or a waste landfill facility (referring to a waste landfill facility referred to in subparagraph 2 (a) of Appendix 3 of the Enforcement Decree of the Wastes Control Act): The units-of-production method or the straight-line method;

4. Tangible assets used for mining: The units-of-production method, the straight-line method, or the declining balance method;

5. Deleted; <Dec. 30, 2002>

6. Development costs: The method of depreciating in proportion to the number of elapsed months by each business year based on the annually reported service life within the period of 20 years from the point of time when the sale or use of related products becomes possible;

7. The value of assets donated for use and profiting therefrom: The method of depreciating the amount (referring to the balance thereof if the relevant donated assets are destroyed or a contract thereof is rescinded) that is equally divided for the period (referring to the reported service life, if there is no any provisions stipulating such period) during which the relevant assets are used and generate profits;

8. Rights to utilize frequencies under Article 14 of the Radio Waves Act, rights to manage the airport facilities under Article 26 of the Airport Facilities Act, and rights to manage harbor facilities under Article 24 of the Harbor Act: The method of depreciating the equal amount for the period of use within the period publicly notified by or registered to the competent authorities;

9. Intangible assets falling under Article 24 (1) 2 (j): The method of depreciating in proportion to the number of months elapsed in each business year, based on the useful life reported annually (meaning the useful life as defined under the corporate accounting standards).

(2) The depreciation methods referred to in paragraph (1) are as follows: <Amended on Dec. 30, 2010; Feb. 3, 2015; Feb. 12, 2016>

1. The straight-line method: Depreciation method of uniformly applying the allowable depreciation for each business year, calculated by multiplying the acquisition value of the relevant depreciable asset (referring to the acquisition value provided for in Article 72; hereafter in this Article the same shall apply) by the depreciation rate based on the service life of such asset;

2. The declining balance method: Depreciation method of annually reducing the allowable depreciation for each business year, as calculated by multiplying the balance (hereinafter referred to as "undepreciated balance") after deducting the amount included as depreciation costs in deductible expenses (including the amount not included in deductible expenses under Article 27-2 (2) and (3) of the Act in cases of passenger vehicles for business use under Article 27-2 (1) of the Act (hereinafter referred to as "passenger vehicles for business use")) from the acquisition value of the relevant depreciable asset by the depreciation rate for the service life of such assets;

3. The units-of-production method: Depreciation method by which an amount falling under any of the following is the depreciation range for each business year:

(a) The amount calculated by dividing the acquisition value of the relevant depreciable assets by the estimated total mining output of the mining area and then multiplying the amount so calculated by the mining output from the mining area during the relevant business year;

(b) The amount calculated by dividing the acquisition value of the relevant depreciable asset by the estimated total landfill volume in the waste landfill facility, which is the relevant asset, and then multiplying the amount so calculated by the landfill volume in the waste landfill facility during the relevant business year.

(3) Where a corporation intends to report depreciation methods under paragraph (1), it shall choose one method for each item of asset provided for in the same paragraph and submit a report on depreciation methods (including submission through the national tax information and communications network) in the form stipulated by Decree of the Ministry of Economy and Finance, to the head of the tax office having jurisdiction over the place of tax payment by the filing deadline of the corporate tax base for the business year in which any of the following dates falls: <Amended on Mar. 17, 2004; Feb. 29, 2008; Feb. 12, 2019>

1. For newly established corporations and non-profit corporations which have newly started profit-making business, the start date of the business;

2. For corporations, other than those referred to in subparagraph 1, which have acquired new depreciable assets according to the following classification, the date of acquisition.

(4) Where a corporation fails to file a report on the depreciation method under paragraph (3), the maximum deductible depreciation amount for the relevant depreciable asset shall be calculated by the depreciation method specified in the following subparagraphs: <Amended on Dec. 31, 2001; Dec. 30, 2002; Feb. 12, 2019; Feb. 28, 2025>

1. Assets referred to in paragraph (1) 1: The straight-line method;

2. Assets referred to in paragraph (1) 2: The declining balance method;

3. Assets referred to in paragraph (1) 3 and 4: The units-of-production method;

4. Assets referred to in paragraph (1) 6: The method of depreciating an equal amount in each year for five years from the time when the sale or use of related products becomes possible;

5. Assets referred to in paragraph (1) 7 and 8: The methods prescribed in the same subparagraphs;

6. Assets referred to in paragraph (1) 9: Depreciation of an equal amount each year for 5 years.

(5) Each corporation shall continue to apply the depreciation method reported under paragraph (3) (where the depreciation method is not reported, the depreciation method referred to in each subparagraph of paragraph (4)) in the subsequent business years. <Amended on Feb. 12, 2019>

(6) In calculating the allowable depreciation, the residual value of depreciable assets shall be deemed zero; provided, where the allowable depreciation is calculated by the declining balance method, it shall be the amount equivalent to 5/100 of the acquisition value, and that amount shall be added to the allowable depreciation of the business year, which the undepreciated balance of the relevant depreciable assets first does not exceed 5/100 of the acquisition value.

(7) For depreciable assets, the depreciation of which ends, the lesser amount of 5/100 of the acquisition value or one thousand won shall be the book value of the relevant depreciable assets, notwithstanding paragraph (6), and such amount shall be excluded from deductible expenses of the relevant corporation.

(8) In applying paragraph (1), where the business year referred to in Article 7 or 8 of the Act is less than one year, the allowable depreciation shall be the amount calculated by multiplying the allowable depreciation by the number of months in the relevant business year and dividing it by 12. In such cases, the number of months shall be calculated based on the calendar months, and the number of days that falls short of one month shall be deemed one month.

(9) In applying paragraph (1), the allowable depreciation of any depreciable assets acquired to use for business during a business year shall be calculated based on the number of months from the day on which such assets are used for business to the end date of the relevant business year. In such cases, the number of months shall be calculated based on the calendar months, and the number of days that falls short of one month shall be deemed one month. <Amended on Dec. 31, 2001>

Article 26-2(Calculation of previous depreciation costs) #

(1) Assets referred to in Article 23 (2) 1 of the Act shall be depreciable assets acquired by a corporation on or before December 31, 2013 (hereafter in this Article and Article 26-3, referred to as "currently owned assets") before the business year immediately preceding the business year (hereafter in this Article and Article 26-3, referred to as "reference year") during which the Korean International Financial Reporting Standards are first applied and the same type (according to the classification of depreciable assets prescribed by Decree of the Ministry of Economy and Finance; hereafter in this Article and Article 26-3, the same shall apply) of assets as the currently owned assets, which shall be used for the same type of business (according to the classification of type of business prescribed by Decree of the Ministry of Economy and Finance, and it shall be limited to where the relevant corporation continuously conducts the relevant business after adopting the Korean International Financial Reporting Standards; hereafter in this Article and Article 26-3, the same shall apply) as the currently owned assets (hereafter in this Article and Article 26-3, referred to as "same type of assets"). <Amended on Feb. 21, 2014; Oct. 30, 2018; Feb. 12, 2019>

(2) Depreciation costs of the depreciable assets referred to in Article 23 (2) 1 of the Act shall be included in deductible expenses within the amount computed under subparagraph 1 in which the total amount of depreciation costs of each item of asset additionally included in deductible expenses under Article 23 (2) of the Act per same type of assets does not exceed the amount computed under subparagraph 2 (hereafter in this Article, referred to as "ceiling on inclusion in calculation of deductible expenses"): <Amended on Feb. 21, 2014; Feb. 12, 2019>

1. Depreciation cost ceilings of each item of asset: The following amounts:

(a) Where the depreciation method applied when appropriating the depreciation costs as deductible expenses with respect to the same type of asset as the relevant assets in the business year immediately preceding the business year during which the Korean International Financial Reporting Standards are first applied (hereinafter referred to as "depreciation method for settlement of accounts") is the straight-line method: An amount computed by multiplying the acquisition value of depreciable assets by the depreciation rate prior to adoption of the Korean International Financial Reporting Standards (hereafter in this Article and Article 26-3, referred to as "standard depreciation rate");

(b) Where the depreciation method for settlement of accounts with respect to the same type of asset as the relevant assets in the reference year is the declining balance method: An amount computed by multiplying the undepreciated balance by the standard depreciation rate. In such cases, the proviso to Article 26 (6) shall apply mutatis mutandis to the calculation of the allowable depreciation;

2. Depreciation cost ceilings of the same type of assets: The following amounts (where the amount is less than zero, it shall be deemed zero):

(a) In cases falling under subparagraph 1 (a): Amount computed according to the following formula: A ceiling on amount: (A x B)-CA: The aggregate of acquisition prices of assets of the same type, the depreciation costs of which are included in deductible expenses under Article 23 (1) of the Act for the relevant business year B: Standard depreciation rate C: The aggregate of depreciation costs included in deductible expenses under Article 23 (1) of the Act with respect to the same type of assets for the relevant business year

(b) In cases falling under subparagraph 1 (b): Amount computed according to the following formula: A ceiling on amount: (A x B)-CA: The aggregate of the undepreciated balance of assets of the same type, the depreciation costs of which are included in deductible expenses for the relevant business year under Article 23 (1) of the ActB: Standard depreciation rateC: The aggregate of depreciation costs included in deductible expenses under Article 23 (1) of the Act with respect to the same type of assets for the relevant business year

(3) In applying each subparagraph of paragraph (2), where the depreciation costs of the same type of asset as the relevant assets are not appropriated as deductible expenses in the reference year, the depreciation method for settlement of accounts in the business year in which the depreciation costs of the same type of asset as the relevant assets are lastly appropriated as deductible expenses prior to the reference year shall be the depreciation method for settlement for accounts in the reference year. <Amended on Feb. 12, 2019>

(4) In applying each subparagraph of paragraph (2), the standard depreciation rate shall be the average of the rates calculated under the following subparagraphs for the reference year and the respective two preceding business years. In such cases, where a corporation is newly established, merged or divided in the reference year and respective two preceding business years, the depreciation method changes under Article 27, or the service life is applied differently from the scope of service life under Article 29 or the applied service life is changed, the depreciation rate shall be calculated upon excluding the business year which ends before the relevant grounds arise:

1. In cases falling under paragraph 2 (1) (a): The rate of the total depreciation costs of the same type of assets included in deductible expenses to the total acquisition value of the same type of assets;

2. In cases falling under paragraph 2 (1) (b): The rate of the total depreciation costs of the same type of assets included in deductible expenses to the total undepreciated balance of the same type of assets.

(5) In applying Article 23 (2) of the Act and paragraphs (1) through (4) of this Article, where a domestic corporation prepares the comparative financial statements by applying mutatis mutandis the international accounting standards in the business year immediately preceding the business year during which it first applies the Korean International Financial Reporting Standards and changes the depreciation method for settlement of accounts and the service life for settlement of accounts in the relevant business year same as the depreciation method and the service life used in preparing the comparative financial statements, it shall be deemed first applied the Korean International Financial Reporting Standards in the relevant business year. <Amended on Feb. 12, 2019>

(6) The depreciation costs of assets under paragraph (1) (hereafter in this Article, referred to as "assets acquired through a qualified merger, division or split-off"), which are acquired by a qualified merger, qualified division or qualified split-off (hereinafter referred to as "assets acquired by a qualified merger, division or split-off") in the business year during which a corporation shall apply the Korean International Financial Reporting Standards and in subsequent business years thereafter may be included in deductible expenses by the following methods: <Amended on Feb. 2, 2012; Feb. 13, 2018; Feb. 12, 2019>

1. Where corporations holding the same type of assets are merged through a qualified merger (including a division and merger constituting a qualified division; hereafter in this Article, the same shall apply): Recalculating the standard depreciation rate of the same type of assets under paragraph (4) as in the business year immediately preceding the business year in which the merger is registered and then including the depreciation costs calculated by applying the recalculated standard depreciation rate in deductible expenses under paragraph (2). In such cases, in applying each subparagraph of paragraph (4), the total depreciation costs of the same type of assets included in deductible expenses shall be the total depreciation costs of the relevant same type of assets included in the deductible expenses by a corporation that transfers (hereafter in this Article, referred to as "transferor corporation") the assets acquired through the qualified merger, division or spin-off and a corporation that assumes the charge of such assets (hereafter in this Article, referred to as "transferee corporation"), the total acquisition value of the same type of assets shall be the sum total of the acquisition value of the relevant same type of assets appropriated by the transferor corporation and the transferee corporation, and the total undepreciated balance of the same type of assets shall be the sum total of the undepreciated balance of the same type of assets appropriated by the transferor corporation and the transferee corporation;

2. In cases of assets that a corporation newly established through a qualified division or split-off acquired through such qualified division or split-off, where corporations that do not hold the same type of assets are merged through a qualified merger: The following methods:

(a) Where the transferor corporation includes the depreciation costs of the relevant assets in deductible expenses under Article 23 (2) of the Act by applying the Korean International Financial Reporting Standards in and before the business year in which the registration date of the merger or division (hereafter in this Article, referred to as "registration date of the merger or division") falls: Including depreciation costs in deductible expenses under paragraph (2) by applying the standard depreciation rate already calculated by the transferor corporation for the relevant assets;

(b) In cases other than item (a): Recalculating the standard depreciation rate under paragraph (4) by the type of business and type upon classifying the assets acquired through qualified merger, division or spin-off from other assets held by the transferee corporation with the business year immediately preceding the business year in which the registration date of the merger, division or spin-off falls and then including depreciation costs in the deductible expenses under paragraph (2) by applying the re-calculated depreciation rate. In such cases, in applying each subparagraph of paragraph (4), the depreciation costs of the same type of assets included in the deductible expenses shall be the depreciation costs included in the deductible expenses by the transferor corporation with respect to the assets acquired through a qualified merger, division or spin-off and the acquisition value and the undepreciated balance shall be the acquisition value of the assets acquired through the qualified merger, division or spin-off and the undepreciated balance appropriated by the transferor corporation, respectively.

(7) In applying paragraph (1) when the depreciation costs of the assets acquired through a qualified merger, division or spin-off are included in the deductible expenses under paragraph (6), the date the transferor corporation acquires such assets shall be deemed the date of acquisition of the assets acquired through the qualified merger, division or spin-off and where the transferor corporation applies the international accounting standards prior to the business year in which the registration date of the merger, division or spin-off falls, paragraph (6) shall not apply to the assets, other than the same type of assets as the currently owned assets by the transferor corporation.

(8) In applying paragraph (2) when the depreciation costs of the assets acquired through a qualified merger, division or spin-off are included in the deductible expenses under paragraph (6), the acquisition value of the assets acquired through the qualified merger, division or spin-off shall be the acquisition value by the transferor corporation and the undepreciated balance shall be the balance calculated by deducting the amount already included by the transferee corporation in the deductible expenses as depreciation costs from the book value (referring to the amount computed by subtracting the asset adjustment account under Article 80-4 (1) or 82-4 (1) from the market value as at the time of transfer) as at the time of transfer by the transferor corporation. <Amended on Feb. 13, 2018>

(9) In calculating the standard depreciation rate of the assets acquired by a qualified merger, division or spin-off and the ceiling on inclusion of such assets in deductible expenses under paragraph (6) 1 and 2, where the depreciation method for settlement of accounts of a transferor corporation or a transferee corporation has changed after the business year during which the Korean International Financial Reporting Standards are first applied, the depreciation method for settlement of accounts prior to such change shall be the depreciation method for settlement of accounts in the reference year and paragraphs (2) and (4) shall apply accordingly, and in applying paragraph (6) 1, where the depreciation method for settlement of accounts between corporations is different, the method of calculating the standard depreciation rate and the ceiling on inclusion in deductible expenses shall be prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 12, 2019>

(10) Where a corporation which has included the depreciation costs of the assets acquired by a qualified merger, division or split-off under paragraph (6) in the deductible expenses falls under Article 44-3 (3) of the Act in cases of a qualified merger, Article 46-3 (3) in cases of a qualified division, or Article 47 (2) of the Act in cases of a qualified split-off (hereafter in this Article and Article 29-2, referred to as "ground for violation of qualified requirements"), the depreciation costs included in the deductible expenses shall be calculated by deeming that paragraph (6) is not applied in the business year during which paragraph (6) is first applied and the subsequent business years in calculating the amount of income after the business year in which the relevant grounds arise, and the amount calculating by subtracting the amount computed under subparagraph (2) from the amount computed under subparagraph (1) shall be included in the gross income in calculating the amount of income in the business year in which the ground for violation of qualified requirements arises: <Amended on Feb. 13, 2018>

1. Total depreciation costs included in the deductible expenses from the business year during which paragraph (6) is first applied to the business year immediately preceding the relevant business year;

2. Total depreciation costs recalculated by deeming that paragraph (6) is not applied from the business year during which paragraph (6) is first applied to the business year immediately preceding the relevant business year.

(11) Except as otherwise provided for in paragraphs (1) through (10), matters necessary for calculating the standard depreciation rates and the ceilings on inclusion in deductible expenses shall be prescribed by Decree of the Ministry of Economy and Finance.

[This Article Added on Dec. 30, 2010]

Article 26-3(Calculation of standard depreciation costs) #

(1) Assets referred to in Article 23 (2) 2 of the Act mean currently owned assets and assets of the same type that a corporation acquires as depreciable assets on or after January 1, 2014.

(2) The depreciation costs of depreciable assets provided for in paragraph (1) shall be included in deductible expenses to the extent that the aggregate of depreciation costs of individual assets of the same type additionally included in deductible expenses under Article 23 (2) of the Act within the amount specified in subparagraph 1 does not exceed the amount specified in subparagraph 2 or 3, whichever is smaller: <Amended on Feb. 12, 2016; Feb. 12, 2019>

1. Standard depreciation costs of an individual asset: An amount calculated by applying the depreciation method for the settlement of accounts for the relevant business year per asset and the standard service life stipulated by Decree of the Ministry of Economy and Finance (hereinafter referred to as "standard service life");

2. Ceiling on the depreciation costs of assets of the same type in consideration of the standard depreciation costs (if the amount is smaller than zero, it shall be deemed zero): The aggregate of depreciation costs of assets of the same type for the relevant business year, calculated by applying the depreciation method applicable to the settlement of accounts for the relevant business year and the standard service life ? The aggregate of depreciation costs of assets of the same type, included in deductible expenses for the relevant business year under Article 23 (1) of the Act;

3. Ceiling on the depreciation costs of assets of the same type in consideration of the previous standard depreciation cost: The amount according to the following classification (if the amount is smaller than zero, it shall be deemed zero):

(a) Where the depreciation method for the settlement of accounts for the reference year is the straight-line method: A ceiling on amount: (A x B)-CA: The aggregate of acquisition prices of assets of the same type for which depreciation costs are included in deductible expenses for the relevant business year under Article 23 (1) of the ActB: Standard depreciation rateC. The aggregate of depreciation costs included in deductible expenses under Article 23 (1) of the Act with respect to the same type of assets for the relevant business year

(b) Where the depreciation method for the settlement of accounts for the reference year is the declining balance method: A ceiling on amount: (A x B)-CA: The aggregate of the undepreciated balance of assets of the same type, the depreciation costs of which are included in deductible expenses for the relevant business year under Article 23 (1) of the ActB: Standard depreciation rateC: The aggregate of depreciation costs included in deductible expenses under Article 23 (1) of the Act with respect to the same type of assets for the relevant business year

(3) Notwithstanding paragraph (2), if the amount equivalent to 25/100 of the amount computed under paragraph (2) 3 is greater than the amount computed under paragraph (2) 2, the depreciation costs additionally included in deductible expenses under Article 23 (2) of the Act for individual assets may be included additionally in deductible expenses to the extent that the aggregate of depreciation costs of assets of the same type does not exceed 25/100 of the amount under paragraph (2) 3.

(4) Article 26-2 (3) through (10) shall apply mutatis mutandis to the calculation of depreciation costs under paragraphs (2) and (3).

[This Article Newly Inserted on Feb. 21, 2014]

Article 27(Change of depreciation method) #

(1) In any of the following circumstances, a corporation may change the depreciation method upon obtaining approval from the head of the tax office having jurisdiction over the place of tax payment, notwithstanding Article 26 (5): <Amended on Feb. 19, 2005; Dec. 30, 2010>

1. Where corporations with different depreciation methods merge (including a merger and division);

2. Where a corporation assumes charge of, or succeeds to, the business of a business operator with a different depreciation method;

3. Where a foreign investor as defined in the Foreign Investment Promotion Act assumes charge of or holds at least 20/100 of the stocks, etc., of a domestic corporation;

4. Where the previous depreciation method needs to be changed due to changing business conditions or economic conditions of overseas markets;

5. Where the depreciation method for settlement of accounts has changed due to a change in the accounting policy prescribed by Decree of the Ministry of Economy and Finance (limited to where it has changed in the same method as the changed depreciation method for settlement of account).

(2) A corporation which intends to obtain approval to change the depreciation method under paragraph (1) shall submit an application (including submitting such application through the national tax information and communications network) to change the method of depreciation in the form stipulated by Decree of the Ministry of Economy and Finance, to the head of the tax office having jurisdiction over the place of tax payment by the end date of the first business year in which it intends to apply the changed depreciation method. <Amended on Mar. 17, 2004; Feb. 29, 2008; Dec. 30, 2010>

(3) Upon receipt of an application submitted under paragraph (2), the head of the tax office having jurisdiction over the place of tax payment shall determine whether to grant approval and notify the relevant corporation thereof within one month from the end date of the business year in which the application is submitted. <Amended on Dec. 30, 2010>

(4) Where the head of the tax office having jurisdiction over the place of tax payment intends to approve the change of the depreciation method on the grounds falling under paragraph (1) 4, he or she shall observe the standards determined by the Commissioner of the National Tax Service.

(5) Where a corporation changes its depreciation method without obtaining approval required under paragraph (1), the allowable depreciation shall be calculated in the depreciation method before the change.

(6) Where the depreciation method is changed under paragraph (1), the allowable depreciation shall be calculated by any of the following formulae. In such cases, the estimated total mining output in the formula referred to in subparagraph 3 means the total mining output recognized by the Korea Mine Rehabilitation and Mineral Resources Corporation established under the Korea Mine Rehabilitation and Mineral Resources Corporation Act, and the estimated total landfill volume means the total landfill volume approved by the Minister of Environment of the relevant Mayor/Do Governor at the time of granting a license for a waste treatment business under Article 25 (3) of the Waste Control Act: <Amended on Dec. 31, 1999; Feb. 19, 2005; Jun. 26, 2009; Nov. 5, 2013; Feb. 3, 2015; Aug. 31, 2021>

1. A change from the declining balance method or the units-of-production method to the straight-line method: The allowable depreciation ＝ (the book value after deduction of the cumulative total amount of depreciation ＋ the amount in excess of the depreciation limit carried forward from the previous period) × the depreciation rate determined by the straight-line method for the reported service life under the main sentence of Article 28 (1) 2 and (6) (the standard service life in cases falling under the proviso to Article 28 (1) 2);

2. A change from the straight-line method or the units-of-production method to the declining balance method:

2. A change from the straight-line method or the units-of-production method to the declining balance method: The allowable depreciation ＝ (the book value after deduction of the cumulative total amount of depreciation ＋ the amount in excess of the depreciation limit carried forward from the previous period) × the depreciation rate determined by the declining balance method for the reported service life under the main sentence of Article 28 (1) 2 and (6) (the standard service life in cases falling under the proviso to Article 28 (1) 2);

3. A change from the declining balance method or the straight-line method to the units-of-production method: The allowable depreciation ＝ (the book value after deduction of the cumulative total amount of depreciation ＋ the amount in excess of the depreciation limit carried forward from the preceding term) × the mining output or landfill volume in the relevant business year / the estimated total mining output or landfill volume － the total mining output or landfill volume until the business year before the change

Article 28(Service life and depreciation rates) #

(1) The useful life of depreciable assets and the depreciation rate corresponding to such useful life shall be determined in accordance with each of the following subparagraphs: <Amended on Dec. 31, 2001; Dec. 30, 2002; Feb. 29, 2008; Dec. 30, 2010; Feb. 12, 2016; Feb. 12, 2019; Feb. 28, 2025>

1. For assets used for testing and research prescribed by Decree of the Ministry of Economy and Finance and intangible assets provided for in Article 24 (1) 2 (a) through (d): The service life prescribed by Decree of the Ministry of Economy and Finance and the corresponding depreciation rate determined by the depreciation method prescribed by Decree of the Ministry of Economy and Finance (hereinafter referred to as "depreciation rate");

2. For depreciable assets (excluding intangible assets provided for in Article 24 (1) 2 (f) through (j)), other than those referred to in subparagraph 1: The service life chosen by a corporation and reported to the head of the tax office having jurisdiction over the place of tax payment (hereinafter referred to as "reported service life") within the scope of the standard service life (hereinafter referred to as "scope of service life") by adding or reducing 25/100 of the standard service life to or from such standard service life by structure or by type of asset or type of business, and the corresponding depreciation rate; provided, where no report is filed by the deadline specified under each subparagraph of paragraph (3), the standard service life and the corresponding depreciation rate shall apply.

(2) In applying paragraph (1), where the business year referred to in Article 6 of the Act falls short of one year, it shall be in accordance with the service life calculated by the following formula and the corresponding depreciation rate. In such cases, the number of months shall be calculated according to the solar calendar, and days less than one month shall be counted as one month. <Amended on Feb. 12, 2019>Converted service life = (A or B) x 12/CA: Service life pursuant to paragraph (1) 1B: Reported service life or standard service life pursuant paragraph (1) 2C: The number of months of a business year

(3) When a corporation reports the service life under paragraph (1) 2 or (6), it shall submit the service life report (including submission via the national tax information and communications network) in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment by the deadline for reporting the tax base of corporate tax for the business year in which any of the following dates falls: <Amended on Mar. 17, 2004; Feb. 29, 2008; Nov. 5, 2013; Feb. 12, 2019>

1. For newly established corporations and non-profit domestic corporations which have newly started profit-making business, the start date of the business;

2. For corporations, other than those referred to in subparagraph 1, where they acquire depreciable assets with a different standard service life based on categories by type of assets or type of business or newly start a different type of business, the acquisition date of such assets or the start date of such business.

(4) A corporation shall continue to apply the useful life it reported or the standard useful life it applied by asset category and business type under paragraph (1) 2 for subsequent business years as well. <Amended on Nov. 5, 2013; Feb. 28, 2025>

(5) The reporting of useful life under paragraphs (1) 2 and (3) shall be made on an annual basis. <Amended on Nov. 5, 2013; Feb. 28, 2025>

(6) Deleted. <Feb. 12, 2019>

(7) Deleted. <Feb. 12, 2019>

Article 29(Special cases and changes of service life) #

(1) In any of the following circumstances, a corporation may apply the service life different from the scope of service life or change the applied service life for a particular place of business within the scope of the period calculated by adding or reducing 50/100 (25/100 in cases falling under subparagraphs 5 and 6) of the standard service life to/from the standard service life upon obtaining approval from the commissioner of the competent regional tax office having jurisdiction over the place of tax payment, notwithstanding Article 28 (1) 2 and (4): <Amended on Feb. 29, 2008; Dec. 30, 2010; Feb. 21, 2014; Feb. 12, 2019>

1. Where the degree of corrosion, wear and tear, or deterioration of the assets is obvious due to the characteristics of the place of business;

2. For a corporation for which three years have passed since the starting of business, where the rate of operation prescribed by Decree of the Ministry of Economy and Finance (hereafter referred to as "rate of operation" in this paragraph) of production facilities (excluding buildings; hereinafter referred to as "production facilities") for the relevant business year is substantially higher than the average rate of operation for the immediately preceding three business years;

3. Where accelerated depreciation of existing production facilities is required on the grounds of the development, distribution, etc. of new production technology and new products;

4. Where operations are suspended or the rate of operation of production facilities is reduced due to changing economic conditions;

5. Where the service life for settlement of accounts in the business year during which the Korean International Financial Reporting Standards are first applied to the depreciable asset falling under Article 28 (1) 2 has changed (limited to where the service life for settlement of accounts is extended, the service life shall be extended and the service life for settlement of accounts is reduced, the service life shall be reduced, but it is impossible to change the service life to the service life shorter than the service life for settlement of accounts);

6. Where the standard service life of the depreciable asset falling under Article 28 (1) 2 has changed; provided, in the case of reducing the service life, where the service life for settlement of accounts is within the scope of adding or reducing 25/100 of the changed standard service life, it is impossible to change it to the service life shorter than the service life for settlement of accounts.

(2) When a corporation intends to obtain approval of the service life or to change the service life under paragraph (1), it shall submit an application (including submitting such application through the national tax information and communications network) for approval of service life (or approval to change the service life) in the form stipulated by Decree of the Ministry of Economy and Finance to the commissioner of the regional tax office through the head of the competent tax office within three months from the date referred to in each subparagraph of Article 28 (3) or to the end date of the first business year in which it intends to apply the changed service life. In such cases, an application for approval of service life or approval to change the service life shall be annually submitted. <Amended on Mar. 17, 2004; Feb. 9, 2006; Feb. 29, 2008; Dec. 30, 2010>

(3) Upon receipt of an application submitted under paragraph (2), the head of the tax office having jurisdiction over the place of tax payment shall notify the applicant as to whether the commissioner of the competent regional tax office grants approval within one month from the end date of the business year in which the application was submitted. <Amended on Feb. 9, 2006; Dec. 30, 2010>

(4) Deleted. <Dec. 30, 2010>

(5) Where a corporation which has changed (including re-change) the service life of the depreciable assets under paragraph (1) intends to re-change the service life of the relevant assets, it shall wait until three years pass from the end date of the business year during which the changed service life was first applied.

Article 29-2(Allowable depreciation of used assets) #

(1) Where a domestic corporation acquires (including succession of assets through a merger or division) assets (hereafter referred to as "used assets" in this Article), at least 50/100 of the standard service life (referring to the standard service life applied to the relevant domestic corporation) of which has lapsed from any other corporation or business operator provided for in Article 1-2 (1) 5 of the Income Tax Act, the service life equivalent to 50/100 of the standard service life of such assets and the service life chosen in the scope of the standard service life, on which a report is filed with the head of the tax office having jurisdiction over the place of tax payment (hereafter referred to as "revised service life" in this Article) may be deemed the service life. In such cases, the service life not exceeding one year in calculating the revised service life shall be dropped. <Amended on Dec. 31, 2001; Feb. 19, 2005; Feb. 18, 2010; Dec. 30, 2010; Feb. 11, 2020>

(2) In determining the allowable depreciation of the assets acquired by a qualified merger, qualified division, qualified split-off, or qualified investment in kind (referring to investment in kind meeting all the requirements prescribed in the subparagraphs of Article 47-2 (1) of the Act where an amount equivalent to the marginal profits from transfer is included in deductible expenses; hereinafter the same shall apply) (hereafter in this Article referred to as "qualified merger, etc."), the acquisition value referred to in each subparagraph of Article 26 (2) and (6) shall be the acquisition value of a corporation which transfers the assets through a qualified merger or division (hereafter referred to as "transferor corporation" in this Article); and the undepreciated balance shall be the balance calculated by deducting the amount already included by the corporation that acquired such assets (hereafter referred to as "transferee corporation" in this Article) in deductible losses as depreciation costs from the book value as at the time of transfer by the transferor corporation, and the allowable depreciation of the relevant assets may be determined by any of the following methods. In such cases, such chosen method shall continue to apply in the subsequent business years: <Added on Dec. 30, 2010; Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Feb. 13, 2018; Feb. 12, 2019>

1. The method of succeeding to the allowable depreciation of the transferor corporation: In such cases, the allowable depreciation amount shall be the amount computed by the depreciation method and the service life applied by the transferor corporation under the Act and this Decree;

2. The method of succeeding to the allowable depreciation of the transferee corporation: In such cases, the allowable depreciation shall be the amount computed by the depreciation method and the service life applied by the transferee corporation under the Act and this Decree.

(3) In applying paragraph (2) for a qualified split-off or qualified investment in-kind, if the allowable depreciation exceeds the book value of the relevant asset, the excess amount may be included in deductible expenses. In such cases, when the asset is disposed of, the total amount included in deductible expenses pursuant to the former part shall be included in gross income for the business year in which the date of disposing of the asset falls. <Added on Feb. 12, 2019>

(4) Where a corporation to which paragraphs (2) and (3) applies falls under the ground for violation of qualified requirements, Article 26-2 (10) shall apply mutatis mutandis to the calculation of the amount of income and the depreciation costs included in the calculation of deductible expenses in the business year in which the relevant grounds arise and in the subsequent business years. In such cases, where an amount (including an amount included in deductible expenses pursuant to the former part of paragraph (3)) computed by subtracting the amount computed under Article 26-2 (10) 2 from an amount computed under subparagraph 1 of the same paragraph is smaller than zero, the amount shall be deemed zero, and the corporation shall file a report on the revised service life on the used assets among the assets acquired by the qualified merger or division under paragraph (1), along with the report provided in Article 60 of the Act in the business year during which the relevant grounds arise, and if it fails to do so, the transferee corporation shall be deemed reported the service life for the relevant asset as prescribed in Article 28 (1). <Added on Dec. 30, 2010; Feb. 12, 2019>

(5) Paragraph (1) shall only apply where a domestic corporation files a report on the revised service life in the form prescribed by Decree of the Ministry of Economy and Finance by the following deadlines: <Amended on Dec. 31, 2001; Feb. 29, 2008; Feb. 12, 2019>

1. In cases of acquisition of any used assets, the filing deadline of the tax base on corporate tax for the business year in which the date of such acquisition falls;

2. In cases of succession of any assets through a merger or division, the filing deadline of the tax base on corporate tax for the business year in which the date of such merger or division falls.

[This Article Added on Dec. 29, 2000]

[Title Amended on Dec. 30, 2010]

Article 31(Constructive instant depreciation) #

(1) Deleted. <Feb. 12, 2019>

(2) "Capital expenditure prescribed by Presidential Decree" referred to in Article 23 (4) 2 of the Act means repair costs expended by a corporation to extend the service life of its depreciable assets or to raise the real value of such assets, and includes expenditures for any of the following: <Amended on Feb. 12, 2019>

1. Remodeling to change the original use;

2. Installation of elevators or cooling/heating equipment;

3. Installation of evacuation facilities, etc. in a building, etc.;

4. Reinstatement of buildings, machinery, facilities, and equipment damaged or destroyed by a disaster or accident to the extent that they cannot be used for their original purposes;

5. Other improvements, expansions, or installations which are similar in nature to those referred to in subparagraphs 1 through 4.

(3) Where any of the following repair costs expended by a corporation in a business year are appropriated as deductible expenses for the business year, they shall not be included in capital expenditures, notwithstanding paragraph (2): <Amended on Dec. 30, 2010; Feb. 12, 2019; Feb. 11, 2020>

1. Where the amount expended as repair costs for each item of asset is less than six million won;

2. Where the amount expended as repair costs for each item of asset is less than 5/100 of the property value on the statement of financial position (referring to the balance of the cumulative total amount of depreciation deducted from the acquisition value) as at the end date of the immediately preceding business year;

3. Where repairs costs are periodically expended at intervals of less than three years.

(4) Where the acquisition value of any depreciable assets is one million won or less per unit of transaction (excluding any of the following assets), such acquisition value shall be included in deductible expenses, limited to those appropriated as deductible expenses for the business year in which they were used for business: <Amended on Feb. 12, 2019>

1.Assets held in large quantities by the nature of the proper business;

2.Assets acquired to start or expand the business.

(5) For purposes of paragraph (4), "unit of transaction" means the unit of acquired assets which the acquiring corporation may use independently and directly for its business.

(6) Notwithstanding paragraph (4), any of the following assets shall be included in deductible expenses, limited to those appropriated as deductible expenses for the business year in which they were used for the business: <Amended on Dec. 31, 1999; Dec. 30, 2010; Feb. 12, 2019; Feb. 11, 2020>

1. Fishing tools used in the fisheries industry (including tools used for fishing boats);

2. Movie film, tools, furniture, electrical appliances, gas machinery, household appliances and fixtures, clocks, test equipment, measurement equipment, and signboards;

3. Videotapes for rental business and compact disks for music play, the acquisition value of each of which shall be less than 300 thousand won;

4. Telephones (including cellular phone) and personal computers (including its peripherals).

(7) In any of the following cases, the amount of the book value of the relevant assets minus one thousand won may be included in deductible expenses for the business year in which the date of discard falls: <Amended on Feb. 17, 2021>

1. Where parts of production facilities are discarded due to the replacement of facilities or outdated technology;

2. Where facilities are removed to restore a place of business leased under a lease contract to its original state due to the closure or relocation of the business.

(8) Where the market value of depreciable assets is rapidly declining due to their obsolescence, physical damage, etc. and a corporation appropriates impairment losses according to the corporate account standards (excluding cases falling under Article 42 (3) 2 of the Act), the relevant amount shall be deemed to have been appropriated in deductible expenses as depreciation costs and Article 23 (1) of the Act shall apply accordingly. <Added on Dec. 30, 2010; Feb. 12, 2019>

Article 32(Disposition of disallowed amount of depreciation) #

(1) An amount that a corporation does not include in deductible expenses by reason of exceeding the allowable depreciation pursuant to Article 23 (5) of the Act (hereafter referred to as "disallowed amount of depreciation" in this Article) shall be confirmed as deductible expenses if the depreciation costs appropriated as deductible expenses by the corporation for the following business year falls short of the allowable depreciation, limited to the amount of the shortfall (hereafter referred to as "approved shortfall" in this Article). In such cases, the disallowed amount of depreciation shall be confirmed as deductible expenses up to the limit of the allowable depreciation even where the corporation fails to appropriate the depreciation costs as deductible expenses. <Amended on Feb. 12, 2019>

(2) An approved shortfall may not be allocated for the disallowed amount of depreciation in any subsequent business year.

(3) Where a corporation increases the book value of depreciable assets under Article 42 (1) 1 of the Act (hereafter referred to as "evaluation increase" in this Article), the disallowed amount of depreciation for the relevant depreciable assets shall be deemed to have been included in gross income up to the limit of the evaluation increase and confirmed as deductible expenses, and the amount in excess of the evaluation increase shall be deemed the disallowed amount of depreciation to be carried forward to the following business year. In such cases, any approved shortfall shall be deemed erased. <Amended on Dec. 30, 2010; Feb. 12, 2019>

(4) Where a corporation concurrently carries out the depreciation and evaluation increase of depreciable assets, the corporation shall be deemed to have carried out depreciation first and then evaluation increase, and the allowable depreciation shall be calculated accordingly.

(5) Where depreciable assets are transferred, the disallowed amount of depreciation of the relevant assets shall be included in deductible losses for the business year in which the date of the transfer falls.

(6) In applying paragraph (5), where some of depreciable assets is transferred, the cumulative total amount of depreciation and the disallowed amount of depreciation or the approved shortfall of the relevant transferred assets shall be the amount computed by multiplying the cumulative total amount of depreciation and the disallowed amount of depreciation or the approved shortfall of all depreciable assets by the ratio of the value of the relevant transferred depreciable assets to their total value. In such cases, the total value shall be based on the book value as at the time of acquisition.

Article 38(Requirements for Korean schools) #

(1) Deleted. <Feb. 29, 2024>

(2) "School prescribed by Presidential Decree" in Article 24 (2) 1 (d) (viii) of the Act means any of the following: <Added on Feb. 2, 2012; Feb. 12, 2019; Feb. 17, 2021>

1. International graduate schools established in the Korea Development Institute under the Act on the Establishment, Operation and Fostering of Government-Funded Research Institutes;

2. Graduate schools established in the Academy of Korean Studies Act under the Act on the Support of the Academy of Korean Studies;

3. Graduate universities established under Article 33 of the Act on the Establishment, Operation and Fostering of Government-Funded Science and Technology Research Institutes.

(3) "Schools that meet requirements prescribed by Presidential Decree" in Article 24 (2) 1 (d) (ix) of the Act mean schools that meet each of the following requirements: <Amended on Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Feb. 12, 2019; Feb. 17, 2021>

1. They shall have their own website on which the annual collection of donations and the outcomes of utilization thereof may be disclosed to the public;

2. Where the designation of a school was revoked under paragraph (14), three years shall have passed since the date of revocation, while, where a school fails to obtain re-designation under the aforesaid paragraph, three years shall have passed since the period of designation ends.

(4) "Corporations that meet requirements prescribed by Presidential Decree" in Article 24 (2) 1 (f) of the Act mean the corporations that meet each of the following requirements: <Amended on Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Feb. 12, 2016; Feb. 13, 2018; Oct. 30, 2018; Feb. 12, 2019; Feb. 17, 2021>

1. They shall have their own website on which the annual collection of donations and the outcomes of utilization thereof may be disclosed to the public;

2. They shall undergo an audit from an auditor referred to in subparagraph 7 of Article 2 of the Act on External Audit of Stock Companies;

3. They shall publish the documents specified in Article 50-3 (1) 1 through 4 of the Inheritance Tax and Gift Tax Act on their websites and the website of the National Tax Service;

4. They shall open and use exclusive accounts under Article 50-2 of the Inheritance Tax and Gift Tax Act;

5. The average amount disbursed for distributing donations for five business years [where the period from the establishment date to the end date of the business year immediately preceding the application date is less than five years, referring to the period (limited where the period is at least one year) from the establishment date of the relevant corporation to the end date of the month immediately preceding the month in which the application date falls; hereafter in subparagraph 6, the same shall apply] immediately preceding the application date under paragraph (6) shall be at least 80/100 of the total amount disbursed, and the expenses incurred in collecting and distributing the donations and in managing and operating the corporation shall not exceed 10/100 of the donation income. In such cases, matters concerning the calculation of the total amount disbursed and the amount disbursed for distribution shall be prescribed by Decree of the Ministry of Economy and Finance;

6. The average amount disbursed for distributing donations for five business years immediately preceding the application date per corporation (including an organization; hereafter in this subparagraph, the same shall apply) shall not exceed 25/100 of the total amount disbursed for distributing, and no amount disbursed for distribution of donations shall exist with respect to a non-profit corporation referred to in Article 2-2 (1) 4, 5, or 8 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act as a contributor provided for in Article 38 (10) of the same Enforcement Decree or a specially related person of such contributor referred to in Article 2-2 (1) of the same Enforcement Decree;

7. Where the designation was revoked under paragraph (14), three years shall have passed since the date of revocation, while, where a corporation fails to obtain re-designation under the aforesaid paragraph, three years shall have passed since the period of designation ends.

(5) Deleted. <Feb. 13, 2018>

(6) The competent authorities shall recommend schools or corporations referred to in paragraph (3) or (4) (hereinafter referred to as "schools, etc.") to the Minister of Economy and Finance, upon receipt of an application from the relevant schools, etc., by submitting documents specified by Decree of the Ministry of Economy and Finance, by no later than one month after the end of each quarter, and the Minister of Economy and Finance shall designate and publicly notify such schools, etc. by no later than the end of each quarter. <Amended on Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Feb. 13, 2018>

(7) Donations paid to schools, etc., publicly notified by the Minister of Economy and Finance under paragraph (6) shall be included in deductible expenses as donations prescribed in Article 24 (2) 1 of the Act for six years from January 1 of the year in which the public notice under paragraph (6) is made (hereafter in this Article, referred to as "period of designation"). <Amended on Mar. 31, 2011; Feb. 2, 2012; Feb. 13, 2018; Feb. 12, 2019; Feb. 17, 2021>

(8) Schools, etc. shall perform the following obligations during the period of designation: <Added on Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Feb. 13, 2018; Feb. 17, 2021>

1. The annual collection of donations and the outcomes of utilization thereof shall be disclosed to the public on the websites of relevant schools, etc. and of the National Tax Service within four months from the end of each business year in the form prescribed by Decree of the Ministry of Economy and Finance; provided, where matters prescribed in Article 50-3 (1) 2 of the Inheritance Tax and Gift Tax Act are disclosed pursuant to the standard form provided in Article 43-3 (4) of the Enforcement Decree of that Act, the amount of donations raised and utilization outcomes thereof shall be deemed to be disclosed:

2. Deleted. <Feb. 13, 2018>

3. At least 80/100 of the expenditures of the relevant business year, excluding the expenditures for a profit-making business, shall be disbursed directly for a principal purpose business.

(9) Schools, etc. shall report on whether they fulfill the requirements prescribed in paragraph (3) or (4) and whether they have performed the obligations prescribed in paragraph (8) (hereafter in this Article, referred to as "whether the requirements, etc. are met") to the competent authorities, as prescribed by Decree of the Ministry of Economy and Finance. In such cases, where the relevant corporation or organization fails to report on whether they meet the requirements, etc., the competent authorities shall require such corporation or organization to report, as prescribed by Decree of the Ministry of Economy and Finance. <Added on Mar. 31, 2011; Feb. 2, 2012; Feb. 13, 2018>

(10) The competent authorities shall review the details reported under paragraph (9) and notify the Commissioner of the National Tax Service of the results thereof (where the relevant corporation fails to report on whether the requirements, etc. are met, notwithstanding having been required under the latter part of paragraph (9), such fact shall be included), as prescribed by Decree of the Ministry of Economy and Finance. <Added on Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014>

(11) In any of the following cases, the Commissioner of the National Tax Service shall request the Minister of Economy and Finance to revoke the designation of the relevant school, etc., as prescribed by Decree of the Ministry of Economy and Finance: <Added on Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Feb. 3, 2017; Feb. 13, 2018; Feb. 12, 2019; Feb. 17. 2021; Jul. 23, 2024>

1. Where inheritance tax (including penalty tax thereon) or gift tax (including penalty tax thereon) is additionally imposed on a school, etc. under Article 48 (2), (3) and (8) through (11); Article 78 (5) 3, (10), or (11) of the Inheritance Tax and Gift Tax Act, in excess of the amount specified by Decree of the Ministry of Economy and Finance;

2. Where a school, etc. has violated public interest by engaging in any business, other than its proper purpose business, or by violating conditions for permission of its establishment; has violated any of the requirements prescribed in paragraphs (3) and (4) 1 and 5 through 7; has breached any of the obligations prescribed in paragraph (8); or fails to report on whether the requirements, etc. are met, even after receipt of a request made under the latter part of paragraph (9);

3. Where it has been disclosed as one of the unconscientious donation-receiving organizations under Article 85-5 of the Framework Act on National Taxes;

4. Where a representative, executive officer, agent, employee, or any other servant of a corporation, etc. violates Act on Collection and Use of Donations and Promotion of Donation Culture, and a sentence of imprisonment with labor or a fine imposed upon the relevant corporation, etc. or individual becomes final;

5. Where a school, etc. is dissolved.

(12) Where a school, etc. falls under paragraph (11) 2, 4, or 5, the competent authorities shall immediately notify the Commissioner of the National Tax Service of the name of the school, etc. and the details thereof. <Added on Feb. 21, 2014>

(13) Where the Commissioner of the National Tax Service becomes aware, after the period of designation of a school, etc. ends, that any event prescribed in the subparagraph of paragraph (11) occurred in relation to the school, etc. during the period of designation, he or she shall not re-designate the school, etc. or shall request the Minister of Economy and Finance to revoke the re-designation, as prescribed by Decree of the Ministry of Economy and Finance, where the school, etc. has been already re-designated. <Added on Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Feb. 3, 2017>

(14) Upon receipt of a request under paragraph (11) or (13), the Minister of Economy and Finance may revoke the designation of the school, etc., or may elect not to re-designate the school, etc. <Added on Feb. 21, 2014>

(15) Where the Minister of Economy and Finance revokes the designation of a school, etc. under paragraph (14), he or she shall publish the name of the school, etc., relevant facts, and period of exclusion from designation (referring to the period required to elapse after the date of revocation of designation under paragraph (3) 2 or (4) 7) in the Official Gazette by December 31 of the year in which the designation is revoked (referring to January 31 of the following year, where the designation is revoked in December). <Added on Feb. 21, 2014; Feb. 13, 2018; Feb. 17, 2021>

[This Article Added on Dec. 30, 2010]

[Title Amended on Feb. 17, 2021]

[Moved from Article 36-2, Previous Article 38 Moved to Article 37 <Feb. 12, 2019>]

Article 39(Scope of donations determined in consideration of public interest) #

(1) "Donations prescribed by Presidential Decree" referred to in Article 24 (3) 1 of the Act means any of the following: <Amended on Dec. 29, 2000; Dec. 31, 2001; Feb. 19, 2005; Feb. 9, 2006; Feb. 28, 2007; Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Feb. 18, 2010; Aug. 25, 2010; Dec. 30, 2010; Mar. 31, 2011; Feb. 2, 2012; Aug. 3, 2012; Feb. 15, 2013; Feb. 21, 2014; Feb. 12, 2016; Feb. 3, 2017; May 29, 2017; Feb. 13, 2018; Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021; Feb. 15, 2022; Feb. 17. 2022; Feb. 28, 2025>

1. For the following non-profit corporations (including organizations and foreign non-profit corporations; hereafter in this Article, referred to as "public service corporation"), donations paid as principal purpose business expenses of the relevant public service corporation; provided, donations paid to any corporation designated and publicly notified under item (f) shall be limited to donations paid for three years from January 1 of the year in which the date of such designation falls (where redesignation occurs within two years of the end of the designated period, it shall be six years from January 1 of the business year in which the redesignation date falls; hereafter in this Article, referred to as "period of designation"):

(a) Social welfare corporations established under the Social Welfare Services Act;

(b) Child-care centers established pursuant to the Infant Care Act;

(c) Kindergartens established pursuant to the Early Childhood Education Act; schools established pursuant to the Elementary and Secondary Education Act and the Higher Education Act; technical colleges established pursuant to the National Lifelong Vocational Skills Development Act; lifelong educational facilities established in the form of a major college pursuant to Article 31 (4) of the Lifelong Education Act; and lifelong educational facilities established in the form of a distance college pursuant to Article 33 (3) of that Act;

(d) Medical corporations under the Medical Service Act and medical technology cooperation foundations under Article 28-2 (1) of the Health and Medical Service Technology Promotion Act (excluding those medical technology cooperation foundations falling under Article 24 (2) 1 (e) (xiv) of the Act);

(e) Non-profit corporations (including organizations affiliated thereto) established for the purpose of missionary work and for other evangelical purposes with the permission of the Minister of Culture, Sports and Tourism or the head of a local governments pursuant to Article 32 of the Civil Act;

(f) Juristic persons designated and publicly notified by the Minister of Economy and Finance upon recommendation of the Commissioner of the National Tax Service (Including the head of the tax office having jurisdiction over the location of the main office or head office; hereafter in this Article the same shall apply) as those that meet each of the follow requirements among non-profit corporations established with permission from competent authorities pursuant to Article 32 of the Civil Act (hereafter in this Article, referred to as "non-profit corporations under the Civil Act"), social cooperatives established pursuant to Article 85 of the Framework Act on Cooperatives (hereafter in this Article, referred to as "social cooperatives"), public institutions under Article 4 of the Act on the Management of Public Institutions (excluding public enterprises referred to in Article 5 (4) 1 of said Act; hereafter in this Article, referred to as "public institutions") and institutions established or registered directly pursuant to any statute. In such cases, the Commissioner of the National Tax Service shall make a recommendation to the Minister of Economy and Finance at the request of the relevant corporation:

(i) Requirements for each category of juristic person:

(ii) The articles of incorporation shall stipulate that, upon dissolution, residual assets shall vest in the State, a local government, or another non-profit corporation established for a similar purpose;

(iii) A non-profit corporation shall operate a website; its articles of incorporation shall stipulate that it shall disclose the amount of donations annually collected and details of the use of such donations on the website; and the website of the relevant corporation shall be connected to the websites created by institutions managing and supervising public interest violations such as the Anti-Corruption and Civil Rights Commission, the National Tax Service, the competent authority, etc. (hereinafter referred to as "institutions managing and supervising public interest violations") so that any violation of public interest can be reported to at least one such institution;

(iv) A non-profit corporation shall have no record of having been involved in an election campaign prescribed in Article 58 (1) of the Public Official Election Act, for a particular political party or person in the name of the non-profit corporation or its representative during the year in which it was designated and publicly notified as a non-profit corporation and the immediately preceding year;

(v) Three years shall have passed since the date of revocation, where designation was revoked under paragraph (12), or three years shall have passed since the expiration of a period of designation, where a juristic person fails to obtain recommendation under paragraph (9); provided, the foregoing shall not apply where designation was revoked or a juristic person failed to obtain recommendation only on the ground that it breached the obligation under paragraph (5) 1;

2. The following donations:

(a) Donations paid as scholarships or education or research expenses to individuals recommended by the heads of kindergartens referred to in the Early Childhood Education Act, the principals of schools referred to in the Elementary and Secondary Education Act and the Higher Education Act, the deans of technical colleges established under the National Lifelong Vocational Skills Development Act or the presidents of lifelong educational facilities in the form of major colleges referred to in Article 31 (4) of the Lifelong Education Act, and lifelong educational facilities in the form of distance colleges referred to in Article 33 (3) of that Act;

(b) Donations placed in the trust for public interest that meets any of the subparagraph of Article 14 (1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act;

(c) Donations designated and publicly notified by the Minister of Economy and Finance as those to be used for public interest, such as social welfare, culture, arts, education, religion, charity and science;

3. Deleted; <Feb. 13, 2018>

4. The value of money and other valuables donated to any facility or institution which can be used gratuitously or at a reasonable cost among any of the following social welfare facilities or institutions; provided, where a person who has established an institution for the aged among the welfare facilities for the aged referred to in item (b) (i) bears any costs incurred in establishing and operating the relevant facility, the amount to the extent of any loss incurred in operating the relevant facility among the charges (referring to the amount of loss for the relevant taxable period calculated according to the corporate accounting standards) shall be included:

(a) Child welfare facilities referred to in Article 52 (1) of the Child Welfare Act;

(b) Facilities, other than the following facilities, among welfare facilities for older persons referred to in Article 31 of the Welfare of Older Persons Act:

(i) Institutions for older persons, communal living home for older persons, and welfare houses for older persons for which the inmates pay all expenses for admission among the residential welfare facilities for the aged referred to in Article 32 (1) of the Welfare of Older Persons Act;

(ii) Intermediate care institutions for older persons, medical treatment and communal living home for older persons and special hospitals for older persons among the medical welfare institutions for older persons for which the inmates pay all expenses for admission referred to in Article 34 (1) of the Welfare of Older Persons Act;

(iii) Facilities for which the users pay all costs for using welfare at home among welfare institutions for older persons at home referred to in Article 38 of the Welfare of Older Persons Act;

(c) Welfare facilities for persons with disabilities referred to in Article 58 (1) of the Act on Welfare of Persons with Disabilities; provided, the following facilities shall be excluded herefrom:

(i) Communal living home for persons with disabilities operated by a person, other than non-profit corporations (including a social welfare foundation established under Article 16 (1) of the Social Welfare Services Act);

(ii) Facilities selling products manufactured by persons with disabilities under Article 36 of the Enforcement Decree of the Act on Welfare of Persons with Disabilities;

(iii) Paid welfare facilities for person with disabilities;

(d) Single-parent family welfare facilities referred to in Article 19 (1) of the Single-Parent Family Support Act;

(e) Mental health sanatoriums and mental health rehabilitation facilities referred to in subparagraphs 6 and 7 of Article 3 of the Act on the Improvement of Mental Health and the Support for Welfare Services for Mental Patients;

(f) Supporting institutions and counseling centers for victims of commercial sex acts referred to in Articles 6 (2) and 10 (2) of the Act on the Prevention of Commercial Sex Acts and Protection of Victims;

(g) Counseling centers related to domestic violence and protection facilities for victims of domestic violence referred to in Articles 5 (2) and 7 (2) of the Act on the Prevention of Domestic Violence and Protection of Victims;

(h) Counseling centers for victims of sexual violence and protection facilities of victims of sexual violence referred to in Articles 10 (2) and 12 (2) of the Sexual Violence Prevention and Victims Protection Act;

(i) Social welfare halls and facilities for vagrants and the homeless, among the social welfare facilities referred to in Article 34 of the Social Welfare Services Act;

(j) Domiciliary long-term care institutions referred to in Article 32 of the Long-Term Care Insurance Act;

(k) Support centers for multicultural families referred to in Article 12 of the Multicultural Families Support Act;

(l) Healthy family support centers referred to in Article 35 (1) of the Framework Act on Healthy Families;

(m) Youth welfare facilities referred to in Article 31 of the Youth Welfare Support Act;

5. Deleted; <Feb. 13, 2018>

6. Donations paid to the international organizations specified and publicly notified by the Minister of Economy and Finance as international organizations that meet each of the following requirements:

(a) Such organizations shall engage in business activities for public interest, such as social welfare, culture, art, education, religion, charity, or scholarship;

(b) The Republic of Korea shall be a member of such organizations.

(2) The amount of income generated by the profit-making business of organizations, other than organizations provided for in each subparagraph of Article 56 (1) among organizations deemed corporations, which is used for principal purpose business expenses, shall be deemed a donation provided for in Article 24 (3) 1 of the Act. <Amended on Dec. 31, 2001; Dec. 30, 2003; Feb. 19, 2005; Feb. 12, 2019; Feb. 17, 2021>

(3) "Principal purpose business expenses" in the main sentence of paragraph (1) 1 and paragraph (2) means an amount to be used for any business operated by the relevant non-profit corporation or organization to accomplish objectives provided for in statutes or regulations concerning the relevant non-profit corporation or organization or the articles of incorporation of the non-profit corporation or organization, other than profit-making businesses specified in Article 3 (1) (excluding health service providers, among health service providers and social welfare service providers). <Amended on Dec. 31, 2001; Feb. 13, 2018; Feb. 12, 2019>

(4) Where a corporation which has disbursed donations intends to include such donations in deductible expenses under Article 24 of the Act, it shall keep a donation receipt determined by Decree of the Ministry of Economy and Finance. <Added on Dec. 30, 2003; Feb. 29, 2008>

(5) A public service corporation, etc. referred to in the items (excluding item (e)) of paragraph (1) 1 shall perform the following obligations. In such cases, a public service corporation, etc. referred to in item (f) of the same subparagraph shall perform the relevant obligations during the period of designation (including the year immediately preceding the year in which the date of designation falls in the case of subparagraph 4): <Added on Feb. 21, 2014; Feb. 12, 2016; Feb. 13, 2018; Oct. 30, 2018; Feb. 11, 2020; Feb. 17, 2021; Feb. 15, 2022; Feb. 28, 2023>

1. A designated organization or corporation receiving donations shall meet each of the requirements prescribed in paragraph (1) 1 (f) (i) through (iii) (limited to juristic persons referred to in paragraph (1) 1 (f));

2. A designated organization or corporation receiving donations shall perform the following obligations:

(a) In cases of a non-profit corporation under the Civil Act or a foreign non-profit corporation: Revenues shall be used for public interest, not for members’ personal interest and persons benefitting directly from its business shall be many and unspecified people (In cases of a foreign non-profit corporation, it is additionally required that the objective of such corporation shall be to provide cooperation and assistance to overseas Koreans defined in Article 2 of the Act on the Immigration and Legal Status of Overseas Koreans, conduct promotional activities for the Republic of Korea or promote international exchange and cooperation); provided, where it falls under the proviso, with the exception of the items, of Article 38 (8) 2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the relevant obligations shall be deemed to have been fulfilled;

(b) In cases of a social cooperative: It shall engage in any of the business activities specified in Article 93 (1) 1 through 3 of the Framework Act on Cooperatives;

(c) In cases of a public institution or an institution established or registered directly pursuant to any Act: It shall perform activities for public interest, such as social welfare, charity, culture, arts, education, science or scholarship;

3. The amount of donations collected and the details of the use of such donations shall be disclosed within four months after the end of each business year according to the following; provided, where matters prescribed in Article 50-3 (1) 2 of the Inheritance Tax and Gift Tax Act are disclosed pursuant to the standard form provided in Article 43-5 (4) of the Enforcement Decree of that Act, all of the following shall be deemed to have been disclosed:

(a) The information shall be disclosed on the website of a public service corporation, etc.;

(b) The information shall be disclosed on the website of the National Tax Service. In such cases, the disclosure shall be made in accordance with the statement of the amount of donations collected and the details of the use of such donations in the form prescribed by the Ministry of the Economy and Finance;

4. A public service corporation, etc. shall have no record confirmed by competent authorities that it has been involved in an election campaign prescribed in Article 58 (1) of the Public Official Election Act, for a particular political party or a particular person under the name of the public service corporation, etc. or its representative;

5. A designated organization or corporation receiving donations shall spend at least 80/100 of its expenditure, excluding the expenditure in its profit-making business, directly for its principal purpose business;

5-2. There shall be expenditure details for a principal purpose business for the past two years as of the end date of each business year;

6. A designated organization or corporation receiving donations shall use an exclusive bank account opened in accordance with Article 50-2 (1) of the Inheritance Tax and Gift Tax Act;

7. The documents specified in Article 50-3 (1) 1 through 4 of the Inheritance Tax and Gift Tax Act shall be disclosed in the websites of the public service corporation, etc. and of the National Tax Service within four months from the end of the business year; provided, the foregoing shall not apply to the public service corporations, etc. referred to in Article 43-5 (2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act;

8. A designated organization or corporation receiving donations shall undergo audits conducted by an auditor specified in subparagraph 7 of Article 2 of the Act on External Audit of Stock Companies in accordance with the accounting standards applicable to public service corporations, etc. under Article 50-4 of the Inheritance Tax and Gift Tax Act; provided, the foregoing shall not apply to the public service corporations, etc. referred to in Article 43 (3) and (4) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act.

(6) A public service corporation, etc. referred to in each item of paragraph (1) 1 (excluding public service corporation, etc. falling under the following) shall report to the Commissioner of the National Tax Service on whether it has performed the obligations of each business year under paragraph (5) (hereafter in this Article, referred to as "whether obligations have been performed"), as prescribed by Decree of the Ministry of Economy and Finance. In such cases, where the relevant public service corporation, etc. fails to report on whether obligations have been performed, the Commissioner of the National Tax Service shall request it to report thereon, as prescribed by Decree of the Ministry of Economy and Finance: <Added on Feb. 18, 2010; Mar. 31, 2011; Feb. 21, 2014; Feb. 13, 2018; Feb. 11, 2020; Feb. 17, 2021; Feb. 28, 2023>

1. A public service corporation, etc. referred to in items (b) and (c) (only applicable to kindergartens) of paragraph (1) 1 (limited to where no donation is collected in the relevant business year);

2. A public service corporation, etc. referred to in paragraph (1) 1 (e).

(7) The Commissioner of the National Tax Service shall examine the details reported pursuant to paragraph (6), and if the examination results show that the amount of donations collected or the use thereof prescribed in paragraph (5) 3 is not disclosed or that there are errors in the disclosure, the Commissioner may request that the relevant public service corporation, etc. submit details on donation expenditure. In such cases, the public service corporation, etc. shall submit donation expenditure details within one month from the date of receiving the request. <Amended on Feb. 11, 2020; Feb. 17, 2021>

(8) In any of the following cases, the Commissioner of the National Tax Service shall request the Minister of Economy and Finance to revoke the designation of a corporation referred to in paragraph (1) 1 (f): <Added on Feb. 28, 2007; Feb. 22, 2008; Feb. 29, 2008; Feb. 18, 2010; Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Feb. 3, 2017; Feb. 13, 2018; Feb. 12, 2019; Feb. 17, 2021; Jul. 23, 2024>

1. Where a corporation has inheritance tax (including penalty tax thereon) or gift tax (including penalty tax thereon) collected additionally in an amount not smaller than the amount specified by Decree of the Ministry of Economy and Finance under any provision of Articles 48 (2), (3), and (8) through (11) and 78 (5) 3, (10) and (11) of the Inheritance Tax and Gift Tax Act;

2. Where a public service corporation, etc. breaches public interest by engaging in any business other than its proper purpose business or by breaching any condition attached to the permission for incorporation, breaches the obligation under paragraph (5) 1 through 5 and 5-2, or fails to report on whether obligations have been performed, even upon receipt of a request made under the latter part of paragraph (6);

3. Where it has been disclosed as one of the unconscientious donation-receiving organizations under Article 85-5 of the Framework Act on National Taxes;

4. Where a representative, executive officer, agent, employee, or any other servant of a public service corporation, etc. violates Act on Collection and Use of Donations and Promotion of Donation Culture, and a sentence of imprisonment with labor or a fine imposed upon the relevant public service corporation, etc. or individual becomes final;

5. Where a public service corporation is dissolved.

(9) Where the Commissioner of the National Tax Service becomes aware, after the end of the period of designation of a public service corporation, etc. referred to in paragraph (1) 1 (f), that any event specified in the subparagraphs of paragraph (8) occurred during the period of designation, he or she shall not recommend the relevant public service corporation, etc. for three years from the end of the designation period, and shall request the Minister of Economy and Finance to revoke designation where the public service corporation, etc. has already been re-designated. <Added on Feb. 18, 2010; Feb. 21, 2014; Feb. 3, 2017; Feb. 13, 2018; Feb. 11, 2020; Feb. 17, 2021>

(10) Before requesting the Minister of Economy and Finance to revoke designation under paragraphs (8) and (9), the Commissioner of the National Tax Service shall notify the relevant public service corporation, etc. of the fact that it is subject to revocation of designation, the grounds therefor, legal basis, etc. <Added on Feb. 12, 2016; Feb. 13, 2018; Feb. 11, 2020; Feb. 17, 2021>

(11) Where a public service corporation, etc. in receipt of the notice prescribed in paragraph (10) has any objection thereto, it may submit its opinions to the Commissioner of the National Tax Service within one month from receiving the notice. <Added on Feb. 11, 20120; Feb. 17, 2021>

(12) Upon receipt of a request under paragraphs (8) and (9), the Minister of Economy and Finance may revoke the designation of the relevant public service corporation, etc. <Amended on Feb. 11, 2020; Feb. 17, 2021>

(13) Where a public service corporation, etc. referred to in paragraph (1) 1 (f) is designated or its designation is revoked, the Commissioner of the National Tax Service shall notify the competent authority of the fact; and the competent authority shall notify the Commissioner of the National Tax Service of the relevant fact, if a public-service corporation, etc. referred to in the same item falls under any subparagraph of paragraph (8), including it engaging in any business other than its purpose business or violating any condition of its establishment permit. <Amended on Feb. 11, 2020; Feb. 17, 2021>

(14) Notwithstanding Paragraph (16), even when a designated organization, etc. receiving donations referred to in Article 36 (1) 1 (c), (d) or (h) of the previous Enforcement Decree of the Corporate Tax Act (referring to the Enforcement Decree before being amended 28640) does not make an application prescribed in the latter part of paragraph (1) 1 (f) from January 1 to October 12, 2021, the Minister of Economy and Finance may make designation and public notification pursuant to paragraph (1) 1 (f) by December 31, 2022, upon receipt of a recommendation from the relevant designated organization, etc. receiving donations, as determined and publicly notified by the Minister of Economy and Finance. <Newly Amended on Feb. 15, 2022; Sep. 26, 2023>

(15) Notwithstanding the proviso, with the exception of the items, of paragraph (1) 1, donations made or to be made to a designated organization, etc. receiving donations designated and publicly notified under paragraph (14) for three years from January 1, 2021 (where it is redesignated within two years after the end of the period of designation, for five years from January 1 of the year in which the date of redesignation falls) shall be deemed donations prescribed in Article 24 (3) 1 of the Act. <Added on Feb. 15, 2022>

(16) Matters necessary for the methods of applying for and recommending a public service corporation, etc., procedures for designation, methods for verifying the requirements for designation and documents to be submitted, the procedures for revoking designation, etc. pursuant to paragraph (1) 1 (f) shall be prescribed by Decree of the Ministry of Economy and Finance. <Added on Feb. 28, 2007; Feb. 29, 2008; Feb. 18, 2010; Dec. 30, 2010; Feb. 15, 2013; Feb. 21, 2014; Feb. 12, 2016; Feb. 13, 2018; Feb. 11, 2020; Feb. 17, 2021; Feb. 15, 2022>

[Title Amended on Feb. 17, 2021]

[Moved from Article 36, Previous Article 39 Moved to Article 42 <Feb. 12, 2019>]

Article 41(Use of credit cards for business promotion expenses) #

(1) "Amount prescribed by Presidential Decree" referred to in the main clause, with the exception of the subparagraphs, of Article 25 (2) of the Act means an amount classified in the following: <Amended on Feb. 9, 2006; Feb. 28, 2007; Feb. 4, 2009; Jun. 3, 2011; Feb. 17, 2021>

1. Celebration or condolence money: 200,000 won;

2. For cases other than that provided in subparagraph 1: 30,000 won.

(2) "Expenditure prescribed by Presidential Decree, such as those paid in any foreign country for farmers or fishermen" in the proviso, with the exception of the subparagraphs, of Article 25 (2) of the Act means each of the following: <Amended on Feb. 2, 2012; Feb. 12, 2019; Feb. 28, 2023>

1. Where it is impractical to obtain evidentiary documents provided in the subparagraphs of Article 25 (2) of the Act by reason of the lack of a means of payment, other than cash in a foreign country where business promotion expenses are expended (including any place similar to the place in neighboring areas where the relevant place is located), the expenditure made in the relevant foreign country;

2. Expenditure made in return for goods directly supplied from farmers or fishermen (referring to those engaged in the growing of crops of agriculture, farming of animals, mixed farming, forestry or fishing but excluding corporations) as payments made through financial companies, etc. defined in subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality (limited to where the relevant corporation files a report on tax base under Article 60 of the Act, along with the statements of remittance on which the fact of remittance is entered, to the head of the tax office having jurisdiction over the place of tax payment).

(3) "Items prescribed by Presidential Decree" in Article 25 (2) 1 (a) of the Act mean any of the following: <Amended on Feb. 12, 2019>

1. Debit cards referred to in the Specialized Credit Finance Business Act;

2. Credit cards issued overseas;

3. Registered prepaid card, electronic debit payment instrument, registered electronic prepaid instrument, or registered electronic cash referred to in Article 126-2 (1) 4 of the Act on Restriction on Special Cases concerning Taxation.

(4) "Withholding receipt prescribed by Presidential Decree" in Article 25 (2) 4 of the Act means a withholding receipt issued under Articles 144 and 145 of the Income Tax Act after having been supplied with services from a person who has not been registered as a business operator under Article 168 of the Income Tax Act. <Added on Feb. 4, 2009; Feb. 12, 2019>

(5) For the purpose of Article 25 (3) of the Act, when being issued sales slips, etc. in the name of a credit card merchant, etc. other than the one that actually supply the relevant goods or services, the trade name and business location stated on the sales slips, etc. should be different from the trade name and business location of the credit card merchant, etc. that has supplied goods or services. <Added on Dec. 29, 2000; Feb. 12, 2019>

(6) For the purpose of paragraphs (1) through (3) and (5), credit cards, etc. referred to in Article 25 (2) 1 of the Act shall be the credit cards, etc. issued in the name of the relevant corporation. <Added on Feb. 12, 2019>

[Title Amended on Feb. 28, 2023]

Article 42(Standard for calculating business promotion expenses as amount of income) #

(1) "The amount of income prescribed by Presidential Decree" in the main clause of Article 25 (4) 2 of the Act means the amount of sales {including the amount of sales from any business category suspended during the relevant business year and in the case of transactions of derivatives-combined securities provided for in Article 4 (7) of the Financial Investment Services and Capital Markets Act and derivatives provided for in Article 5 (1) of that Act, it means the net profit calculated by summing up the income and losses from the relevant transactions (if such net profit is smaller than zero, it shall be zero); hereinafter referred to as "amount of sales"} calculated according to the corporate accounting standards; provided, in the case of any of the following corporations, the amount of sales means an amount computed by any of the following formulas: <Amended on Feb. 12, 2019; Feb. 17, 2022; Feb. 29, 2024>

1. An investment dealer or investment broker as defined in the Financial Investment Services and Capital Markets Act: Sales + Amount equivalent to nine times the remuneration and fees related to the business specified in Article 6 (1) 2 of the Financial Investment Services and Capital Markets Act;

2. A collective investment business entity as defined in the Financial Investment Services and Capital Markets Act: Sales + Amount equivalent to nine times the remuneration and fees related to the management of collective investment assets specified in Article 9 (20) of the Financial Investment Services and Capital Markets Act;

3. The Korea Investment Corporation incorporated under the Korea Investment Corporation Act: Sales + Amount equivalent to six times the management fees specified in Article 34 (2) of the Korea Investment Corporation Act;

4. The Export-Import Bank of Korea established under the Export-Import Bank of Korea Act: Sales + Amount equivalent to six times the guarantee fees received;

5. The Korea Asset Management Corporation incorporated under the Act on the Establishment of Korea Asset Management Corporation: Sales + Amount equivalent to six times the fees for handling business affairs specified in Article 31 (1) of that Act;

5-2. The Korea Housing and Urban Guarantee Corporation established under the Housing and Urban Fund Act: Sales revenues + an amount equivalent to six times the income guarantee fee;

6. A corporation specified in each subparagraph of Article 63 (1): Sales ＋ Amount equivalent to six times guarantee fees received.

(2) "Domestic corporation that meets the criteria prescribed by Presidential Decree" in Articles 25 (5) and 27-2 (5) of the Act means a domestic corporation that meets all of the following criteria: <Added on Feb. 3, 2017; Feb. 12, 2019; Feb. 11, 2020; Feb. 15, 2022>

1. The sum of stocks, etc., held by the controlling stockholder, etc., of the domestic corporation under Article 43 (7) as at the end of the relevant business year shall exceed 50/100 of the total number of outstanding stocks or the total amount of investment of the domestic corporation;

2. The domestic corporation shall engage mainly in real estate leasing business in the relevant business year or the sum of the following amounts shall be at least 50/100 of the sales computed according to the Korea Financial Accounting Standards (if the amounts specified in items (a) through (c) are not included, the amounts shall be included in the computation):

(a) The amount of income accruing from the leasing of real estate or of any right to real estate (including the amount to be added to gross income under Article 138 (1) of the Restriction of Special Taxation Act);

(b) The amount of interest income referred to in Article 16 (1) of the Income Tax Act;

3. The number of full-time employees for the relevant business year shall be less than five persons.

(3) Where a domestic corporation engages in at least two different businesses, the business that generates more business revenue shall be deemed its main business for the purpose of applying paragraph (2) 2. <Added on Feb. 3, 2017; Feb. 12, 2019>

(4) In applying paragraph (2) 3, full-time employees shall be limited to Korean employees who have entered into an employment contract pursuant to the Labor Standards Act; provided, the following employees shall be excluded herefrom: <Added on Feb. 3, 2017; Feb. 12, 2019>

1. The largest stockholder or largest investor of the corporation and employees who are relatives of such stockholder or investor, as defined in Article 1-2 (1) of the Enforcement Decree of the Framework Act on National Taxes;

2. Employees on whom it is not verified by the book for tax withholding for wage and salary income under Article 196 (1) of the Enforcement Decree of the Income Tax Act whether earned income tax was withheld;

3. Employees whose employment contract term is less than one year; provided, employees whose employment contract term exceeds one year as a result of consecutive renewal of his or her employment contract;

4. Part-time workers defined in Article 2 (1) 8 of the Labor Standards Act.

(5) Article 26-4 (3) of the Enforcement Decree of the Restriction of Special Taxation Act shall apply mutatis mutandis to the method of calculating the number of full-time employees for the purpose of applying paragraph (2) 3. <Added on Feb. 3, 2017>

(6) Article 36 (1) 3 shall apply mutatis mutandis to calculating the value of business promotion expenses. <Added on Feb. 12, 2019; Feb. 28, 2023>

[Title Amended on Feb. 28, 2023]

[Moved from Article 39, Previous Article 42 Moved to Article 40 <Feb. 12, 2019>]

Article 43(Non-inclusion of bonuses in deductible expenses) #

(1) Bonuses paid by a corporation to its executive officers or employees to dispose of profits shall not be included in deductible expenses. In such cases, remuneration paid to partners who invest through work and labor in unlimited partnerships or limited partnerships shall be deemed bonuses from the disposal of profits. <Amended on Feb. 13, 2018; Feb. 12, 2019>

(2) Where a corporation pays bonuses to its executive officers in excess of the amount to be paid under the salary payment standards determined by the articles of incorporation or by resolution at the general meeting of stockholders, the general meeting of partners, or the board of directors, such excess shall not be included in deductible expenses.

(3) Where a corporation pays remuneration to an executive officer or employee who is a controlling stockholder, etc. (including any related party; hereafter the same shall apply this paragraph) in excess of the amount paid to executive officers or employees in the same position, other than the controlling stockholder, etc. without any justifiable grounds, such excess shall not be included in deductible expenses. <Amended on Feb. 22, 2008; Feb. 12, 2019>

(4) The remuneration paid to a non-standing executive officer of a corporation shall be included in deductible expenses, except in cases falling under Article 52 of the Act.

(5) Dissolution bonuses or retirement bonuses paid to executive officers or employees of a corporation due to its dissolution shall be included in deductible expenses of the final business year. <Amended on Feb. 12, 2019>

(6) Deleted. <2009. 2. 4.>

(7) "Controlling stockholder, etc." in paragraph (3) means a stockholder, etc. (hereinafter referred to as "controlling stockholder, etc.") who, holding at least 1/100 of the total number of issued stocks or total investment amount of a corporation, have the most stocks or investment shares after summing up those held by the stockholder, etc. and any related party. <Added on Feb. 22, 2008>

(8) "Related party" in paragraphs (3) and (7) means a person who has any of the following relationships with the relevant stockholder, etc.: <Added on Feb. 22, 2008; Feb. 4, 2009; Feb. 2, 2012; Feb. 12, 2019; Feb. 28, 2023>

1. A person with any of the following relationships if the relevant stockholder, etc. is an individual:

(a) A relative (referring to a person falling under Article 1-2 (1) of the Enforcement Decree of the Framework Act on National Taxes; hereinafter the same shall apply);

(b) A corporation in a relationship referred to in Article 2 (8) 1;

(c) A corporation in which the relevant stockholder, etc. and the persons falling under items (a) or (b) invest at least 30/100 of the total number of issued stocks or total investment amount;

(d) A non-profit corporation in which the relevant stockholder, etc. and his or her relatives occupy a majority of the directors or contribute at least 30/100 of contribution (limited to contributions for establishment) and one of them is the founder;

(e) A corporation in which a corporation falling under items (c) or (d) invest at least 30/100 of the total number of issued stocks or total investment amount;

2. A person in a relationship falling under such subparagraph (excluding subparagraph 3) of Article 2 (8) if the relevant stockholder, etc. is a corporation.

Article 44(Non-inclusion of retirement benefits in deductible expenses) #

(1) Retirement benefits (referring to benefits defined in subparagraph 5 of Article 2 of the Guarantee of Workers' Retirement Benefits Act; hereinafter the same shall apply) paid by a corporation to its executive officers or employees shall be included in deductible expenses within the extent of the amount actually paid when an executive officer or employee actually retires (hereafter referred to as "actual retirement" in this Article). <Amended on Feb. 9, 2006; Feb. 12, 2019>

(2) Actual retirement includes any of the following cases, in which a corporation actually pays retirement benefits: <Amended on Feb. 19, 2005; Aug. 19, 2005; Feb. 9, 2006; Feb. 4, 2009; Feb. 18, 2010; Feb. 12, 2019; Feb. 15, 2022>

1. Where an employee of a corporation becomes an executive officer of the corporation;

2. Where an employee or executive officer of a corporation retires due to the reorganization, merger, division, or transfer of the business of the corporation;

3. Where retirement benefits are paid upon making interim settlement pursuant to Article 8 (2) of the Act on the Guarantee of Employees' Retirement Benefits (where retirement benefits were partly paid by interim settlement in the past, referring to the interim settlement of retirement benefits starting from the day after the end of the immediately preceding interim settlement period; hereafter in subparagraph 5 the same shall apply);

4. Deleted; <Feb. 3, 2015>

5. Where retirement benefits are paid upon making interim settlement to executive officers for reasons prescribed by Decree of the Ministry of Economy and Finance, such as long-term medical care as prescribed in the articles of incorporation or the regulations on payment of retirement benefits delegated by the articles of incorporation benefits.

(3) Where a corporation pays retirement benefits to an executive officer (excluding the controlling stockholder, etc., and persons related to the controlling stockholder. etc., as defined in Article 43 (8)) or employee, which is calculated by adding the period during which the executive officer or employee worked for the corporation and the period worked for a corporation with a special relationship, an amount equivalent to the relevant retirement benefits shall be included in deductible expenses divided in proportion to the corporations, as prescribed by Decree of the Ministry of Economy and Finance. In such cases, the corporation for which the relevant executive officer or employee worked most recently may submit the detailed statements of withholding and payment under the Income Tax Act concerning the relevant retirement benefits all together. <Added on Feb. 4, 2009; Feb. 2, 2012; Feb. 15, 2013; Feb. 12, 2019>

(4) The amount of retirement benefits paid to an executive officer of a corporation in excess of any of the following amounts shall be excluded from deductible expenses: <Amended on Dec. 29, 2000; Feb. 19, 2005; Feb. 9, 2006; Feb. 29, 2008; Feb. 4, 2009; Mar. 31, 2011; Feb. 12, 2019>

1. Where the amount to be paid as retirement benefits (including retirement bonuses, etc.) is prescribed by the articles of incorporation, the amount prescribed by the articles of incorporation;

2. In cases, other than those referred to in subparagraph 1, the amount computed by multiplying the amount equivalent to 10/100 of the total amount of salaries paid to the relevant executive officer for one year retroactively from the date of retirement [referring to the amount referred to in Article 20 (1) 1 and 2 of the Income Tax Act (excluding the nontaxable income under Article 12 of that Act), excluding the amount excluded from deductible expenses as prescribed in Article 43] by the number of years of continuous service as calculated by the method prescribed by Decree of the Ministry of Economy and Finance. In such cases, where no retirement benefits have been paid when the relevant executive officer became an executive officer from an employee, the period in which he or she has worked as an employee may be added to the number of years of continuous service.

(5) Paragraph (4) 1 shall include cases where the calculation standards for retirement benefits for executive officers are stipulated by the articles of incorporation, and where the payment of retirement benefits to executive officers are otherwise stipulated by the articles of incorporation, such retirement benefits shall be calculated pursuant to the relevant provisions. <Amended on Feb. 9, 2006; Feb. 4, 2009>

(6) In determining whether a corporation is in the special relationship referred to in Article 43 (8) with a controlling stockholder, etc., under paragraph (3), an executive officer in the relationship referred to in Article 2 (8) 7 with the controlling stockholder, etc., shall not be deemed in the special relationship. <Added on Feb. 18, 2010; Feb. 12, 2019; Feb. 28, 2023>

[Title Amended on Feb. 9, 2006]

Article 44-2(Non-inclusion of retirement insurance premiums in deductible expenses) #

(1) Insurance premiums, installments, or charges (hereafter in this Article referred to as "insurance premium, etc.") paid or borne by a domestic corporation to pay retirement benefits to its executive officers and employees, other than those included in deductible expenses under paragraphs (2) through (4), shall be excluded from deductible expenses. <Amended on Feb. 9, 2006; Feb. 18, 2010; Feb. 3, 2015; Feb. 12, 2019>

(2) The amount paid as charges by a domestic corporation for a pension prescribed by Decree of the Ministry of Economy and Finance (hereafter in this Article referred to as "retirement pension, etc.") with the retirement benefits to its executive officers and employees making the retirement of executive officers or employees as the condition for payment and with its executive officers or employees named as qualified recipients shall be included in deductible expenses for purposes of calculating the amount of income for the relevant business year. <Amended on Feb. 9, 2006; Feb. 29, 2008; Dec. 30, 2010; Feb. 12, 2019>

(3) Total amount of charges for the defined contribution retirement pension, etc., (referring to the defined contribution retirement pension provided for in Article 19 of the Act on the Guarantee of Workers' Retirement Benefits, a SME retirement pension fund established under Article 23-6 of that Act, the individual retirement pension system provided for in Article 24 of that Act, and the defined contribution retirement pension among the retirement pensions provided for in the Korea Scientists and Engineers Mutual-Aid Association Act; hereinafter the same shall apply) among the amounts expended under paragraph (2) shall be included in deductible expenses; provided, Article 44 (4) shall apply to charges for executive officers, deeming that the sum total of the charges borne by a corporation until its executive officers retire to be retirement benefits; where any amount in excess of the ceiling on inclusion in deductible expenses, the amount equivalent to the amount in excess of the ceiling on inclusion in deductible expenses among the charges for the business year in which the date of retirement falls, shall be excluded from deductible expenses; and where the amount in excess of the ceiling on inclusion in deductible expenses exceeds the charges for the business year in which the date of retirement falls, such excess amount shall be included in gross income for the business year in which the date of retirement falls. < Feb. 18, 2010; Dec. 30, 2010; Apr. 13, 2012; Feb. 12, 2016; Feb. 15, 2022>

(4) The amount, other than the charges for the defined contribution retirement pension, etc., among the amounts expended under paragraph (2), shall be included in deductible expenses up to the amount computed by subtracting the amount referred to in subparagraph 2 from the larger of the amounts referred to in subparagraphs 1 and 1-2, and, if at least two charges exist, the charges for the retirement pension, etc., for which a contract is first concluded shall be included in deductible expenses: <Added on Feb. 18, 2010; Dec. 30, 2010; Apr. 13, 2012; Feb. 21, 2014; Feb. 12, 2016; Feb. 12, 2019>

1. Charges for the pension equivalent to the estimated amount payable as retirement benefits (excluding the amount excluded from deductible expenses under Article 44 and the amount included in deductible expenses under the main sentence of paragraph (3)), less retirement benefit appropriation funds accumulated as at the end of the relevant business year, if all executive officers or employees who hold offices as at the end of the relevant business year;

1-2. Charges for the pension equivalent to the aggregate of the following amounts (excluding the amount excluded from deductible expenses under Article 44 and the amount included in deductible expenses under the main sentence of paragraph (3)), less retirement benefit appropriation funds accumulated as at the end of the relevant business year:

(a) The amount referred to in Article 16 (1) 1 of the Act on the Guarantee of Workers' Retirement Benefits;

(b) The aggregate of the estimated retirement benefits payable, if all persons who are not members of the defined contribution retirement pension referred to in subparagraph 8 of Article 2 of the Act on the Guarantee of Workers’ Retirement Benefits retire at once, and the estimated amount of retirement benefits payable for the duration that falls short of the duration of service, if all persons who are members of the defined contribution retirement pension but whose duration of membership falls short of the duration of service, retire at once, among executive officers or employees in service at the end of the relevant business year;

2. Charges paid by the last day of the immediately preceding business year.

(5) A corporation that has included charges in deductible expenses under paragraph (2) shall submit a report referred to in Article 60 of the Act to the head of the tax office having jurisdiction over the place of tax payment, along with an adjustment statement of retirement pension charges in the form stipulated by Decree of the Ministry of Economy and Finance. <Amended on Feb. 29, 2008; Dec. 30, 2010>

[This Article Added on Dec. 29, 2000]

Article 48(Non-inclusion of joint expenses in deductible expenses) #

(1) The amount of expenses incurred or expended by a corporation as a result of jointly operating or carrying on the same organization, assets, business, etc. with a person other than the corporation in excess of the amount of the share under each of the following subparagraphs shall not be counted as income when calculating the amount of income of the corporation. <Amended on Dec. 29, 2000, Feb. 28, 2007, Feb. 22, 2008, Feb. 29, 2008, Feb. 18, 2010, Feb. 12, 2016, Feb. 12, 2019, Feb. 12, 2023, Feb. 28, 2025>

1. Where a specific business is jointly operated through investment, the ratio of the investment by the relevant corporation to the total investment;

2. The following standards for expenses expended by all corporations, etc. (hereafter in this paragraph referred to as "non-equity joint business partners") related to the organization, assets, business, etc., in cases other than the cases specified in subparagraph 1:

(a) Where non-equity joint business partners are in any of the relationships provided in the subparagraphs of Article 2 (8): The ratio of total sales (referring to the total asset value, if the total asset value is chosen) of the relevant corporation either to the total sales for the immediately preceding business year or for the relevant business year or to the total asset value (excluding book value of stocks of the other joint business holder, if either joint business operator holds shares of the other joint business operator; the same shall apply hereafter in this Article), whichever is chosen by the corporation, (if neither the sales nor the total asset value has been chosen, the total sales shall be deemed chosen, and the amount shall apply for five consecutive business years from the business year in which the amount was chosen; provided, the standards prescribed by Ministerial Decree of the Economy and Finance concerning the number of participants, the amount of purchase, and the ownership share and frequency of use of the relevant assets, etc. may apply to the deductible expenses specified by Decree of the Ministry of Economy and Finance, such as joint event expenses and joint procurement expenses;

(b) In cases other than the cases falling under item (a): The ratio of allotment under the agreement between non-equity joint business partners; provided, if no applicable ratio is stipulated, it means the ratio provided for in item (a);

3. Deleted. <Feb. 22, 2008>

(2) In applying the main clause of subparagraph 2 (a) of paragraph (1), if all or part of the non-investing joint ventures have no sales in the preceding business year, the relevant corporation shall choose either the total sales amount or the total asset value for the relevant business year, and if no choice is made, the total sales amount for the relevant business year shall be deemed to have been chosen. <Added on Feb. 28, 2025>

(3) In applying paragraph (1), matters necessary for the calculation of contributions, such as the scope of sales, shall be prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 29, 2008; Feb 28, 2025>

Article 49(Scope of non-business assets) #

(1) "Assets prescribed by Presidential Decree" in subparagraph 1 of Article 27 of the Act means any of the following assets: <Amended on Dec. 31, 1999; Dec. 29, 2000; Feb. 19, 2005; Feb. 29, 2008; Jun. 3, 2011>

1. Any of the following real estate; provided, the real estate, the use of which is banned or restricted in accordance with statutes or regulations, the real estate transferred by a special purpose company incorporated under the Asset-Backed Securitization Act according to its asset securitization plan registered under Article 3 of that Act and other real estate with inevitable circumstances prescribed by Decree of the Ministry of Economy and Finance shall be excluded herefrom:

(a) Real estate which is not directly used for the business of a corporation; provided, it shall exclude such real estate that is held until the period prescribed by Decree of the Ministry of Economy and Finance (hereafter referred to as "grace period" in this Article) elapses;

(b) Real estate which is not directly used for the business of a corporation and is transferred during the grace period; provided, this shall exclude corporations which operate a real estate sales business prescribed by Decree of the Ministry of Economy and Finance as their main business;

2. Any of the following moveable:

(a) Paintings and curios; provided, any paintings and any curios that are on permanent display in the space, such as offices and corridors, for the purpose of ornamenting and environmentally beautifying such space that is visible to many people shall be excluded;

(b) Cars, ships, and aircraft which are not directly used for business; provided, cars, ships and aircraft with inevitable circumstances prescribed by Decree of the Ministry of Economy and Finance, such as ships acquired for the purpose of exercising mortgages and getting credits repaid for which three years have yet to elapse from the date of such acquisition, shall be excluded;

(c) Other assets similar to those referred to in items (a) and (b) which are not used directly for the business of a corporation.

(2) Matters necessary for determining whether an asset is the real estate falls under paragraph (1) 1 shall be prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 29, 2008>

(3) "Amount prescribed by Presidential Decree" in subparagraph 1 of Article 27 of the Act means expenses incurred in acquiring and managing the assets provided in each subparagraph of paragraph (1) and their maintenance expenses, repair expenses and other related expenses. <Amended on Jun. 3, 2011>

Article 50(Non-business expenditures) #

(1) "Expenditures prescribed by Presidential Decree" in subparagraph 2 of Article 27 of the Act means any of the following: <Amended on Feb. 4, 2009; Dec. 30, 2010; Feb. 12, 2019>

1. Maintenance expenses, management expenses, and user fees and other related expenses of places, buildings, other things, etc. which the relevant corporation does not directly use but a third person (excluding executive officers, other than stockholders, etc., and executive officers and employees who are minority stockholders, etc.) mainly uses; provided, this shall not include expenses related to production facilities lent by a corporation to small and medium enterprises free of charge to transfer a business under Article 35 of the Act on the Promotion of Mutually Beneficial Cooperation between Large Enterprises and Small and Medium Enterprises to the relevant small and medium enterprises (limited to the operators of manufacturing business);

2. Maintenance expenses, management expenses, user fees and other related expenses for private residences used by stockholders, etc. (excluding minority stockholders, etc.), contributing executive officers of the relevant corporation or their relatives;

3. Expenses related to obtaining loans expended to acquire assets falling under any subparagraph of Article 49 (1);

4. The total amount of money, assets other than money, and other economic gains offered by the relevant corporation which fall under a bribe under the Criminal Act or the Act on Combating Bribery of Foreign Public Officials in International Business Transactions;

5. Benefits paid in violation of Article 24 (2) and (4) of the Trade Union and Labor Relations Adjustment Act.

(2) "Minority stockholder, etc." in paragraph (1) 1 and 2 means a stockholder, etc. (excluding the related parties of the controlling stockholders, etc. of the relevant corporation which are not the State and local governments; hereinafter referred to as "minority stockholder, etc.") who owns less than 1/100 of the total number of issued stocks or total investment amount. <Amended on Feb. 2, 2012; Feb. 12, 2019>

(3) Losses incurred in disposing of claims falling under any subparagraph of Article 19-2 (2) of the Act shall not be included in deductible expenses. <Added on Feb. 12, 2019>

[This Article Wholly Amended on Feb. 22, 2008]

Article 50-2(Special cases concerning exclusion of expenses incurred in relation to passenger vehicles for business use from deductible expenses) #

(1) "Passenger vehicles specified by Presidential Decree and directly used for such business as transportation business or motor vehicle sales business and passenger vehicles used for the purpose of research and development, as prescribed by Presidential Decree" in Article 27-2 (1) of the Act means any of the following: <Amended on Feb. 11, 2020>

1. Passenger vehicles directly used to make commercial profits in the type of business specified in any subparagraph of Article 19 of the Enforcement Decree of the Value-Added Tax Act or in a facility leasing business defined in subparagraph 9 of Article 2 of the Specialized Credit Finance Business Act;

2. Passenger vehicles specified by Decree of the Ministry of Economy and Finance, among passenger vehicles similar to those specified in subparagraph 1;

3. Autonomous motor vehicles permitted for temporary operation by the Minister of Land, Infrastructure and Transport under the proviso of Article 27 (1) of the Motor Vehicle Management Act.

(2) "Expenses prescribed by Presidential Decree" in Article 27-2 (2) of the Act means expenses for acquiring and maintaining passenger vehicles for business use (hereafter in this Article referred to as "expenses incurred in relation to passenger vehicles for business use"), including depreciation costs, rental charges, fuel expenses, insurance premiums, repairing cost, motor vehicle tax, tolls, and finance lease liabilities.

(3) Notwithstanding Articles 26 (1) 2 and 28 (1) 2, the straight line method shall apply as the depreciation method for passenger vehicles for business use, and the amount computed by applying the service years of five years shall be included in deductible expenses as depreciation costs.

(4) "Amount for business use prescribed by Presidential Decree" in Article 27-2 (2) of the Act means the amount classified as follows; provided, if the motor vehicle registration number plate prescribed by Decree of the Ministry of Economy and Finance is not attached to the passenger vehicle for business use, it shall be zero won. <Amended on Feb. 13, 2018, Feb. 12, 2019; Feb. 29, 2024>

1. Where a corporation purchases motor vehicle insurance policies covering only the cases where any of the following persons operates a vehicle (hereinafter referred to as "motor vehicle insurance policies only for business use") during the entire period of the relevant business year (referring to the period of lease during the relevant business year, in cases of a leased passenger vehicle): The amount computed by multiplying expenses incurred in relation to passenger vehicles for business use by the business use ratio:

(a) An executive officer or employee of the relevant corporation;

(b) A person who operates a vehicle for the relevant corporation's business under a contract;

(c) Any of the persons specified by Decree of the Ministry of Economy and Finance as those necessary for the relevant corporation's business;

2. Where a corporation does not purchase any motor vehicle insurance policy: zero (0) won.

(5) The business use ratio referred to in paragraph (4) 1 shall be defined as the ratio of the mileage of business use to the total mileage confirmed according to operation records, etc., prescribed by Decree of the Ministry of Economy and Finance (hereafter in this Article referred to as "operation records, etc.").

(6) A domestic corporation that wishes to qualify for paragraph (4) 1 shall keep and maintain operation records, etc., for each passenger vehicle for business use and shall submit them immediately to the head of the tax office having jurisdiction over the place of tax payment, if requested.

(7) If a corporation does not keep and maintain operation records, etc., for the application of paragraph (4) 1, either of the following rates shall apply as the business use ratio of the relevant passenger vehicles for business use, notwithstanding paragraph (5): <Amended on Feb. 13, 2018; Feb. 11, 2020>

1. Where expenses incurred in relation to passenger vehicles for business use during the relevant business year do not exceed 15 million won (referring to the amount computed by multiplying 15 million won by the number of months of the relevant business year and then dividing it by 12, if the relevant business year is less than one year, or the amount computed by multiplying 15 million won by the number of months in the period of owing or lease and then dividing it by the number of months in the relevant business year, if a vehicle is owned or leased for a certain period in the relevant business year; hereafter in this Article the same shall apply): 100/100;

2. Where expenses incurred in relation to passenger vehicles for business use during the relevant business year exceed 15 million won: The rate computed by dividing 15 million won by the expenses incurred in relation to passenger vehicles for business use.

(8) If a corporation has a special agreement on the lease of the leased passenger vehicles specified by Decree of the Ministry of Economy and Finance, which restricts operators to either of the following persons, it shall be deemed to have purchased motor vehicle insurance policies only for business use for the purpose of applying paragraph (4) 1: <Added on Feb. 3, 2017; Feb. 12, 2019>

1. Executive officers or employees of the corporation;

2. Persons who operate the vehicles under a contract for business of the corporation.

(9) Notwithstanding paragraph (4) 2, if a business-use automobile insurance policy is purchased for only a part of the entire business year (in the case of a leased passenger car, referring to the period during which the car is leased during the business year), the amount of business use pursuant to Article 27-2 (2) of the Act shall be the amount calculated according to the following formula: <Added on Feb. 3, 2017; Feb. 13, 2018>

(9) Where a corporation purchases a motor vehicle insurance policy only for business use only for a certain period in the entire period of the relevant business year (referring to the period of lease during the relevant business year, in cases of a leased passenger vehicle), the expenses incurred for business use under Article 27-2 (2) of the Act shall be computed by the following formula, notwithstanding paragraph (4) 2: <Added 27828, Feb. 3, 2017; Feb. 13, 2018>Expenses incurred in relation to passenger vehicles for business use × Business use ratio × (Number of days actually covered by motor vehicle insurance policies only for business use for the relevant business year ÷ Number of days that shall be mandatorily covered by motor vehicle insurance policies only for business use for the relevant business year)

(10) The excess of the ceiling on depreciation costs referred to in the main sentence of Article 27-2 (3) of the Act shall be computed by subtracting eight million won (referring to an amount computed by multiplying the number of months of the relevant business year and then dividing it by 12, if the relevant business year is less than one year, or the amount computed by multiplying eight million won by the number of months in the period of owing or lease and then dividing it by the number of months in the relevant business year, if a vehicle is owned or leased for a certain period in the relevant business year) from the amount computed by multiplying the amount in either subparagraph of Article 27-2 (3) of the Act by the business use ratio. <Amended on Feb. 13, 2018>

(11) "Method prescribed by Presidential Decree" in Article 27-2 (3) of the Act, with the exception of its subparagphs, means the method of carrying over an amount within the maximum amount computed by the following methods and including the amount in deductible expenses: <Amended on Feb. 3, 2017; Feb. 12, 2019; Feb. 11, 2020>

1. Carried-over depreciation costs for each passenger vehicle for business use: If depreciation costs, among expenses incurred for business use of the relevant passenger vehicle for business use for business years following the relevant business year, is less than eight million won, the depreciation costs shall be recognized subsequently as deductible expenses within the maximum amount of the shortfall;

2. Carried-over rents equivalent to depreciation costs provided for in paragraph (12) for each passenger vehicle for business use: If the amount equivalent to depreciation costs, among expenses incurred for business use of the relevant passenger vehicle for business use for business years following the relevant business year, is less than eight million won, the amount shall be included in deductible expenses within the maximum amount of the shortfall.

(12) "Amount specified by Presidential Decree as equivalent to depreciation costs" in Article 27-2 (3) 2 of the Act means an amount specified by Decree of the Ministry of Economy and Finance as an amount exclusive of insurance premiums, motor vehicle tax, etc., among rents for a passenger vehicle for business use.

(13) "Methods prescribed by Presidential Decree" in Article 27-2 (4) of the Act means the method by which eight million won shall be included in deductible expenses equally for each business year following the relevant business years, but the full amount of the remainder shall be included in deductible expenses for the business year in which the remainder is less than eight million won.

(14) When a corporation that has included expenses incurred in relation to a passenger vehicle for business use or a loss on the disposal of such vehicle in deductible expenses files a return in accordance with Article 60 of the Act, it shall file the return with the head of the tax office having jurisdiction over the place of tax payment, accompanied by a statement of expenses incurred in relation to the passenger vehicle for business use.

(15) When paragraph 7, 10, 11, or 13 applies to a domestic corporation that meets all of the requirements provided for in Article 42 (2), "15 million won" shall be construed as "five million won," and "eight million won" as "four million won," respectively. <Added on Feb. 3, 2017; Feb. 12, 2019; Feb. 11, 2020>

(16) If the relevant business year is less than one year or if a vehicle has been owned or leased for a certain period in the relevant business year, the number of months shall be counted by calendar, but the number of days less than one month shall be deemed one month. <Added on Feb. 13, 2018>

(17) Except as otherwise provided for in paragraphs (1) through (16), the scope of business use and other necessary matters shall be prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 3, 2017; Feb. 13, 2018>

[This Article Added on Feb. 12, 2016]

Article 52(Scope of interest on loans appropriated for construction capital) #

(1) "Interest on loans appropriated for construction capital prescribed by Presidential Decree" in Article 28 (1) 3 of the Act means interest paid on loans used for purchasing, producing or constructing tangible and intangible assets for business (hereafter referred to as "construction, etc." in this Article), irrespective however named, (excluding loans, the use of which for the construction, etc. of assets is unclear; hereafter referred to "special loan" in this Article) or other similar expenses (hereafter referred to "interest, etc. paid" in this Article). <Amended on Dec. 30, 2010; Feb. 12, 2019>

(2) Interest, etc. paid on a special loan shall be capital expenses included in the original capital until the date of the completion of the construction, etc.; provided, interest income accruing from the temporary deposit of the special loan shall be subtracted from the amount of capital expenses added to the original capital. <Amended on Dec. 30, 2010>

(3) Where some of special loans are converted to operational capital, interest, etc. paid on the corresponding amount shall be deemed deductible expenses. <Amended on Dec. 30, 2010>

(4) Where interest on special loans in arrears is added to the original capital, the added amount shall be deemed the capital expenditures of the relevant business year, and the interest paid on the added amount shall be deemed deductible expenses. <Amended on Dec. 30, 2010>

(5) Interest on any special loan remaining after the completion of the relevant construction, etc. shall be deemed deductible expenses for each business year. In such cases, the date of the completion of construction, etc. shall be the date on which all objectives of the relevant construction, etc. are completed. <Amended on Dec. 30, 2010>

(6) "Date of completion" in the main clause of paragraphs (2) and the latter part of paragraph (5) means any of the following dates: <Amended on Feb. 19, 2005; Feb. 12, 2019>

1. Where land is purchased, the date the price is settled; provided, where the relevant land is used for business before the price is settled, it means the date on which the land was first used for business;

2. For buildings, the date of acquisition as prescribed in Article 162 of the Enforcement Decree of the Income Tax Act or the date on which it is first used for the purpose of its construction (hereafter referred to as "start date of use" in this paragraph), whichever comes earlier;

3. For other tangible and intangible assets used for business, the start date of use.

(7) "Amount prescribed by Presidential Decree" in Article 28 (2) of the Act means the amount whichever is smaller between the amount computed by multiplying the construction, etc. of the tangible and intangible assets for each business during the relevant business year by the amount prescribed by subparagraph 2 and the rate by subparagraph 3, and the amount by subparagraph 1: <Added on Dec. 30, 2010; Feb. 12, 2019>

1. The sum total of the interest, etc. paid on the general loan (referring to the amount excluding the special loan among the loans repaid or not repaid during the relevant business year; hereafter the same shall apply in this Article) actually incurred in the period required for the construction, etc. during the relevant business year;

2. The amount computed by the following formula: Total amount expended for relevant construction, etc. during the relevant business year/ Number of days in the relevant business year - Total amount of special loans during the relevant business year/Number of days in the relevant business year

3. The rate calculated by the following formula: Sum total of interest, etc. paid, etc. on general loans÷Total amount of general loans during the relevant business year/Number of days in relevant business year

Article 53(Non-inclusion of interest paid on non-business assets in deductible expenses) #

(1) "Provisional payments, etc. prescribed by Presidential Decree" in Article 28 (1) 4 (b) of the Act means the amount of loans for capital with no connection to the business of the relevant corporation, irrespective of however named, (for financial companies, etc. provided for in any subparagraph of Article 61 (2), including the amount of loans for capital which cannot be recognized as the main profit-making business); provided, the amount prescribed by Decree of the Ministry of Economy and Finance shall be excluded. <Amended on Feb. 29, 2008; Feb. 18, 2010; Jun. 3, 2011>

(2) "Amount calculated, as prescribed by Presidential Decree" in Article 28 (1) 4 of the Act means the amount computed by the following formula: <Amended on Jun. 3, 2011>Interest paid × [Sum total of asset value under paragraph (1) and Article 49 (1) (up to the limit of the total loans) / Total loans]

(3) The sum of the total loans and the asset value referred to in paragraph (2) shall be calculated based on the accumulated amount during the corresponding period. In such cases, the assets referred to in paragraph (1) shall, if there concurrently exist the provisional payments to and suspense receipts from the same person, be the amount offsetting them, and the assets referred to in Article 49 (1) shall be the acquisition value (it shall be the acquisition value of assets as prescribed in Article 72, and shall include the amount exceeding market prices referred to in paragraph (4) 3 of the same Article). <Amended on Dec. 29, 2000; Dec. 30, 2002; Feb. 2, 2012>

(4) Loans provided in paragraph (2) shall not include any of the following amounts: <Amended on Dec. 29, 2000; Feb. 19, 2005; Dec. 30, 2006; Feb. 22, 2008; Feb. 18, 2010>

1. The following amounts borrowed by a financial company, etc. under each subparagraph of Article 61 (2):

(a) Amounts borrowed from the Public Capital Management Fund established under the Public Capital Management Fund Act or from the Bank of Korea established under the Bank of Korea Act;

(b) Amounts borrowed from the State or local governments (including associations of local governments);

(d) Foreign currency loans obtained under the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act;

(e) Funds managed and operated after being received from many and unspecified customers on condition that a certificate of deposit shall be issued or compensation, such as the payment of regular interest through a bank account shall be made;

2. Amounts borrowed by a domestic corporation through business purchase financing loans under the rules prescribed by the Governor of Bank of Korea.

Article 56(Inclusion of reserve funds for principal purpose business in deductible expenses) #

(1) "Organizations prescribed by Presidential Decree" in the part of Article 29 (1) of the Act, with the exception of its subparagraphs, means the following organizations: <Amended on Dec. 31, 2001; Feb. 18, 2010; Dec. 30, 2010; Aug. 11, 2016; Aug. 11, 2016; Feb. 13, 2018; Feb. 12, 2019>

1. Organizations referred to in Article 39 (1) 1;

2. Deleted; <Dec. 31, 2001>

3. Any Fund established under the statutes or regulations;

4. An assembly of representatives of residents, an assembly of representatives of tenants or any similar management organization of a multi-family housing complex, as defined in Article 2 (1) 1 (a) of the Multi-Family Housing Management Act.

(2) Any of the following amounts of interest income shall be deemed the amount provided for in Article 29 (1) 1 (a) of the Act: <Amended on Feb. 28, 2007; Feb. 22, 2008; Feb. 12, 2019; Feb. 11, 2020; Feb. 29, 2024>

1. The amount of interest income generated when a non-profit domestic corporation engaging in financial or insurance business temporarily deposits funds to financial instruments with a contractual term of up to three months (including demand deposits with no contractual term) of any corporation engaging in financial and insurance activities listed on the Korea Standard Industrial Classification;

2. The amount of interest income generated when a person engaging in the business provided for in Article 3 (1) 5 (b) manages funds;

3. The amount of interest income generated when the Housing Finance Credit Guarantee Fund established under the Korea Housing Finance Corporation Act manages the guarantee fees received under Article 43-8 (1) and (2) of the said Act.

(3) Income generated from a profit-making business referred to in Article 29 (1) 2 of the Act means the amount of income generated from a profit-making business for the relevant business year (the amount of income before including in deductible expenses the reserves for a principal purpose business and donations referred to in Article 24 (2) 1 of the Act, excluding the amount of income increased by correction prescribed in Article 66 (2) of the Act which is disposed of as bonus and other income to a specially related person of the relevant corporation pursuant to Article 106), minus an amount prescribed in Article 29 (1) 1 of the Act; losses (in cases of a corporation entitled to a deduction of 80/100 of its income for each business year under the proviso, with the exception of the subparagraphs, of the same paragraph, referring to an amount calculated by subtracting losses carried forward for not being deductible due to the application of the deduction limit) prescribed in Article 13 (1) 1 of the Act; and donations prescribed in Article 24 (2) 1 of the Act. <Amended on Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021; Feb. 28, 2023>

(4) Deleted. <Mar. 22, 2004>

(5) A principal purpose business referred to in paragraph (1), with the exception of the subparagraphs, of Article 29 of the Act means the business directly operated by the relevant non-profit domestic corporation for accomplishing its purpose of establishment stipulated by the statutes or regulations, or the articles of incorporation, other than the profit-making business provided for in Article 3 (1).

(6) In applying Article 29 (1) through (5) of the Act, the following amounts shall be deemed expended or used for the principal purpose business; provided, if a domestic non-profit corporation disposes of a tangible and intangible asset without directly using the asset for at least three years for the principal purpose business or health services prescribed by statutes or regulations or stipulated by its articles of incorporation (limited to domestic non-profit corporations providing health services (hereafter referred to as "medical corporation" in this Article) after acquiring the fixed asset, the amount specified in subparagraph 1 or 3 shall not be deemed an amount expended or used for its principal purpose business: <Amended on Dec. 29, 2000; Dec. 31, 2001; Dec. 30, 2002; Dec. 30, 2003; Feb. 19, 2005; Feb. 9, 2006; Feb. 29, 2008; Dec. 30, 2010; Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Jan. 22, 2016; Feb. 3, 2017; Feb. 13, 2018; Feb. 12, 2019; Aug. 19, 2020; Feb. 29, 2024>

1. The amount of expenses directly incurred in operating the principal purpose business of a non-profit domestic corporation, such as the acquisition expenses (including capital expenditures referred to in Article 31 (2)) of tangible and intangible assets and personnel expenses;

2. The amount of reserve funds for principal purpose business recognized as deductible expenses that are accumulated as funds or reserve funds under the statutes or regulations by a non-profit domestic corporation, established under special Acts (including an organization deemed a corporation under Article 13 of the Framework Act on National Taxes from among the Funds established and operated in the relevant corporation), operating the health insurance business, pension fund management business, mutual aid business, and the business referred to in Article 3 (1) 8;

3. Any of the following amounts expended by a medical corporation:

(a) An amount expended to acquire assets specified by Decree of the Ministry of Economy and Finance, such as medical equipment;

(b) An amount expended for the purposes specified by Decree of the Ministry of Economy and Finance, such as the development of overseas markets for medical services under subparagraph 1 of Article 2 of the Act on Support for Overseas Expansion of Healthcare System and Attraction of International Patients;

(c) An amount expended for research and development projects prescribed by Decree of the Ministry of Economy and Finance;

4. The amount of loans that the National Agricultural Cooperative Federation established under the Agricultural Cooperatives Act provides to its members free of charge from the reserve funds for principal purpose business, appropriated under Article 29 (2) of the Act;

5. The amount contributed by the National Agricultural Cooperative Federation established under the Agricultural Cooperatives Act to the Mutual Finance Depositor Protection Fund created under the Act on the Structural Improvement of Agricultural Cooperatives;

6. The amount contributed by the National Federation of Fisheries Cooperatives established under the Fisheries Cooperatives Act to the Mutual Finance Depositor Protection Fund created under the Act on the Prevention of Insolvency and Structural Improvement of Fisheries Cooperatives

7. The amount contributed by the National Credit Union Federation of Korea established under the Credit Unions Act to the Credit Union Depositor Protection Fund created under that Act;

8. The amount contributed by the Korean Federation of Community Credit Cooperatives established under the Community Credit Cooperatives Act to the Depositor Protection Reserves created under that Act;

9. The amount contributed by the National Forestry Cooperatives Federation established under the Forestry Cooperatives Act to the Mutual Finance Depositor Protection Fund created under that Act;

10. The amount expended by the Jeju Free International City Development Center established under Article 166 of the Special Act on the Establishment of Jeju Special Self-Governing Province and the Development of Free International City for the business affairs provided for in Article 170 (1) 1 and 2 (d) and (e) (including the acquisition and reservation of the relevant land) and Article 170 (1) 3.

(7) "Amount equivalent to the interest calculated, as prescribed by Presidential Decree" in Article 29 (7) of the Act means the amount computed by multiplying the amount referred to in subparagraph 1 by the rate referred to in subparagraph 2: <Amended on Dec. 30, 2002; Dec. 30, 2010; Feb. 12, 2019; Feb. 15, 2022>

1. The difference in the amount of corporate tax for the business year in which the balance of the relevant reserve funds for principal purpose business was included in deductible expenses, generated by including the balance in deductible expenses;

2. 22/100,000 per day for the period from the first day of the business year following the business year in which the balance was included in deductible expenses falls until the last day of the business year in which the balance was included in gross income falls.

(8) "Circumstances prescribed by Presidential Decree" in Article 29 (8) of the Act means circumstances in which the income accruing from the profit-making business of the relevant non-profit domestic corporation is subject to the application of the non-taxation, exemption, inclusion of reserve funds in deductible expenses, income deductions or tax reductions or exemptions (excluding tax credits) provided for in the Act or the Restriction of Special Taxation Act; provided, this shall not apply where a revised return is filed only for the application of the reserve funds for principal purpose business. <Added on Feb. 9, 2006; Dec. 30, 2010; Feb. 12, 2019>

(9) A non-profit domestic corporation that wishes to qualify for Article 29 (1) of the Act shall submit a detailed statement on the adjustment of reserve funds for principal purpose business in the form prescribed by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, along with the report referred to in Article 60 of the Act. <Amended on Feb. 29, 2008>

(10) A medical corporation that wishes to qualify for paragraph (6) 3 shall manage the amount equivalent to reserved funds for principal purpose business that was appropriated as deductible expenses in a separate medical development account prescribed by Decree of the Ministry of Economy and Finance. <Added on Dec. 29, 2000; Feb. 29, 2008; Feb. 12, 2019>

(11) Where the sum total of wages and salaries referred to in each subparagraph of Article 20 (1) of the Income Tax Act paid to executive officers and employees of any of the following corporations for the relevant business year (hereinafter referred to as "total amount of wages" and, where the period of employment for the relevant business year is less than one year, it means the amount computed by multiplying the amount, which is divided by the total amount of wages by the number of months in the period of employment, by 12. In such cases, the number of months shall be calculated according to the solar calendar, and days less than one month shall be counted as one month) exceeds 80 million won, such excess amount shall not be deemed personnel expenses referred to in paragraph 6 (1): Provided, That the same shall not apply where the relevant corporation obtains approval from the competent authorities with respect to the payment regulations on personnel expenses for the relevant executive officers and employees before it files a report on the tax base under Article 60 of the Act for the relevant business year: <Newly Inserted by Presidential Decree No. 23589, Feb. 2, 2012; Feb. 12, 2019>

1. A non-profit domestic corporation which includes the income in deductible expenses as reserve funds for principal purpose business in excess of the amount computed by multiplying the amount of income generated by profit-making business under Article 29 (1) 2 of the Act by 50/100;

2. A non-profit domestic corporation which falls under Article 74 (1) 2 and 8 of the Restriction of Special Taxation Act and includes the income in deductible expenses as reserve funds for principal purpose business in excess of the amount computed by multiplying the amount of income generated by the profit-making business by 50/100.

3. A non-profit domestic corporation for which the ratio calculated according to the following formula exceeds 50 percent:

┌────────────────────────────────────────┐

│ │

│ In accordance with Article 29 (1) 2 of the Act during the relevant fiscal year and the 5 preceding fiscal years │

│ The total amount of income accruing from profit-making business, included in deductible expenses as reserves for proper purpose business │

Total value of assets of another corporation

│ During the relevant fiscal year and the preceding 5 fiscal years │

│ The aggregate of income generated from profit-making business under Article 29 (1) 2 of the Act │

│ │

└────────────────────────────────────────┘

(12) The competent authorities in receipt of a request to approve the payment regulations on personnel expenses under the proviso to paragraph (11) or (13) shall approve such regulations where it is deemed socially acceptable. <Added on Feb. 2, 2012>

(13) A person who has obtained approval of the payment regulations on personnel expenses under paragraph (12) shall re-obtain approval every three years from the date of the approval; provided, where the payment regulations on personnel expenses are revised within such period, he or she shall re-obtain approval until the filing deadline of tax bases specified under Article 60 of the Act for the business year in which such grounds arise. <Added on Feb. 2, 2012>

(14) A corporation which has obtained approval from the competent authorities under paragraph (12) shall submit the payment regulations on personnel expenses and the documents to verify the approval of the competent authorities to the head of the tax office having jurisdiction over the place of tax payment when filing a report under Article 60 of the Act. <Added on Feb. 2, 2012>

Article 57(Inclusion of liability reserve funds in deductible expenses) #

(1) Liability reserve funds referred to in Article 30 (1) of the Act shall be included in deductible expenses up to the sum of the following amounts in calculating the amount of income for the relevant business year: <Amended on Dec. 31, 1999; Feb. 19, 2005; Feb. 28, 2007; Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Jun. 28, 2010; Dec. 30, 2010; Feb. 2, 2012; Feb. 15, 2013; Mar. 23, 2013; Nov. 19, 2014; Jul. 26, 2017; Feb. 12, 2019; Jan. 5, 2021; Feb. 28, 2023; Sep. 26, 2023>

1. The amount of money which would have to be refunded to policy-holders or beneficiaries under the terms and conditions concerning the insurance business or mutual aid business prescribed in the Fisheries Cooperatives Act, the Trade Insurance Act, the Community Credit Cooperatives Act, the Framework Act on the Construction Industry, the Small and Medium Enterprise Cooperatives Act, and the Credit Unions Act if all insurance contracts were cancelled as on the last day of the relevant business year (including surrender charges; hereafter in this Article referred to as "surrender charges"):

2. Where an insured accident has occurred as on the last day of the relevant business year but the amount of insurance money payable is not determined, the amount of insurance money estimated (including the amount estimated to be used for damage assessment, subrogation of insurance and exercise of indemnity rights) in consideration of losses;

3. The amount which is a dividend reserve fund accumulated for distribution to the policy-holders, which is approved by the Minister of Oceans and Fisheries in cases of mutual aid business under the Fisheries Cooperatives Act; approved by the Minister of the Interior and Safety in cases of mutual aid business under the Community Credit Cooperatives Act; and approved by the Governor of Financial Supervisory Service in cases of mutual aid business under the Credit Unions Act, after consultation with the Minister of Economy and Finance.

(2) The amount referred to in paragraph (1) 1 and 2 out of the amounts included in deductible expenses under paragraph (1) shall be included in the gross income when calculating the amount of income for the following business year; and where the amount referred to in paragraph (1) 3 is distributed to the policy-holders, it shall be offset by the dividend in order of appropriation; however, where any balance is left after offset by the third anniversary of the last day of the business year in which it is included in deductible expenses, it shall be included in the gross income when calculating the amount of income for the business year in which the third anniversary falls. <Added on Feb. 4, 2009>

(3) "Grounds prescribed by Presidential Decree, such as dissolution, occur before three years pass" in Article 30 (2) of the Act means any of the following: <Added on Feb. 4, 2009; Jun. 8, 2010; Dec. 30, 2010; Feb. 12, 2019>

1. Dissolution; provided, this shall not apply where a corporation is dissolved following a merger or division and a surviving corporation, etc., engaging in insurance business succeeds to the balance;

2. Revocation of a license to engage in insurance business.

(4) The amount succeeded to by a surviving corporation, etc., under the proviso to paragraph (3) 1 shall be deemed included in deductible expenses by the surviving corporation, etc., in the business year in which the merged corporation, etc., included in deductible expenses. <Added on Feb. 4, 2009; Jun. 8, 2010; Dec. 30, 2010; Feb. 12, 2019>

(5) The amount equivalent to interest referred to in Article 30 (3) of the Act shall be the amount computed by applying mutatis mutandisArticle 56 (7). <Added on Feb. 12, 2019>

(6) A domestic corporation that wishes to be governed by Article 30 (1) of the Act shall submit a detailed statement on liability reserve funds prescribed by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, along with the report referred to in Article 60 of the Act. <Amended on Feb. 29, 2008; Feb. 4, 2009; Dec. 30, 2010; Feb. 12, 2019>

[Title Amended on Feb. 12, 2019]

Article 58(Inclusion of contingency reserve funds in deductible expenses) #

(1) Contingency reserve funds referred to in Article 31 (1) of the Act (hereafter in this Article referred to as "contingency reserve funds") shall be included in deductible expenses to the extent of the amount (hereafter in this Article referred to as "accumulation standard amount by insurance type") calculated by multiplying the sum of insurance premiums subject to accumulation by insurance type (referring to fire insurance, marine insurance, automobile insurance, specialty insurance, warranty insurance, overseas disaster and overseas origin insurance; hereafter in this Article the same shall apply) for the relevant business year by the accumulation standard rates by insurance type determined by the Financial Services Commission under Article 63 (4) of the Enforcement Decree of the Insurance Business Act. <Amended on Feb. 28, 2023>

(2) The accumulated amount of contingency reserve funds to be included in deductible expenses pursuant to paragraph (1) shall not exceed 50/100 of the sum of insurance premiums subject to accumulation by insurance type for the relevant business year (it shall be 40/100 in cases of automobile insurance, and 150/100 in cases of warranty insurance). <Amended on Feb. 28, 2023>

(3) "Amount calculated, as prescribed by Presidential Decree" in Article 31 (2) of the Act means 90/100 of the sum of accumulation standard amounts by insurance type.

(4) The treatment of contingency reserve funds included in deductible expenses pursuant to paragraphs (1) and (2) and the method for calculating insurance premiums subject to accumulation shall be as prescribed and publicly notified by the Financial Services Commission under Article 63 (4) of the Enforcement Decree of the Insurance Business Act. <Amended on Feb. 28, 2023>

(5) A domestic corporation that wishes to be governed by Article 31 (1) of the Act shall submit a detailed statement on contingency reserve funds prescribed by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, along with the report referred to in Article 60 of the Act.

[This Article Added on Feb. 12, 2019]

Article 60(Inclusion of retirement benefit appropriation funds in deductible expenses) #

(1) "Amount calculated, as prescribed by Presidential Decree" in Article 33 (1) of the Act means the amount equivalent to 5/100 of the total salaries (refers to the total amount of salaries referred to in Article 44 (4) 2) paid to executive officers or employees eligible to receive retirement benefits (excluding those for whom the defined contribution retirement pension, etc. have been established; hereafter the same shall apply in this Article) in the relevant business year. <Amended on Feb. 9, 2006; Feb. 4, 2009; Jun. 3, 2011; Feb. 12, 2019>

(2) The amount of accumulated retirement benefit appropriation funds included in deductible expenses under paragraph (1) shall be limited to the amount calculated by multiplying the estimated retirement benefits payable if all executive officers or employees currently in service at the end of the pertinent business year retire at once or the aggregate of the amounts under Article 44-2 (4) 1-2, whichever is larger (excluding the amount not included in deductible expenses under Article 44), by any of the following rates: <Amended on Feb. 9, 2006; Dec. 30, 2010; Feb. 2, 2012; Apr. 13, 2012; Feb. 21, 2014; Feb. 12, 2019>

1. The business year that commences during the period from January 1, 2010 to December 31, 2010: 30/100;

2. The business year that commences during the period from January 1, 2011 to December 31, 2011: 25/100;

3. The business year that commences during the period from January 1, 2012 to December 31, 2012: 20/100;

4. The business year that commences during the period from January 1, 2013 to December 31, 2013: 15/100;

5. The business year that commences during the period from January 1, 2014 to December 31, 2014: 10/100;

6. The business year that commences during the period from January 1, 2015 to December 31, 2015: 5/100;

7. Business years that commences after January 1, 2016: 0/100.

(3) Where the amount less the retirement benefits paid to executive officers or employees during the business year following the business year during which retirement benefit appropriation funds are included in deductible expenses from the accumulated amount of retirement benefit appropriation funds included in deductible expenses within the limit set by each subparagraph of paragraph (2) exceeds the amount multiplied by the rate set by each subparagraph of paragraph (2) to the estimated amount referred to paragraph (2), such excess shall not be included in gross income. <Added on Dec. 30, 2010; Feb. 12, 2019>

(4) The amount appropriated as retirement benefits conversion funds under the National Pension Act by a domestic corporation shall be added to the limit of the accumulated amount of retirement benefit appropriation funds included in deductible expenses, notwithstanding paragraph (2). <Amended on Feb. 19, 2005>

(5) A domestic corporation which intends to be applicable under Article 33 (1) of the Act shall submit a detailed statement on the settlement of retirement benefit appropriation funds in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, along with the report provided for in Article 60 of the Act. <Amended on Feb. 29, 2008>

Article 61(Inclusion of allowances for bad debts in deductible expenses) #

(1) "Credit sales accounts, loans, and other claims equivalent thereto" in Article 34 (1) of the Act are as follows: <Amended on Feb. 12, 2016; Feb. 12, 2019>

1. Credit sales accounts: The amount receivable upon selling commodities and goods, and the amount of business revenue receivable with respect to processing fees and upon provision of services;

2. Loans: The amount of loans provided to other persons under a consumer cash loan contract;

3. Other equivalent claims: Receivable claims on bills, outstanding accounts, and other claims with respect to which allowances for bad debts shall be created in accordance with Korean Financial Accounting Standards (excluding bonds equivalent to the excess of market price prescribed in Article 88 (1) 1 shall apply).

(2) "Amount calculated, as prescribed by Presidential Decree" in Article 34 (1) of the Act means the amount equivalent to 1/100 of the sum of book values of all credit sales accounts, loans, and other equivalent claims provided for in paragraph (1) as of the last day of the relevant business year (hereafter in this Article referred to as "balance of receivable claims") or the amount computed by multiplying the balance of receivable claims by the rate of actual bad debts, whichever is greater; provided, as for the financial companies, etc., specified in subparagraphs 1 through 4, 6 through 17, 17-2, and 24 it means the amount that shall be accumulated in accordance with the accumulation standards of allowances for bad debts, as prescribed by the Financial Services Commission (referring of Ministry of the Interior and Safety in cases of subparagraph 24) in consultation with the Minister of Economy and Finance, the amount equivalent to 1/100 of the balance of receivable claims, or the amount computed by multiplying the balance of receivable claims by the rate of actual bad debts, whichever is greater: <Amended on Dec. 31, 1999; Dec. 29, 2000; Dec. 31, 2001; Dec. 5, 2002; Dec. 30, 2002; Dec. 30, 2003; Mar. 22, 2004; Feb. 19, 2005; Feb. 9, 2006; Feb. 28, 2007; Feb. 29, 2008; Feb. 4, 2009; Feb. 18, 2010; Jun. 28, 2010; Nov. 15, 2010; Jun. 3, 2011; Feb. 2, 2012; Feb. 15, 2013; Mar. 24, 2014; Feb. 12, 2016; Mar. 11, 2016; May 31, 2016; Jul. 6, 2016; Feb. 3, 2017; Aug. 11, 2020; Feb. 17, 2021; Feb. 17, 2022; Feb. 28, 2023; Dec. 19, 2023>

1. Banks established upon approval granted under the Banking Act;

2. The Korea Development Bank established under the Korea Development Bank Act;

3. The Industrial Bank of Korea established under the Industrial Bank of Korea Act;

4. The Export-Import Bank of Korea established under the Export-Import Bank of Korea Act;

5. Deleted; <Dec. 30, 2014>

6. The National Agricultural Cooperative Federation (limited to the business activities provided for in Article 134 (1) 4 of that Act) and the Nonghyup Bank established under the Agricultural Cooperatives Act;

7. The National Federation of Fisheries Cooperatives and the Suhyup Bank established under the Fisheries Cooperatives Act (limited to business activities provided for in Article 138 (1) 4 and 5 of that Act);

8. Investment traders and investment brokers defined in the Financial Investment Services and Capital Markets Act;

9. Merchant banks established under the Financial Investment Services and Capital Markets Act;

10. The Korea Federation of Savings Banks (limited to deposits for reserve requirement) and the mutual savings banks established under the Mutual Savings Banks Act;

11. Insurance companies;

12. Trust business entities defined in the Financial Investment Services and Capital Markets Act;

13. Specialized credit finance companies established under the Specialized Credit Finance Business Act;

14. The National Forestry Cooperatives Federation established under the Forestry Cooperatives Act (limited to the business provided for in Article 108 (1) 3, 4 and 5 of that Act);

15. The Korea Housing Finance Corporation incorporated under the Korea Housing Finance Corporation Act;

16. Fund brokerage companies established under the Financial Investment Services and Capital Markets Act;

17. Financial holding companies established under the Financial Holding Companies Act;

17-2. The National Credit Union Federation of Korea under the Credit Unions Act (limited to the business activities provided for in Articles 78 (1) 5 and 6 and 78-2 (1) of that Act);

18. The Credit Guarantee Fund established under the Credit Guarantee Fund Act;

19. The Korea Technology Finance Corporation established under the Korea Technology Finance Corporation Act;

20. The Credit Guarantee Fund for Farmers and Fishers established under the Act on the Credit Guarantee for Farmers and Fishers;

21. The Korea Housing Finance Credit Guarantee Fund established under the Korea Housing Finance Corporation Act;

22. The Korea Trade Insurance Corporation established under the Trade Insurance Act;

23. Credit guarantee foundations established under the Regional Credit Guarantee Foundation Act;

24. The Korean Federation of Community Credit Cooperatives established under the Community Credit Cooperatives Act (limited to the businesses prescribed in Article 67 (1) 5 and 6 of that Act);

25. A venture investment company defined in subparagraph 10 of Article 2 of the Act on the Venture Investment Promotion Act;

26. The Korea Deposit Insurance Corporation and a financial company authorized to perform liquidation under the Depositor Protection Act;

27. Special purpose companies established under the Asset-Backed Securitization Act;

28. Corporations registered as credit business operators under the Act on Registration of Credit Business and Protection of Finance Users;

29. The Korea Workers' Compensation and Welfare Service established under the Industrial Accident Compensation Insurance Act (limited to claims for indemnity accruing from the support business of workers' credit guarantee);

30. The Korea Asset Management Corporation (including the non-performing asset management fund) incorporated under the Act on the Establishment of Korea Asset Management Corporation;

31. The Agricultural Cooperative Asset Management Corporation incorporated under the Act on the Structural Improvement of Agricultural Cooperatives;

32. through 38. Deleted. <Feb. 4, 2009>

33. through 38. Deleted. <Feb. 4, 2009>

34. through 38. Deleted. <Feb. 4, 2009>

35. through 38. Deleted. <Feb. 4, 2009>

36. through 38. Deleted. <Feb. 4, 2009>

37. through 38. Deleted. <Feb. 4, 2009>

38. Deleted. <Feb. 4, 2009>

(3) The rate of actual bad debts referred to in paragraph (2) means the rate calculated by the following formula: <Amended on Feb. 4, 2009>

┌────────────────────────────────────────────────┐

│ │

Rate of actual bad debts = [Bad debts for the relevant business year under Article 19-2 (1) of the Act

│ ──────────────────────────│

Amount of receivable claims as on the end date]

│ │

└────────────────────────────────────────────────┘

(4) In calculating the ceilings on the amount of allowances for bad debts to be included in deductible expenses under Article 34 (1) of the Act, the funds for bad debts recognized in relation to the bad debts provided for in Article 19-2 (5) shall be excluded. <Added on Feb. 18, 2010>

(5) A domestic corporation that wishes to qualify for Article 34 (1) of the Act shall submit a detailed statement on the settlement of allowances for bad debts and bad debts in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, along with the report provided for in Article 60 of the Act. <Amended on Feb. 29, 2008; Feb. 12, 2019>

Article 63(Inclusion of allowances to redeem claims for indemnity in deductible expenses) #

(1) "Corporation prescribed by Presidential Decree" in Article 35 (1) of the Act means any of the following: <Amended on Dec. 29, 2000; Dec. 30, 2002; Nov. 29, 2003; Dec. 30, 2003; Mar. 22, 2004; Feb. 19, 2005; Mar. 8, 2005; Feb. 22, 2008; Feb. 4, 2009; Feb. 18, 2010; Dec. 30, 2010; Jan. 17, 2011; Feb. 2, 2012; Jun. 30, 2015; Feb. 12, 2016; Feb. 3, 2017; Dec. 8, 2020>

1. Corporations referred to in Article 61 (2) 18 through 23 and 29;

2. Deleted; <Feb. 29, 2024>

3. The Industrial Infrastructure Credit Guarantee Fund established under the Act on Public-Private Partnerships in Infrastructure;

4. The Korean Federation of Credit Guarantee Foundations established under Article 35 of the Regional Credit Guarantee Foundation Act;

4-2. The Korea Inclusive Finance Agency established under Article 3 of the Microfinance Support Act;

5. Engineering mutual aid cooperatives established under the Engineering Industry Promotion Act;

6. Software mutual aid associations established under the Software Promotion Act;

7. Mutual aid associations established under the Act on Door-to-Door Sales;

8. The Korea Housing Finance Corporation incorporated under the Korea Housing Finance Corporation Act;

9. Mutual aid cooperatives established under the Framework Act on the Construction Industry;

10. Electric Constructors' Financial Cooperatives established under the Electric Constructors' Financial Cooperative Act;

11. Capital goods mutual aid cooperatives established under the Industrial Development Act;

12. The Fire-Fighting Industry mutual aid cooperatives established under the Fire-Fighting Industry Promotion Act;

13. Information and communications financial cooperatives established under the Information and Communications Construction Business Act;

14. The Certified Architects’ Financial Cooperative established under the Certified Architects Act;

15. The mutual aid cooperative established under Article 74 of the Construction Technology Promotion Act;

16. The Korea Content Financial Cooperative established under Article 20-2 of the Content Industry Promotion Act.

(2) Deleted. <Feb. 29, 2024>

(3) "Amount calculated, as prescribed by Presidential Decree" in Article 35 (1) and (2) of the Act means the amount computed by multiplying the credit guarantee balance related to the credit guarantee business as of the last day of the relevant business year by 1/100 or by the incidence of claims for indemnity (referring to the rate of claims for indemnity accrued in the relevant business year among the credit guarantee balance related to the credit guarantee business as of the last day of the immediately preceding business year), whichever is smaller. <Amended on Feb. 22, 2008; Dec. 30, 2010; Feb. 2, 2012>

(4) "Bad debts prescribed by Presidential Decree" in Article 35 (3) of the Act means bad debts incurred from any of the following claims for indemnity: <Amended on Dec. 29, 2000; Dec. 30, 2002; Feb. 19, 2005; Feb. 29, 2008; Feb. 4, 2009; Dec. 30, 2010; Feb. 2, 2012; Jun. 30, 2015; Feb. 29, 2024>

1. Claims for indemnity falling under any subparagraph of Article 19-2 (1);

2. Claims for indemnity that a steering committee established under the Act concerning the incorporation of the relevant corporation (referring to the credit guarantee deliberation committee for farmers and fishers in cases of the Credit Guarantee Fund for Farmers and Fishers, the Korean Federation of Credit Guarantee Foundations established under Article 35 of the Regional Credit Guarantee Foundation Act in cases of a credit guarantee foundation, and the board of directors in cases of the Korea Labor Welfare Corporation) recognizes as those that meet the standards, in consultation with the Minister of Economy and Finance.

(5) A domestic corporation that wishes to qualify for Article 35 (1) of the Act shall submit a detailed statement on the settlement of allowances for redemption of claims for indemnity in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, along with accompanied by the report provided for in Article 60 of the Act. <Amended on Feb. 29, 2008>

Article 64(Inclusion of national subsidies in deductible expenses) #

(1) "Business assets prescribed by Presidential Decree" in Article 36 (1) of the Act means tangible and intangible business assets and petroleum. <Amended on Jun. 3, 2011; Feb. 12, 2019>

(2) The amount that may be included in deductible expenses under Article 36 (1) of the Act shall be limited to the amount of subsidies granted under the Subsidy Management Act, or any Act specified in the subparagraphs of paragraph (6) (hereafter referred to as "national subsidies, etc." in this Article) and used to acquire or improve relevant business assets, among the value of each business asset. In such cases, if national subsidies, etc., are paid after acquiring or improving business assets, the amount equivalent to depreciation costs already included in deductible expenses for any business year before the business year in which such subsidies are paid shall be excluded from the amount that may be included otherwise in deductible expenses. <Amended on Dec. 31, 1999; Dec. 31, 2001; Feb. 19, 2005; Feb. 2, 2012; Feb. 21, 2014; Feb. 13, 2021>

(3) The amount included in deductible expenses under paragraph (2) shall be appropriated as lump sum depreciation reserve funds or as compressed account reserve funds in accordance with the following classifications for each type of the relevant business assets:

1. Depreciable assets: Lump sum depreciation reserve funds;

2. Assets other than those referred to in subparagraph 1: Compressed account reserve funds.

(4) Lump sum depreciation reserve funds and compressed accounts reserve funds appropriated as deductible expenses under paragraph (3) shall be included in gross income by any of the following methods: <Amended on Feb. 12, 2019>

1. The lump sum depreciation reserve funds shall offset the depreciation costs of the relevant business assets (limited to an amount equivalent to the relevant lump sum depreciation reserve funds among the acquisition value); provided, where the relevant assets are disposed of, the balance after offset shall be included in gross income for the business year in which such assets are disposed of;

2. The full amount of the compressed accounts reserve funds shall be included in gross income for the business year in which the relevant business assets are disposed of.

(5) In applying paragraph (4), the amount included in gross income when the relevant business assets are partially disposed of shall be computed by multiplying the value of the relevant business assets by the ratio of the proportion occupied by the lump sum depreciation reserve funds or the compressed accounts reserve funds. <Amended on Feb. 12, 2019>

(6) "Acts prescribed by Presidential Decree" in Article 36 (1) of the Act means each of the following Acts: <Added on Dec. 31, 2001; Dec. 30, 2002; Feb. 19, 2005; Mar. 8, 2005; Feb. 9, 2006; Jun. 3, 2011; Feb. 11, 2020; Feb. 29, 2024>

1. The Act on the Promotion of Electrification in Agricultural and Fishing Villages;

2. The Electric Utility Act;

3. The Act on Public-Private Partnerships in Infrastructure;

4. The Korea Railroad Corporation Act;

5. The Agricultural and Fishing Villages Improvement Act;

6. The Act on the Improvement of Urban Areas and Residential Environments;

7. The Industrial Accident Compensation Insurance Act;

8. Framework Act on Environmental Policy.

9. The Industrial Technology Innovation Promotion Act.

(7) "Grounds prescribed by Presidential Decree" in the latter part of Article 36 (2) of the Act means any of the following: <Added on Feb. 22, 2008>

1. Where permission, authorization, etc., of construction is delayed;

2. Where the period for construction is extended because the construction site is not determined, etc.;

3. Where litigation on compensation for land, etc., is pending;

4. Where any grounds corresponding to those provided for in subparagraphs 1 through 3 have arisen.

(8) A domestic corporation which seeks the benefit of Article 36 (1) and (2) of the Act shall submit a detailed statement on settlement of the inclusion of an amount equivalent to National subsidies, etc., in deductible expenses (a plan to use National subsidies, etc.) in the form stipulated by Decree of the Ministry of Economy and Finance, accompanied by the report provided for in Article 60 of the Act, to the head of the tax office having jurisdiction over the place of tax payment. <Amended on Dec. 31, 1999; Feb. 29, 2008>

[Title Amended on Dec. 31, 1999]

Article 68(Business year in which gains and losses from sale of assets accrue) #

(1) In applying Article 40 (1) and (2) of the Act, the business year in which gross income or deductible expenses accrue from the transfer, etc., of assets shall be the business year in which any of the following dates falls: <Amended on Feb. 28, 2007; Feb. 2, 2012; Feb. 3, 2017>

1. Sale of commodities (excluding real estate), manufactured goods, or other products (hereafter in this Article referred to as "commodities"): The date on which such commodities, etc., are delivered;

2. Trial sale of commodities, etc.: The date on which the other party expresses its intention to purchase the commodities, etc.; provided, where the sale is finalized by a special contract which states that if the commodities, etc., are not returned or the intention to reject them is not expressed within a certain period, it shall be the expiration date of such period;

3. Transfer of assets, other than commodities, etc.: The date the price is settled [for the portion of exchange rate fluctuations in the amount of acquisition capital that is a foreign currency price (hereafter referred to as "foreign currency price" in this subparagraph), which is not converted into won currency, received in exchange for transferring foreign currency-denominated assets, such as foreign currency bonds, acquired and held by the Bank of Korea under the Bank of Korea Act, the date the foreign currency price is sold and converted into Korean won in such a manner as determined by the Bank of Korea]; provided, where the registration of the transfer of rights of possession, the delivery of the relevant assets, or the use of the relevant assets by the other party takes place before the date on which the price is settled, it shall be the registration date of the transfer (including the date of registration), the date of delivery, or the date on which the other party started to use the relevant assets, whichever is sooner;

4. Consignment sales and purchases of assets: The date on which the consignee buys or sells the consigned assets;

5. Sale and purchase of securities in the securities exchange, as defined in Article 8-2 (4) 1 of the Financial Investment Services and Capital Markets Act, by an ordinary transaction method in accordance with the Securities Market Business Regulation of the Exchange referred to in Article 393 (1) of that Act: The date on which a sale and purchase agreement is entered into.

(2) In the settlement of accounts for the business year which includes the date of the delivery of assets sold or transferred on a long-term installment plan (for assets falling under paragraph (1) 3, the date specified in the proviso to the same subparagraph; hereafter in this Article the same shall apply), where the amount collected or to be collected in the relevant business year and the corresponding expenses are recognized as earnings and expenses respectively, the amount collected or to be collected pursuant to the long term installment plan in each business year and the corresponding expenses shall be included in the gross income and deductible expenses for each business year, notwithstanding paragraph (1) 1 and 3; provided, where a corporation that is a small and medium enterprise has sold or transferred the assets on a long term installment plan, the amount collected or to be collected pursuant to the long term installment plan in each business year and the corresponding expenses shall be included in the gross income and deductible expenses. <Amended on Dec. 30, 2010>

(3) In applying paragraph (2), the amount collected or to be collected prior to the date of delivery shall be deemed collected on the date of delivery, and where the relevant corporation closes its business during the period of long term installment, the amount not included in gross income as on date of closure and the corresponding expenses shall be included in the gross income and deductible expenses, respectively, for the business year in which the date of closure falls. <Added on Dec. 30, 2010>

(4) "Long term installment plan" in paragraph (2) means the sale or transfer of assets (for overseas transactions, including leases of assets under conditional agreements for the transfer of ownership), the sales proceeds or income of which is paid monthly, yearly, or by another periodic method by which payments are made in at least two installments, and the last payment is made one year or later from the day after the date of the delivery of the relevant assets.

(5) In applying paragraph (1), where a corporation sells at a discount, the amount of sales discount shall be subtracted from the amount of sales for the business year which includes the date of payment under the agreement with the other party (where the date of payment is not prescribed, the date the payment is made).

(6) Where a corporation has evaluated the debentures generated upon the transfer or sale of assets under a long term installment plan referred to in paragraph (4) at the present value as determined by the corporate accounting standards and appropriates the realization balance, the amount equivalent to the realization balance entered or to be entered shall be included in the gross income for each business year during the collection period of the relevant debentures in accordance with the corporate accounting standards. <Amended on Dec. 30, 2010>

(7) Where a project financial investment company under Article 104-31 of the Act on Restriction on Special Cases concerning Taxation implements a land development project prescribed by Decree of the Ministry of Economy and Finance, such as a housing site development project under the Housing Site Development Promotion Act, and the company transfers a portion of the land subject to the project before completing the project, the transfer price may be included in the gross income of each business year depending on the progress ratio of the relevant project under the main clause, with the exception of the subparagraphs, of Article 69 (1), notwithstanding paragraph (1) 3. <Added on Feb. 29, 2024>

(8) Matters necessary for the scope of the dates of delivery referred to in paragraph (1) 1 shall be prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 29, 2008; Dec. 30, 2010; Feb. 29, 2024>

Article 69(Business year on which gains and losses from provision of services devolve) #

(1) In applying Article 40 (1) and (2) of the Act, in the case of gains and losses generated from construction, manufacturing or the provision of other services (including contracts and subscription sales; hereafter referred to as "construction, etc." in this Article), the gains and expenses, which are calculated based on the construction completion rate, as prescribed by Decree of the Ministry of Economy and Finance (hereafter referred to as "progress rate of work" in this Article) shall be included in the gross income and deductible expenses for each business year from the business year which includes the commencement date of construction, etc. of the object to the business year in which the date of delivery (referring to the date on which services are completely provided, if services are involved; hereafter the same shall apply in this Article) of the object falls; provided, in any of the following cases, gains and losses may be included in the gross income and deductible expenses for each business year from the business year which includes the date of delivery of the object: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 15, 2013>

1. In the case of construction, etc. with less than one year of the period of the construction contract conducted by a corporation which is a small and medium enterprise;

2. Where they are appropriated, according to the corporate accounting standards, as the gross income and deductible expenses for the business year in which the date of delivery of the object falls.

(2) Where it is recognized that the progress rate of work cannot be calculated when applying paragraph (1), as prescribed by Decree of the Ministry of Economy and Finance, gains and losses shall be included in the gross income and deductible expenses for the business year in which the date of delivery of the object falls. <Amended on Feb. 28, 2023>

(3) In applying paragraph (1), if there is any difference between the gross income or deductible expenses based on the progress rate of work and the amount determined due to the termination of a construction contract, such difference shall be included in the gross income or deductible expenses for the business year which includes the date of termination of the construction contract. <Added on Feb. 2, 2012>

Article 70(Business year on which interest income accrues) #

(1) In applying Article 40 (1) and (2) of the Act, the business year in which the interest, etc. reverts to gross income or deductible expenses shall be according to the following classification: <Amended on Dec. 31, 2001; Feb. 19, 2005; Feb. 4, 2009; Dec. 31, 2009; Feb. 12, 2019; Feb. 17 2021; Feb. 29, 2024>

1. Interest and discounts paid to a corporation: Business year in which the date of receipt of income provided for in Article 45 of the Enforcement Decree of the Income Tax Act falls (for any corporation that runs the financial and insurance business listed in the Korean Standard Industrial Classification, the date of actually receiving the income, excluding any prepaid interest and discounts); provided, in the settlement of accounts, where the interest and discounts on a period which has already passed (excluding interest and discounts withheld as prescribed in Articles 73 and 73-2 of the Act) are appropriated as profits for the relevant business year, it shall be included in gross income for the relevant business year;

2. Interest and discounts paid by a corporation: Business year in which the date of receipt of income provided in Article 45 of the Enforcement Decree of the Income Tax Act falls; provided, in the settlement of accounts, where the interest and discounts on a period which has already passed (excluding interest and discounts on transactions with a specially related person where the interest payment date exceeds one year from the date of borrowing) are appropriated as losses for the relevant business year, it shall be included in deductible expenses for the relevant business year.

(2) In applying Article 40 (1) and (2) of the Act, dividends paid to a corporation shall be included in gross income for the business year in which the date of receipt of income provided for in Article 46 of the Enforcement Decree of the Income Tax Act falls; provided, as for dividends paid by a special purpose company as defined in the Asset-Backed Securitization Act, which has been established jointly by financial companies, etc. referred to in any subparagraph of Article 61 (2) in order to help debt delinquents recover credit, etc. and to jointly collect claims, such dividends shall be included in gross income for the business year in which the date such dividends were actually paid falls. < Feb. 18, 2010>

(3) In applying Article 40 (1) and (2) of the Act, insurance premiums, installments, guarantee fees, or fees (hereafter referred to as "insurance premiums, etc." in this paragraph), excluding prepaid insurance premiums, etc. received by a corporation that runs the financial and insurance business activities listed in the Korean Standard Industrial Classification shall revert to the business year in which the date of actually receiving the insurance premiums falls: provided, in the settlement of accounts, where insurance premiums on a period which has already passed are appropriated as gains for the relevant business year, they shall be included in gross income for the relevant business year and where an investment dealer or investment broker prescribed in the Financial Investment Services and Capital Markets Act has traded securities defined in Article 4 of that Act (hereafter referred to as "securities" in this Article) by a standardized dealing method, the business year to which the commission thereof reverts shall be the business year in which the date on which the transaction contract thereon is concluded falls. <Amended on Dec. 31, 2001; Feb. 19, 2005; Feb. 4, 2009; Dec. 30, 2010; Feb. 29, 2024>

(4) Where interest, discounts and dividend income for a period that already passed among the gains relating to investment in securities, etc. have been appropriated as gains of the relevant business year when an investment company, etc. settles accounts, such gains shall be included in gross income for the relevant business year in which such appropriation is made, notwithstanding paragraphs (1) and (2). <Added on Dec. 31, 2001; Dec. 30, 2003; Feb. 19, 2005; Feb. 4, 2009; Dec. 31, 2009>

(5) Notwithstanding paragraphs (1) and (2), the business year to which the amount of income provided in the subparagraphs of Article 73 (1) of the Act that belongs to the trust property operated by the trust business entity registered under the Financial Investment Services and Capital Markets Act (excluding the investment trust property defined in that Act; hereafter the same shall apply in Articles 111 and 113) reverts shall be the business year in which the date of withholding under Article 111 (6) falls. <Added on Feb. 4, 2009; Dec. 31, 2009>

(6) Notwithstanding paragraphs (1) and (3), the items falling under each of the following subparagraphs shall be the gross income or deductible expenses of the business year which are recorded as revenue or loss expenses in accordance with the Insurance Supervisory Accounting Standards. <Added on Feb. 28, 2023; Feb. 29, 2024>

1. Interest, discounts, and premiums received or paid by an insurance company in connection with insurance contracts, which are reflected in the calculation of liability reserves pursuant to Article 120 of the Insurance Business Act;

2. Interest, discounts and premiums received or paid by the Housing and Urban Guarantee Corporation under the Housing and Urban Fund Act in connection with credit guarantee contracts, which are reflected in the calculation of liability reserves pursuant to Article 24 of the Enforcement Decree of that Act.

Article 71(Business year on which other gains and losses, such as rental fees devolve) #

(1) In applying Article 40 (1) and (2) of the Act, the business year in which gains and losses generated from the rental of assets accrue shall be the business year which includes any of the following dates; provided, in settling accounts, where any amount equivalent to the rental fee for any period that has already passed and expenses corresponding thereto is appropriated as gains, and the payment period of such rental fee exceeds one year, an amount equivalent to the rental fee on the period that has already passed and other expenses shall be included in gross income or deductible expenses of the relevant business year: <Amended on Dec. 31, 2001>

1. Where the date of payment of rental fees is prescribed by a contract, the payment date;

2. Where the date of payment of rental fees is not prescribed by a contract, the date on which payment is received.

(2) In applying Article 40 (1) and (2) of the Act, where a corporation operating a business, to which Article 162 of the Income Tax Act and Article 36 (4) of the Value-Added Tax Act applies, installs and uses a cash register, the business year to which the prices receivable for goods and services revert may be the business year in which such prices are actually received. <Amended on Feb. 19, 2005; Jun. 28, 2013>

(3) In applying Article 40 (1) and (2) of the Act, where any corporation issues bonds, an amount (hereafter referred to as "bond discount" in this paragraph) computed by deducting the total amount of the value of issued bonds (excluding the commission for issuing such bonds and expenses spent directly and inevitably to issue such bonds) from the total amount of bonds to be redeemed shall be included in deductible expenses according to the method of depreciating bond discounts under the corporate accounting standards. <Added on Dec. 31, 2001>

(4) In applying Article 40 (1) and (2) of the Act, where any corporation transfers the assets it owns by the method provided for in Article 13 of the Asset-Backed Securitization Act and endorses and transfers the accounts receivable or note receivable, the business year in which the relevant gains or losses are included shall be determined according to the recognition method of gains and losses under the corporate accounting standards. <Added on Dec. 30, 2010; Feb. 2, 2012>

(5) In applying Article 40 (1) and (2) of the Act, where any corporation appropriates any expenses as development costs provided for in Article 24 (1) 2 (f) but cancels the development before the time the relevant product becomes available for sale or use arrives, such expenses shall be included in the deductible expenses for the business year in which the date all of the following requirements are satisfied falls: <Added on Feb. 2, 2012; Feb. 12, 2019>

1. That it is impossible to discern the outcomes of improving the relevant material, device, product, process, system or service for commercial production or use from the relevant development;

2. That all relevant development costs shall be appropriated as deductible expenses.

(6) In applying Article 40 (1) and (2) of the Act, any gains or losses arising from trading of derivatives in which the object of the contract are not delivered but the difference due to a change in the value of the object is paid with money shall be included in gross income or deductible expenses for the business year in which the payment date determined in the relevant trading falls. <Added on Feb. 2, 2012>

(7) In applying Article 40 (1) and (2) of the Act, the business year to which gross income or deductible expenses reverts shall be prescribed by Decree of the Ministry of Economy and Finance, except as otherwise provided for in the Act (excluding Article 43), the Restriction of Special Taxation Act, and this Decree. <Amended on Feb. 19, 2005; Feb. 29, 2008; Feb. 2, 2012>

Article 72(Acquisition value of assets) #

(1) "Financial assets prescribed by Presidential Decree" in Article 41 (1) 1 of the Act means financial assets and derivatives classified as short-term trading items (hereafter referred to as "short-term financial assets, etc." in this Article) by the corporate accounting standards. <Added on Dec. 30, 2010>

(2) The acquisition value of assets referred to in Article 41 (1) and (2) of the Act means the following amounts: <Amended on Dec. 31, 2001; Feb. 9, 2006; Feb. 29, 2008; Feb. 4, 2009; Feb. 18, 2010; Jun. 8, 2010; Dec. 30, 2010; Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Feb. 3, 2015; Feb. 13, 2018; Feb. 12, 2019; Feb. 17, 2021; Feb. 28, 2023; Feb. 29, 2024>

1. Assets purchased from a third person: The sum of the purchase price, acquisition tax (including special tax for rural areas and local education tax), registration and license tax, and other incidental expenses [where a corporation acquires land, the building built on the land, other structures, etc., (hereafter referred to "building, etc." in this subparagraph) and it is unclear to classify the value of the land and the value of the building, etc., such value shall be in proportion to the market price referred to in Article 52 (2) of the Act];

1-2. Stocks, etc. acquired by a domestic corporation by acquiring its foreign subsidiary, if the amount of dividend income prescribed in Article 18-4 (1) of the Act (hereafter in this Article referred to as "dividend income") received by the domestic corporation from the foreign subsidiary according to the acquisition of such stocks, etc. meet each of the following requirements: the purchase price of such stocks, etc. minus the dividend income meeting each of the following requirements:

(a) The dividend income shall be financed by retained earnings as of the day immediately preceding the day on which the domestic corporation comes to hold at least 10/100 of the total number of the issued voting stocks or the total amount of investment of the foreign subsidiary (5/100 in the case of a foreign corporation conducting an overseas resources development project under Article 22 of the Act on Restriction on Special Cases concerning Taxation);

(b) The dividend income has not been included in gross income under Article 18-4 (1) of the Act;

2. Assets acquired by directly manufacturing, producing, or constructing the assets, or by other similar methods: The sum of raw materials costs, labor costs, shipping expenses, loading and unloading expenses, insurance premiums, fees, public charges (including acquisition tax and registration tax), installation costs, and other incidental expenses;

3. The following amounts in cases of assets acquired through a merger, division, or investment in kind:

(a) In cases of a qualified merger or qualified division: The book value provided for in Article 80-4 (1) or 82-4 (1);

(b) In other cases: 　 The market value of the relevant assets;

3-2. The following amounts in cases of stocks, etc., acquired by a divided corporation due to a split-off: The market value of net assets divided by the split-off;

(a) Deleted; <Fed. 21, 2014>

(b) Deleted; <Fed. 21, 2014>

4. The following amounts in cases of stocks, etc., acquired by an investing corporation through investment in kind:

(a) In cases of an investment in kind with which an investing corporation (including persons who jointly invest with an investing corporation pursuant to Article 47-2 (1) 3 of the Act; hereinafter referred to as "investing corporation, etc.") establishes an invested corporation and acquires only stocks, etc., in return for the new establishment: The market value of the net assets invested in kind;

(b) In other cases: The market value of the relevant stocks, etc.

4-2. Stocks, etc., acquired by debt-equity swap: The acquisition value of such stocks, etc., at the time of acquisition; provided, for the stocks, etc., acquired by debt-equity swap meeting the requirements prescribed in any subparagraph of Article 15 (1), it shall be the book value of the claims that have converted into investment (excluding any claim falling under any subparagraph of Article 19-2 (2) of the Act);

5. Stocks, etc., acquired through a merger or division (excluding a split-off): The amount calculated by subtracting the sum total of money or other property value among the costs of a merger provided for in Article 16 (2) 1 of the Act or the costs of a division provided for in Article 16 (1) 2 from the amount computed by adding the amounts provided for in Article 16 (1) 5 or 6 of the Act, and subparagraph 8 of Article 11 to the former book value;

5-2. Short-term financial assets, etc.: The purchase value;

5-3. Assets donated to a public corporation, etc., provided for in Article 12 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act: An asset falling under the donation (limited to assets, other than money referred to in Article 36 (1)) provided for in Article 24 (3) 1 of the Act received from a person, other than any related party means the book value as at the time of donation [referring to the acquisition value computed under Article 89 of the Enforcement Decree of the Income Tax Act as at the acquisition of asset in cases of any asset not related to business revenue]; provided, for any contributed property excluded from the taxable value of the gift tax under the Inheritance Tax and Gift Tax Act, if the tax liability arise with respect to the contributed property excluded from the taxable value and an amount equivalent to the total amount of such inheritance tax or gift tax is imposed, the amount means the market price as at the time of contribution;

6. Emission permits gratuitously allocated by the Government under Article 12 of the Act on the Allocation and Trading of Greenhouse-Gas Emission Permits: Nil;

7. Total amount of emission permits allocated free of charge by the government pursuant to Article 17 of the Special Act on Air Quality Improvement in Air Management Areas: zero (0) won;

8. Assets acquired by other methods: The market price as at the time of acquisition.

(3) In applying paragraph (2), the following amounts shall be included in the acquisition value: <Amended on Feb. 9, 2006; Dec. 30, 2010; Feb. 21, 2014; Feb. 12, 2019>

1. The amount included in the gross income referred to in Article 15 (2) 1 of the Act;

2. The amount excluded from deductible expenses under Article 28 (1) 3 and (2) of the Act;

3. Where tangible assets are acquired and national and public bonds are also purchased, the difference between the purchase value of the national and public bonds and the current value thereof is counted as the amount of the acquisition value of the relevant tangible assets by corporate accounting standards.

(4) In applying paragraph (2), the following amounts shall be excluded from the acquisition value: <Amended on Dec. 30, 2002; Feb. 29, 2008; Dec. 30, 2010>

1. Where the present value of liabilities generated in acquiring assets through a long term installment plan provided for in Article 68 (4) is evaluated by corporate accounting standards and appropriated as the realization balance, such realization balance;

2. For deferred payment import prescribed by Decree of the Ministry of Economy and Finance, the acquisition value and the amount divided and appropriated as paid interest;

3. The amount in excess of the market price pursuant to Article 88 (1) 1 and 8 (b);

4. Deleted. <Dec. 31, 2001>

(5) Where any of the following cases occurs with respect to assets held by a corporation, the acquisition value thereof shall be as follows: <Amended on Feb. 4, 2009; Dec. 30, 2010; Feb. 21, 2014; Feb. 12, 2019; Feb. 29, 2024>

1. In the case of a dividend received under subparagraph 8 of Article 18 of the Act, the amount obtained by deducting such amount (limited to the book value of stocks held by a domestic corporation);

1-2. The evaluated value, if evaluation is conducted under each subparagraph of Article 42 (1) and Article 42 (3) of the Act;

1-3. In the case of a merger under Article 44 (3) 2 of the Act, if there are no stocks, etc. to be acquired from the merging corporation as consideration for the merger, the amount added by the acquisition value of the stocks, etc. of the relevant merged corporation (if there is any consideration for the merger other than stocks, etc., referring to the amount deducting the consideration for the merger);

2. The sum of the acquisition value and such capital expenditures, if capital expenditures are made under Article 31 (2);

3. The amount computed by adding profits, if any profit referred to in subparagraph 8 of Article 11 accrues as a result of a merger or a division and merger (excluding cases of paragraph (2) 5).

(6) Articles 18-2 (1) 2, 28, 73, 73-2, 98, 120, and 120-2 of the Act shall not apply to the depreciation cost of the realization balance referred to in paragraph (4) 1 and the paid interest referred to in paragraph (4) 2. <Amended on Dec. 30, 2003; Dec. 30, 2010; Feb. 21, 2014; Feb. 12, 2019; Feb. 28, 2023>

Article 74(Evaluation of inventory assets) #

(1) The evaluation of inventory assets referred to in subparagraph 1 of Article 73 shall be conducted in the method chosen and reported to the head of the tax office having jurisdiction over the place of tax payment by a corporation among any of the following methods (referring to the method under any item of subparagraph 1 in the case falling under subparagraph 1):

1. The cost method: The method of using the acquisition value calculated by any of the following methods as the evaluated value of the assets:

(a) The method of using the acquisition value of each inventory asset calculated on an individual basis as the evaluated value of the asset (hereinafter referred to as "individual method");

(b) The method of removing the inventory assets beginning with the first put into storage, and using the acquisition value calculated by deeming the assets acquired on the date nearest to the end date of the business year to be inventory assets as the evaluated value of the assets (hereinafter referred to as "first-in first-out method");

(c) The method of removing the inventory assets beginning with the assets most recently put into storage, and using the acquisition value calculated by deeming the assets acquired on the date furthest from the end date of the business year as inventory assets to be the evaluated value of the assets (hereinafter referred to as "last-in first-out method");

(d) The method of using the overall average acquisition value, calculated by adding the sum total of the acquisition value of assets as at the start date of the relevant business year to the sum total of the acquisition value of assets acquired during the relevant business year for each type of product and dividing by the total number of assets, as the evaluated value of the assets (hereinafter referred to as "gross average method");

(e) The method of using the average acquisition value calculated by the average unit price computed by dividing the total amount on the account books by the number of assets on the account books each time assets are acquired as the evaluated value of the assets (hereinafter referred to as "moving average method");

(f) The method of using the acquisition value calculated by deducting the estimated marginal earnings from sales from the estimated sales prices by the type of product on the end date of the relevant business year as the evaluated value of the assets (hereinafter referred to as "sales price reduction method");

2. The low-of-cost-or-market method: The method of using the amount computed in the cost method provided in subparagraph 1 or the value evaluated as the market price according to corporate accounting standards as the evaluated value, whichever is lower, for the inventory assets.

(2) In the evaluation of inventory assets under paragraph (1), a corporation may separate the relevant assets by type of assets under each item of subparagraph 1 of Article 73 and evaluate them each by a different method according to the types or places of business. In such cases, earnings and expenses shall be separated into types of business (according to Divisions or Groups under the Korean Standard Industrial Classification) or places of business and entered into the accounts, and a report on manufacturing costs and a comprehensive income statement (referring to a balance sheet if there is no comprehensive income statement; hereinafter the same shall apply) shall be made by type of business or place of business. <Amended on Dec. 30, 2010>

(3) When a corporation intends to report on the evaluation method of inventory assets under paragraph (1), it shall submit a report (or a change report) on the evaluation method of inventory assets, etc. (including submitting such report through the national tax information and communications network) in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment by the following deadlines. In such cases, where the corporate reports the low-of-cost-or-market method, it shall also submit a report comparing the cost method and the market price: <Amended on Mar. 17, 2004; Feb. 29, 2008>

1. For a newly established corporation or non-profit domestic corporation which has commenced profit-making business: The filing deadline of reports on the corporate tax base for the business year which includes the date of the establishment of the relevant corporation or the commencement date of profit-making business;

2. For a corporation which has submitted a report under subparagraph 1 and intends to change the evaluation method: Three months prior to the end date of the business year in which it intends to use the changed evaluation method.

(4) In any of the following circumstances, the head of the tax office having jurisdiction over the place of tax payment of a corporation shall evaluate inventory assets by the first-in first-out method (or by the individual method in cases of real estate owned for the purpose of sale); provided, in cases of subparagraph 2 or 3, where the amount evaluated by the reported appraisal method is greater than the amount appraised by the first-in first-out method (or by the individual method in cases of real estate owned for the purpose of sale), the reported appraisal method shall apply: <Amended on Feb. 21, 2014>

1. Where the corporation fails to submit a report on the evaluation method of inventory assets by the deadline specified under paragraph (3) 1;

2. Where the corporation conducts evaluation by a method, other than the reported evaluation method;

3. Where the corporation changes the evaluation method of inventory assets without submitting a report to change the evaluation method by the deadline specified under paragraph (3) 2.

(5) Where a corporation reports on the evaluation method of inventory assets after the deadline specified in each subparagraph of paragraph (3) expires, paragraph (4) shall apply mutatis mutandis to the business year which includes the date of the report, and the evaluation method reported by the corporation shall apply from the following business year.

(6) If a corporation intends to apply an evaluation method different from the evaluation method prescribed by paragraph (4) for inventory assets, which has been applied to the corporation because it failed to file a report on the evaluation method, such corporation shall file a report on the change by no later than three months before the end of the business year for which it intends to apply the different evaluation method. <Added on Feb. 15, 2013>

(7) A corporation which evaluates inventory assets under paragraph (1) shall submit a detailed statement on the settlement of the evaluation of inventory assets in the form stipulated by Decree of the Ministry of Economy and Finance, along with the report provided for in Article 60 of the Act, to the head of the tax office having jurisdiction over the place of tax payment. <Amended on Feb. 29, 2008>

Article 75(Evaluation of securities) #

(1) Securities prescribed in subparagraph 2 (a) and (b) of Article 73 shall be evaluated according to the method reported by the relevant corporation to the head of the tax office having jurisdiction over the place of tax payment among the following methods: <Amended on Presidential Decree NoDec. 31, 2001; Dec. 30, 2003; Feb. 19, 2005; Feb. 4, 2009; Jun. 8, 2010; Mar. 31, 2011>

1. The individual method (limited to bonds);

2. The gross average method;

3. The moving average method;

4. Deleted. <Feb. 4, 2009>

(2) Article 74 (3) through (6) shall apply mutatis mutandis to the evaluation of securities. In such cases, "first in first out method" referred to in Article 74 (4) shall be construed as "gross average method", and "detailed statement on the settlement of the evaluation of inventory assets" referred to in paragraph (6) of the same Article shall be construed as "detailed statement on the settlement of the evaluation of securities". <Amended on Mar. 31, 2011>

(3) The property referred to in subparagraph 2 (c) of Article 73 held by an investment company, etc. shall be evaluated by the fair market value method; provided, the non-marketable assets referred to in Article 242 (2) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act held by any closed-end fund provided for in Article 230 of that Act shall be evaluated by a method reported by the relevant close-end fund to the head of the tax office having jurisdiction over the place of tax payment, along with the report provided for in Article 60 of the Act among the methods falling under any subparagraph of paragraph (1) or the fair market value method, and such method shall continuously apply thereafter. <Added on Feb. 4, 2009; Mar. 31, 2011>

(4) Assets referred to in subparagraph 2 (d) of Article 73 held by an insurance company shall be evaluated by a method reported by the relevant insurance company, along with the report provided for in Article 60 of the Act, to the head of the tax office having jurisdiction over the place of tax payment among the methods falling under any subparagraph of paragraph (1) or the fair market value method, and such method shall continuously apply thereafter. <Added on Feb. 4, 2009; Feb. 28, 2023>

[Title Amended on Dec. 31, 2001]

Article 76(Evaluation of foreign assets and liabilities) #

(1) Monetary assets and liabilities denominated in a foreign currency, currency forwards, etc. held by financial companies, etc. referred to in Article 61 (2) 1 through 7 shall be evaluated in the following methods: <Amended on Dec. 30, 2010; Feb. 2, 2012>

1. Monetary assets and liabilities denominated in a foreign currency: Method of evaluation by the basic rate of exchange or arbitrated rate of exchange (hereinafter referred to as "basic rate of exchange, etc.") prescribed by Decree of the Ministry of Economy and Finance as of the date the relevant business year ends;

2. Currency forwards, etc.: Method of evaluation by the method reported to the head of the competent tax office among any of the following methods; provided, the method provided for in item (a) shall apply in the business year before the method provided for in item (b) is first reported and applied:

(a) The method of evaluating the assets and liabilities denominated in a foreign currency stated in the contract in accordance with the basic rate of exchange, etc. as of the date of contract;

(b) The method of evaluating the assets and liabilities denominated in a foreign currency stated in the contract in accordance with the basic rate of exchange, etc. as of the end of the relevant business year.

(2) Monetary assets and liabilities denominated in a foreign currency (excluding liability reserve funds of insurance companies; hereafter in this Article the same shall apply) held by a corporation, other than financial companies, etc. referred to in Article 61 (2) 1 through 7 and currency forwards, etc. held to avoid the exchange risk arising from monetary assets and liabilities denominated in a foreign currency under subparagraph 5 of Article 73 (hereinafter referred to as "currency forwards, etc. to avoid exchange risk") shall be evaluated by the method reported to the head of the competent tax office among any of the following methods; provided, the method provided for in subparagraph 1 shall apply in the business year before the method provided for in subparagraph 2 is first reported and applied: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 28, 2023>

1. The method of evaluating the assets and liabilities denominated in a foreign currency stated in the contract of the monetary assets and liabilities denominated in a foreign currency, currency forwards, etc. to avoid exchange risk in accordance with the basic rate of exchange, etc. as of the acquisition date or the effective date (referring to the date of contract in the case of the currency forwards, etc.);

2. The method of evaluating the assets and liabilities denominated in a foreign currency stated in the contract of the monetary assets and liabilities denominated in a foreign currency, currency forwards, etc. to avoid exchange risk in accordance with the basic rate of exchange, etc. as of the end of the relevant business year.

(3) The evaluation method reported under paragraphs (1) 2 and (2) by a corporation shall apply continuously in the subsequent business years; provided, a different evaluation method may be reported to apply the changed method after five business years, including the business year in which the evaluation method reported under paragraph (2) is applied. <Added on Feb. 22, 2008; Dec. 30, 2010; Feb. 21, 2014>

(4) Marginal profits or losses in the evaluated won currency amount and the won currency account amount arising from the evaluation of the monetary assets and liabilities denominated in any foreign currency, currency forwards, etc., and currency forwards, etc. to avoid exchange risk referred to in paragraphs (1) and (2) shall be included in the gross income or deductible expenses for the relevant business year. In such cases, the won currency account amount as at the time of contract of currency forwards, etc., currency forwards, etc. to avoid exchange risk means the amount computed by multiplying the amount of assets and liabilities denominated in a foreign currency stated in the contract by the basic rate of exchange, etc. as at the date of contract. <Amended on Dec. 31, 2001; Feb. 9, 2006; Feb. 28, 2007; Feb. 22, 2008; Feb. 18, 2010; Dec. 30, 2010; Feb. 2, 2012>

(5) Marginal profits or losses in the won currency amount and the won currency account amount of foreign currency claims and liabilities to be repaid to or repaid by a domestic corporation shall be included in the gross income or deductible expenses during the relevant business year; provided, the portion of exchange fluctuations in the amount to be repaid or repay in any foreign currency (hereafter referred to as "foreign currency amount" in this paragraph) among the foreign currency claims and liabilities of the Bank of Korea under the Bank of Korea Act shall be included in the gross income or deductible expenses for the business year in which the foreign currency amount is sold and converted into Korean won in such a manner as determined by the Bank of Korea. <Amended on Feb. 28, 2007>

(6) A corporation that intends to apply the evaluation method provided in paragraph (1) 2 (b) or (2) 2 or to change the evaluation method under the proviso to paragraph (3) shall submit a report on the evaluation method of monetary assets, etc. denominated in a foreign currency in the form stipulated by Decree of the Ministry of Economy and Finance, along with the report provided for in Article 60 of the Act for the business year to which it intends to first apply the evaluation method provided for in paragraph (1) 2 (b) or (2) 2 or for the business year to which it intends to apply the evaluation method changed under the proviso to paragraph (3). <Added on Dec. 30, 2010; Feb. 21, 2014>

(7) A corporation which evaluates the monetary assets and liabilities denominated in a foreign currency, currency forwards, etc, and currency forwards, etc. to avoid exchange risk under paragraphs (1) and (2) shall submit a detailed statement on settlement on marginal profits and losses on the evaluation of assets, etc. denominated in a foreign currency in the form stipulated by Decree of the Ministry of Economy and Finance, along with the report provided for in Article 60 of the Act, to the head of the tax office having jurisdiction over the place of tax payment. <Amended on Dec. 31, 2001; Feb. 9, 2006; Feb. 28, 2007; Feb. 22, 2008; Feb. 29, 2008; Dec. 30, 2010; Feb. 2, 2012>

Article 78(Marginal losses from evaluation of inventory assets) #

(1) "Grounds prescribed by Presidential Decree, such as a natural disaster and a fire" in Article 42 (3) 2 of the Act means any of the following: <Amended on Jun. 3, 2011; Feb. 12, 2019>

1. Natural disasters, accidents, or fires;

2. Expropriation, etc. under statutes or regulations;

3. Mines abandoned due to non-fulfillment of estimated mining outputs (including where tangible assets used for mining, including land, cannot be used for their proper purposes).

(2) "Stocks, etc. prescribed by Presidential Decree" in subparagraph 3, with the exception of the items, of Article 42 (3) of the Act means stocks, etc. according to the following classification: <Amended on Feb. 19, 2005; Feb. 9, 2006; Feb. 22, 2008; Feb. 4, 2009; Jun. 3, 2011; Feb. 12, 2019; Aug. 23. 2022; Feb. 28, 2023; Dec. 19, 2023>

1. Cases prescribed in Article 42 (3) 3 (a) through (c) of the Act: Stocks, etc. falling under any of the following:

(a) Stocks, etc. issued by stock-listed corporations prescribed in the Financial Investment Services and Capital Markets Act (hereinafter referred to as "stock-listed corporations");

(b) Stocks issued by business founders or new technology business entities from among the stocks, etc. that are held by venture investment companies provided for in the Venture Investment Promotion Act or the new technology venture capitalist provided in the Specialized Credit Finance Business Act;

(c) Stocks, etc. issued by a corporation, among the corporations, other than stock-listed corporations, which is not in any relationship listed in any subparagraph of Article 2 (8).

2. Cases falling under Article 42 (3) 3 (d) of the Act: Stocks, etc.;

3. Deleted. <Feb. 12, 2019>

(3) "Method prescribed by Presidential Decree" in the part, with the exception of the subparagraph, of Article 42 (3) of the Act means the method of reducing the book value of assets provided for in each subparagraph of the same paragraph by the value evaluated under each of the following subparagraphs in the business year (in cases falling under Article 42 (3) 2 of the Act, including a business year in which damage or destruction is determined) during which the grounds for reducing such book value arise and appropriating the reduced amount as deductible expenses for the relevant business year: <Amended on Dec. 31, 2001; Feb. 9, 2006; Jun. 3, 2011; Feb. 12 ,2019>

1. For inventory assets provided for in Article 42 (3) 1 of the Act, the value evaluated as the market price which could be obtained through the disposal of the relevant inventory assets as of the end date of the business year;

2. For tangible assets provided for in Article 42 (3) 2 of the Act, the value evaluated as the market price as of the end date of the business year;

3. For stocks, etc. provided for in Article 42 (3) 3 of the Act, the value evaluated as the market price as of the end date of the business year (where the value evaluated as the market price of the total amount of stocks held by each corporation that issues stocks, etc. is 1,000 won or less, it shall be 1,000 won);

4. Deleted. <Feb. 28, 2023>

(4) In determining whether having a special relationship with a corporation as prescribed in paragraph (2) 1 (c), a corporation that holds not more than 5/100 of the total number of issued stocks or total investment amount of the corporation issuing the stocks, etc. and its purchase price is less than one billion won shall be deemed as a minority stockholder, etc., for the purpose of determining whether the corporation is a related party, notwithstanding Article 50 (2). <Added on Feb. 18, 2010; Feb. 2, 2012; Feb. 12, 2019>

Article 78-2(Non-inclusion in gross income of evaluation marginal profits of inventory assets of domestic corporation that applies Korean International Financial Reporting Standards) #

(1) "Last-in first-out method prescribed by Presidential Decree" in the former part, with the exception of the subparagraphs, of Article 42-2 (1) of the Act means the last-in first-out method as prescribed in Article 74 (1) 1 (c). <Amended on Feb. 12, 2019>

(2) "Other evaluation methods of inventory assets prescribed by Presidential Decree" in the former part, with the exception of the subparagraphs, of Article 42-2 (1) of the Act means the evaluation methods of inventory assets, excluding the last-in first-out method, among the evaluation methods of inventory assets provided in each subparagraph of Article 74 (1). <Amended on Feb. 12, 2019>

(3) Where a domestic corporation includes the marginal profits from evaluation of inventory assets in the gross income under the latter part, with the exception of the subparagraphs, of Article 42-2 (1) of the Act, the amount computed by the following formula shall be included in the gross income for the relevant business year. In such cases, the number of months shall be calculated according to the solar calendar and the number of days that falls short of one month shall be deemed one month. Where the month in which the commencement date of the business year falls is included in the calculation, the month which includes the fifth anniversary of the commencement date of the business year shall be excluded from the calculation: <Amended on Feb. 12, 2019>

Evaluation marginal profits of inventory assets x Number of months in the relevant business year ÷ 60 months

(4) A domestic corporation that intends to be applicable under Article 42-2 (1) of the Act shall submit an application for non-inclusion in the gross income of evaluation marginal profits of inventory assets in the form stipulated by Decree of the Ministry of Economy and Finance when filing a report on the tax base under Article 60 of the Act for the business year in which it first applies the Korean International Financial Reporting Standards to the head of the tax office having jurisdiction over the place of tax payment. <Amended on Feb. 12, 2019>

[This Article Added on Feb. 2, 2012]

[Title Amended on Feb. 12, 2019]

Article 78-3(Special cases concerning calculation of income for insurance company applying Korean International Financial Reporting Standards) #

(1) "Accounting standards prescribed by Presidential Decree" in Article 42-3 (1) of the Act refers to the Korean International Financial Reporting Standards for Insurance Contracts, established by the Korea Accounting Institute pursuant to Article 7 (1) of the Enforcement Decree of the Act on External Audit of Stock Companies by No. 1117, entering into force on January 1, 2023 (hereinafter referred to as "International Financial Reporting Standards for Insurance Contracts").

(2) "Amount calculated by applying the formula prescribed by Presidential Decree" in Article 42-3 (1) of the Act means the amount of liability reserves (referring to liability reserves prescribed in the Insurance Business Act; hereafter in this Article the same shall apply) included in deductible expenses for the business year immediately preceding the business year for which the International Financial Reporting Standards for Insurance Contracts are first applied (hereafter in this Article referred to as "business year of first application") added by an amount pursuant to subparagraph 2, minus an amount pursuant to subparagraph 1:

1. The sum of the following amounts:

(a) Items prescribed by Decree of the Ministry of Economy and Finance, such as unamortized new contract expenses as of the end of the immediately preceding business year, which were classified as assets and included in gross income according to the insurance supervisory accounting standards in effect in the immediately preceding business year, but were changed to items reflected in calculating the amount of liability reserves under the new insurance supervisory accounting standards after the business year of first application;

(b) Reinsured assets prescribed in Article 63 (2) of the Enforcement Decree of the Insurance Business Act as of the end of the immediately preceding business year;

2. Items prescribed by Decree of the Ministry of Economy and Finance, such as insurance payables as of the end of the immediately preceding business year, which were classified as other liabilities and included in deductible expenses according to the insurance supervisory accounting standards in effect in the immediately preceding business year, but were changed to items reflected in calculating liability reserves under the new insurance supervisory accounting standards after the business year of first application.

(3) "Amount which is calculated by applying the formula prescribed by Presidential Decree" in Article 42-3 (2) of the Act means the amount of liability reserves (excluding changes in the assessed valuation of liability reserves due to changes in the discount rates) as at the start date of the business year of first application minus the amount of insurance contract assets and reinsurance contract assets.

(4) "Amount which is calculated by applying the formula prescribed by Presidential Decree" in Article 42-3 (3) of the Act means the amount calculated under paragraph (2) minus the amount calculated under paragraph (3), multiplied by 1.

(5) Where an insurance company includes in its gross income, pursuant to the latter part of Article 42-3 (3) of the Act, the converted profits prescribed in the former part of the same paragraph (hereafter in this Article referred to as "converted profits"), an amount calculated according to the following formula shall be included in its gross income for the relevant business year. In such cases, the number of days less than one month shall be one month, and where the month in which the start date of the business year falls is included in the calculation, the month in which the date that is three years after the start date of the business year falls shall be excluded from the calculation.

┌─────────────────────┐

Converted profits x The number of months in the relevant business year

│ ─────────────────────────────────────────│

└─────────────────────┘

(6) An insurance company that wishes to be governed by Article 42-3 (3) of the Act shall submit an application for non-inclusion in gross income of converted profits, as prescribed by Decree of the Ministry of Economy and Finance, when filing a report on its tax base under Article 60 of the Act with respect to the income for the year of first application to the head of the tax office having jurisdiction over the place of tax payment.

[This Article Added on Feb. 28, 2023]

Article 80(Calculation of capital gains or losses from transfer upon merger) #

(1) The transfer value referred to in Article 44 (1) 1 of the Act shall be any of the following amounts: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 3, 2017>

1. In cases of a qualified merger: 　 The net book value of the assets as of the registration date of the merger by the merged corporation referred to in Article 44 (1) 2 of the Act;

2. In cases other than those falling under subparagraph 1: Sum total of the following amounts:

(a) Sum total of the value of the stocks, etc. (hereinafter referred to as "merger consideration shares, etc.") of a surviving corporation, etc., or the parent company of the surviving corporation, etc. (referring to a domestic corporation that owns the total number of issued stocks or total investment amount of the surviving corporation, etc., as of the registration date of the merger: hereinafter the same shall apply), money or other property value received by the stockholders, etc., of the merged corporation due to the merger; provided, where the surviving corporation, etc., acquired stocks, etc. (for a new merger or a merger of at least three corporations, including the stocks, etc., of another merged corporation, etc., acquired by the merged corporation; hereinafter referred to as "stocks, etc., combined due to a merger") of the merged corporation prior to the registration date of the merger, although the stocks, etc., granted due to a merger are not granted with respect to the stocks, etc., combined due to a merger, the stocks, etc., granted due to a merger shall be deemed granted by the equity ratio for the purposes of calculating the value of the stocks, etc., granted due to a merger;

(b) Sum total of the corporate tax of the merged corporation paid by the surviving corporation, the national tax imposed on the corporate tax (including the amount of tax reduction or exemption) and the local corporate tax imposed under Article 88 (2) of the Local Tax Act.

(2) Where any corporate tax is refunded under the Framework Act on National Taxes in calculating the net book value of assets of the merged corporation referred to in Article 44 (1) 2 of the Act, the amount equivalent to such refunded amount shall be added to the net book value of assets as on the registration date of the merger of the merged corporation.

(3) Any merged corporation, etc., that wishes to qualify for paragraph (1) 1 shall file an application for special cases for taxation upon merger in the form prescribed by Decree of the Ministry of Economy and Finance, along with a surviving corporation, etc., in filing a report on tax base under Article 60 of the Act, with the head of the tax office having jurisdiction over the place of tax payment. In such cases, the surviving corporation, etc. shall also submit the detailed statement on the asset adjustment account referred to in Article 80-4 (11) to the head of the tax office having jurisdiction over the place of tax payment of the merged corporation. <Amended on Dec. 30, 2010; Feb. 13, 2018>

[This Article Wholly Amended on Jun. 8, 2010]

Article 80-2(Requirements for qualified merger) #

(1) "In inevitable circumstances prescribed by Presidential Decree" in the proviso to Article 44 (2) of the Act, with the exception of its subparagraphs, means the following circumstances: <Amended on Dec. 30, 2010; Mar. 31, 2011; Feb. 2, 2012; Feb. 21, 2014; Sep. 26, 2014; Feb. 3, 2017; Feb. 13, 2018; Feb. 12, 2019>

1. Where inevitable circumstances are deemed to exist with respect to Article 44 (2) 2 of the Act: In any of the following cases:

(a) Where the stockholders, etc., provided for in paragraph (5) (hereafter in this Article referred to as "relevant stockholders, etc.") dispose of not more than 1/2 of the stocks, etc., granted due to a merger. In such cases, where the relevant stockholders, etc., dispose of stocks, etc., granted due to a merger among them, they shall not be deemed to have disposed of stocks, etc.; and where the relevant stockholders, etc. dispose of stocks, etc. of a surviving corporation, they shall be deemed to have disposed of stocks, etc. selected by the surviving corporation.

(b) Where the stocks, etc., are disposed of due to the death or bankruptcy of the relevant stockholders, etc.;

(c) Where the relevant stockholders, etc., dispose of stocks, etc., due to a qualified merger, qualified division, qualified split-off, or qualified investment in kind;

(d) Where the relevant stockholders, etc. invested stocks, etc. in kind or exchanged or transferred stocks, etc. pursuant to Article 38, 38-2 or 121-30 of the Restriction of Special Taxation Act and then dispose of the stocks, etc. with the tax deferred;

(e) Where the relevant stockholders, etc., dispose of stocks, etc., upon obtaining approval from the court pursuant to the rehabilitation procedure under the Debtor Rehabilitation and Bankruptcy Act;

(f) Where the relevant stockholders, etc., dispose of stocks, etc., under an agreement to implement a business normalization plan under Article 34 (6) 1 of the Enforcement Decree of the Restriction of Special Taxation Act or a special agreement to implement a workout program under Article 34 (6) 2;

(g) Where the relevant stockholders, etc., dispose of stocks, etc., to perform the obligations under the statutes or regulations;

2. Where inevitable circumstances are deemed to exist with respect to Article 44 (2) 3 of the Act: In any of the following cases:

(a) Where the surviving corporation disposes of the succeeded assets due to its bankruptcy;

(b) Where the surviving corporation discontinues its business due to a qualified merger, qualified division, qualified split-off or investment in kind;

(c) Where the surviving corporation disposes of assets to which the corporation succeeded under an agreement for implementing a workout program under Article 34 (6) 1 of the Enforcement Decree of the Restriction of Special Taxation Act or a special agreement for implementing a workout program under Article 34 (6) 2 of said Enforcement Decree;

(d) Where the surviving corporation, etc., disposes of the succeeded assets upon obtaining approval from the court according to the rehabilitation procedure under the Debtor Rehabilitation and Bankruptcy Act.

3. Where inevitable circumstances are deemed to exist with respect to Article 44 (2) 4 of the Act: In any of the following cases:

(a) Where the surviving corporation is implementing a rehabilitation plan under Article 193 of the Debtor Rehabilitation and Bankruptcy Act;

(b) Where the surviving corporation fails to maintain the ratio of employees following bankruptcy;

(c) Where the surviving corporation fails to maintain the ratio of employees due to a qualified merger, division, split-off, or investment in kind;

(d) Where the number of Korean nationals employed by the merged corporation as of one month before the registration date of the merger under an employment contract made under the Labor Standards Act is less than five.

(2) "Corporation prescribed by Presidential Decree" in the proviso to Article 44 (2) 1 and the proviso to subparagraph 3 of the same paragraph of the Act means a corporation that meets all requirements referred to in the items of Article 6 (4) 14 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act as a special purpose acquisition company prescribed in the same subparagraph (hereafter in this Article referred to as "special purpose acquisition company"). <Added on Dec. 30, 2010; Feb. 15, 2022>

(3) The total costs of the merger received by the stockholders, etc., of the merged corporation referred to in Article 44 (2) 2 of the Act shall be the amount computed under Article 80 (1) 2 (a), and where a surviving corporation acquired stocks, etc., combined due to a merger within two years prior to the registration date of the merger for the purpose of determining whether the value of the stocks, etc., of the total costs of the merger exceeds the rate referred to in Article 44 (2) 2 of the Act, any of the following amounts shall be deemed granted with money. In such cases, for the new merger or merger of at least three corporations, where the merged corporation acquired the stocks, etc., of another merged corporation, etc., the amount computed by applying any of the followings shall be added to the total costs of the merger by deeming the merged corporation that acquired the stocks, etc. of another merged corporation, etc., to be the surviving corporation, etc.: <Amended on Feb. 2, 2012>

1. Where the surviving corporation, etc., is not the controlling stockholder, etc., of the merged corporation referred to in Article 43 (7) as of the registration date of the merger: Where the stocks, etc., combined due to the merger acquired by the surviving corporation, etc., within two years prior to the registration date of the merger exceed 20/100 of the total number of issued stocks or the total investment amount of the merged corporation, the value of the stocks, etc., granted due to the merger with respect to the stocks, etc., combined due to the merger (where the stocks, etc., granted due to a merger are deemed granted under the proviso to Article 80 (1) 2 (a), including such stocks, etc.);

2. Where the surviving corporation, etc., is the controlling stockholder, etc., of the merged corporation referred to in Article 43 (7) as of the registration date of the merger: The value of the merger consideration shares, etc. ith respect to the stocks, etc., combined due to the merger (in cases where the merger consideration shares, etc. are deemed granted under the proviso of Article 80 (1) 2 (a), including such stocks, etc.) acquired within two years prior to the registration date of the merger.

(4) In allocating stocks received due to a merger to the stockholders, etc., of the merged corporation under Article 44 (2) 2 of the Act, the stocks, etc., in excess of the value calculated by the following formula shall be allocated to the relevant stockholders, etc.: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 28, 2025>

The total value of the merger consideration shares, etc. received by the shareholders, etc. of the merged corporation under Article 80 (1) 2 (a) x the equity ratio of each relevant shareholder, etc. in the merged corporation (in cases where no merger consideration shares, etc. are allotted for the treasury shares or treasury equity interests of the merged corporation, the equity ratio shall be calculated excluding such treasury shares or treasury equity interests)

(5) "Stockholders, etc., of the merged corporation prescribed by Presidential Decree" in Article 44 (2) 2 of the Act means stockholders, etc., other than the following persons, among the controlling stockholders, etc., of the merged corporation, etc. referred to in Article 43 (3): <Amended on Feb. 21, 2014; Feb. 15, 2022; Feb. 28, 2023>

1. Relatives by blood in the fourth degree, among relatives referred to in Article 43 (8) 1 (a);

2. Persons whose equity ratio in the merged corporation is less than 1/100 or the value of the equity share appraised at the market price is less than one billion won as on the registration date of the merger;

3. Persons who are the controlling stockholders, etc., of the merged corporation that merges with any special purpose acquisition company;

4. Controlling shareholders, etc. of a special purpose acquisition company that is a merged corporation.

(6) "Employees specified by Presidential Decree" in Article 44 (2) 4 of the Act means Korean nationals employed under an employment contract entered into under the Labor Standards Act; provided, the following employees shall be excluded herefrom: <Added on Feb. 13, 2018; Feb. 12, 2019>

1. Executive officers specified in any subparagraph of Article 40 (1);

2. Employees who will retire from office at the retirement age under Article 19 of the Act on Prohibition of Age Discrimination in Employment and Elderly Employment Promotion before the end of the business year in which the merger is registered;

3. Employees who died before the end of the business year in which the merger is registered or employees who retired due to any of the causes specified by Decree of the Ministry of Economy and Finance, such as illness or injury;

4. Workers employed on a daily basis, as referred to in Article 14 (3) 2 of the Income Tax Act;

5. Employees whose employment contract term is less than six months; provided, employees whose employment contract term is not less than one year as of one month before the registration date of the merger due to consecutive renewals of the employment contract shall be excluded herefrom;

6. Employees who retired due to any fault for which employees are liable, as specified by Decree of the Ministry of Economy and Finance, such as employees sentenced to imprisonment without labor or any heavier punishment.

(7) Where a surviving corporation disposes of at least 1/2 of the value of assets (It refers to the value of tangible assets, intangible assets, and investment assets (hereinafter the same shall apply in this Subsection and Article 156 (2)) which it succeeded to from a merged corporation on or before the last day of the business year in which the registration date of the merger falls or fails to use them for its business, it shall be deemed not to fall under Article 44 (2) 3 of the Act; provided, where the surviving corporation, etc., retires the treasury stocks upon succeeding to the stocks of the surviving corporation, etc., held by the merged corporation, whether the surviving corporation continues the business shall be determined based on the assets succeeded to from the merged corporation, other than the relevant stocks of the surviving corporation; and where the succeeded assets are only the stocks of the surviving corporation, the surviving corporation, etc., shall be deemed to continue the business. <Amended on Dec. 30, 2010; Feb. 13, 2018; Feb. 12, 2019>

(8) A corporation that intends to be governed by the latter part of paragraph (1) 1 (a) shall, where requested by the head of the tax office having jurisdiction over the place of tax payment, submit data necessary to verify the order of disposition of shares selected by the relevant corporation <Added on Feb. 12, 2019>

[This Article Added on Jun. 8, 2010]

Article 80-3(Disposition of difference between transfer value and net market price of assets upon merger) #

(1) Where the transfer value is less than the net market price of assets as prescribed in Article 44-2 (2) of the Act and a surviving corporation includes the difference between them (hereinafter referred to as "marginal profits from merger") in gross income, it shall include the amount computed by the following formula from the business year in which the registration date of the merger falls to the business year in which the fifth anniversary of the registration date of the merger falls. In such cases, the number of months shall be calculated based on the calendar months; however, the number of days that falls short of one month shall be deemed one month. Where the month which includes the registration date of the merger is calculated as one month, the month which includes the fifth anniversary of the registration date of the merger shall be excluded from the calculation:

┌─────────────────────┐

│ │

Marginal profits from merger × Number of months in the relevant business year

│ ────────────│

60 months

│ │

└─────────────────────┘

(2) "Circumstances prescribed by Presidential Decree" in Article 44-2 (3) of the Act means the circumstances in which the surviving corporation, etc. deemed that the company name, transaction relationships and other trade secrets of the merged corporation have business value and paid the consideration therefor.

(3) Where the transfer value exceeds the net market price of assets under Article 44-2 (3) of the Act, paragraph (1) shall apply mutatis mutandis to the inclusion of the difference thereof (hereinafter referred to as "marginal losses from merger") in deductible expenses, method of inclusion and other matters.

[This Article Added on Jun. 8, 2010]

[Title Amended on Feb. 12, 2019]

Article 80-4(Follow-up management based on special provisions concerning taxation upon qualified merger) #

(1) Where a surviving corporation acquires assets of the merged corporation transferred at the book value under Article 44-3 (1) of the Act, it shall recognize the market price as of the registration date of the merger as the value of the transferred assets and liabilities. The surviving corporation shall include the difference between the market price and the book value of the merged corporation in gross income, and shall include the same amount in deductible expenses in the asset adjustment account, if the amount computed by subtracting the book value (where tax settlement matters referred to in subparagraph 1 of Article 85 exist, such value shall be calculated by adding the amount not included in gross income and by subtracting the amount not included in deductible expenses, among the tax settlement matters) of the merged corporation from the market price is greater than zero. The surviving corporation shall include the difference between the market price and the book value in deductible expenses, and shall include the same amount in gross income in the asset adjustment account, if the difference is smaller than zero. In such cases, where the recognized asset adjustment account shall be handled as follows: <Amended on Feb. 3, 2017>

1. An asset adjustment account set for depreciable assets: Where the difference is included in deductible expenses in the asset adjustment account, it shall be offset against the depreciation cost of the relevant assets (limited to the portion equivalent to those in the relevant asset adjustment account), while it shall be added to depreciation costs, if it is included in gross income in the asset adjustment account. In such cases, the amount left over after set-off or addition, where relevant assets are disposed of, shall be fully included in gross income or deductible expenses for the business year in which such assets are disposed of;

2. An asset adjustment account set for assets, other than those provided for in subparagraph 1: It shall be all included in the gross income or deductible expenses for the business year in which the relevant assets are disposed of; provided, where the treasury stocks are retired, it shall be extinguished without being included in the gross income or deductible expenses.

(2) Where a surviving corporation, etc., acquires assets of the merged corporation transferred at the book value as prescribed in paragraph (1), it is eligible for the tax reduction or exemption, or tax credits upon succeeding to the tax reduction or exemption, or tax credits under Article 59 of the Act which applied to the merged corporation before the merger. In such cases, where provisions governing the requirements, etc., for the tax reduction or exemption, or tax credits in the Act or other statutes, the same shall apply only where the surviving corporation, etc., meets all the requirements, etc. <Added on Dec. 30, 2010>

(3) "Period prescribed by Presidential Decree" in the main sentence of Article 44-3 (3) of the Act, with the exception of its subparagraphs, means two years (or three years in cases under Article 44-3 (3) 3 of the Act) beginning on the first day of the business year following the business year in which the registration date of the merger falls. <Amended on Feb. 2, 2012; Feb. 13, 2018>

(4) Where a surviving corporation, etc., falls under any subparagraph of Article 44-3 (3) of the Act, the sum total of the balance in the asset adjustment account recognized under paragraph (1) (limited to cases where the sum total is greater than zero; and where it is smaller than zero, it shall be deemed nil) and the amount deducted among the deficits which it succeeded to from the merged corporation under Article 44-3 (2) of the Act shall be included in the gross income. In such cases, the asset adjustment account recognized under paragraph (1) shall be deemed extinguished. <Amended on Dec. 30, 2010>

(5) Where the sum total of the balance in the asset adjustment account is included in the gross income under paragraph (4), the amount equivalent to capital gains or losses from sale upon merger shall be disposed of by the following methods: <Amended on Dec. 30, 2010; Feb. 28, 2025>

1. Where the transfer value paid by a surviving corporation, etc., to a merged corporation upon the merger is less than the net market price of assets of the merged corporation as on the registration date of the merger: The amount equivalent to the capital gains from sale upon the merger shall be included in the deductible losses for the business year which includes the date on which any ground referred to in any subparagraph of Article 44-3 (3) of the Act arises, and the amount equivalent thereto shall be included in the gross income in installment by the fifth anniversary of the registration date of the merger in accordance with the following classifications:

(a) The business year in which any grounds referred to in any subparagraph of Article 44-3 (3) of the Act arise: The amount computed by multiplying the capital gains from sale upon the merger by the ratio calculated by dividing the number of months in the relevant business year from the registration date of the merger to the last day of the relevant business year by 60 months shall be included in the gross income (the number of months shall be calculated based on the calendar months, and the number of days that falls short of one month shall be deemed one month);

(b) The business year which includes the fifth anniversary of the registration date of the merger from the business year since the business year referred to in item (a): The amount computed by multiplying the capital gains from sale upon the merger by the ratio calculated by dividing the number of months for the relevant business year by 60 months (where the number of the month that includes the registration date of the merger falls short of one month, the month that includes the fifth anniversary of the registration date of the merger shall be deemed nil) shall be included in the gross income;

2. Where the transfer value paid by a surviving corporation, etc. to a merged corporation upon merger exceeds the net market price of assets of the merged corporation as of the registration date of the merger: The amount equivalent to the capital losses from sale upon a merger shall be included in the gross income for the business year which includes the date on which any grounds referred to in any subparagraph of Article 44-3 (3) of the Act arise, and the relevant amount shall, limited to the cases falling under Article 80-3 (2), be included in the deductible expenses in installment until the fifth anniversary of the registration date of the merger by the following classifications:

(a) The business year in which any grounds referred to in any subparagraph of Article 44-3 (3) of the Act arise: The amount computed by multiplying the capital losses from sale upon the merger by the ratio calculated by dividing the number of months in the relevant business year from the registration date of the merger to the last day of the relevant business year by 60 months shall be included in the deductible expenses (the number of months shall be calculated based on the calendar months, and the number of days that falls short of one month shall be deemed one month);

(b) The business year which includes the fifth anniversary of the registration date of the merger from the business year since the business year referred to in item (a): The amount computed by multiplying the capital losses from sale upon the merger by the ratio calculated by dividing the number of months in the relevant business year by 60 months (where the number of the month that includes the registration date of the merger is less than one month, the month that includes the fifth anniversary of the registration date of the merger shall be deemed nil) shall be included in the deductible expenses.

(6) Where a surviving corporation falls under any subparagraph of Article 44-3 (3) of the Act, it shall add the amount not included in the gross income and subtract the amount not included in the deductible expenses among the tax settlement matters succeeded under subparagraph 1 of Article 85 for the purposes of calculating the amount of income and the tax base of the surviving corporation and add the amount equivalent to tax reduction or exemption or tax credits granted upon succession from a merged corporation to the corporate tax of the business year in which the relevant grounds arise and pay such amount, and it shall not apply from the business year in which the relevant grounds arise. <Added on Dec. 30, 2010; Feb. 2, 2012>

(7) "Where inevitable circumstances prescribed by Presidential Decree exist" in the proviso to Article 44-3 (3) of the Act, with the exception of its subparagraphs, means the following cases: <Amended on Dec. 30, 2010; Feb. 13, 2018>

1. Where inevitable circumstances are deemed to exist with respect to Article 44-3 (3) 1 of the Act: 　 Where the surviving corporation, etc., falls under any item of Article 80-2 (1) 2;

2. Where inevitable circumstances are deemed to exist with respect to Article 44-3 (3) 2 of the Act: 　 Where the stockholders, etc., provided for in paragraph (9) fall under any item of Article 80-2 (1)1;

3. Where inevitable circumstances are deemed to exist with respect to Article 44-3 (3) 3 of the Act: Where the surviving corporation falls under any provision of Article 80-2 (1) 3 (a) through (c).

(8) Where a surviving corporation, etc., disposes of at least 1/2 of the value of assets which it succeeded to from a merged corporation during the period referred to in paragraph (3) or fails to use them for the succeeded business, it shall be deemed to discontinue the business which the corporation succeeded to from the merged corporation; provided, where the surviving corporation, etc., retires the treasury stocks upon succeeding to the stocks of the surviving corporation, etc., held by the merged corporation, whether the surviving corporation continues the business shall be determined based on the assets which it succeeded to from the merged corporation, other than the relevant stocks of the surviving corporation, etc., and where the succeeded assets are only the stocks of the surviving corporation, etc., the surviving corporation, etc., shall be deemed to continue the business. <Amended on Dec. 30, 2010; Feb. 12, 2019>

(9) "Stockholders, etc., of a merged corporation prescribed by Presidential Decree" in Article 44-3 (3) 2 of the Act means the stockholders, etc., referred to in Article 80-2 (5). <Amended on Dec. 30, 2010>

(10) "Employees specified by Presidential Decree" in Article 44-3 (3) 3 of the Act means Korean nationals employed under an employment contract entered into under the Labor Standards Act. <Added on Feb. 13, 2018>

(11) Any surviving corporation, etc., that recognizes the asset adjustment account under paragraph (1) shall submit a detailed statement on asset adjustment account in the form prescribed by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, accompanied by the report provided for in Article 60 of the Act.

[This Article Added on Jun. 8, 2010]

Article 81(Succession of losses carried forward upon merger) #

(1) "Rate of value of asset prescribed by Presidential Decree" in Article 45 (1) of the Act means the rate of value of business asset of a surviving corporation and a merged corporation as of the registration date of the merger. In such cases, the value of business asset of the merged corporation, which is succeeded to by the surviving corporation shall be determined by the value as at the registration date of the merger of the asset, limited the asset that is continuously held (including where the asset is replaced after disposal) and used by the end of each business year in which succeeded losses are deducted. <Amended on Feb. 4, 2009; Feb. 12, 2019>

(2) Losses succeeded to and deducted by a surviving corporation when the surviving corporation calculates the tax base of each business year under Article 45 (2) of the Act shall be the losses referred to in Article 13 (1) 1 of the Act (referring to the amount computed by deeming the registration date of the merger to be the start date of a business year) of the merged corporation as at the registration date of the merger, and the amount of such losses (hereafter referred to as "limit of succeeded losses" in this Article) shall be calculated each year by deeming that one year has passed sequentially from the business year following the business year in which the registration date of the merger falls. <Amended on Feb. 4, 2009; Feb. 12, 2019>

(3) A surviving corporation, etc. may obtain a tax reduction or exemption, or tax credit succeeded by a merged corporation under Article 44-3 (2) of the Act as follows: <Added on Dec. 30, 2010>

1. For reductions or exemptions provided for in Article 59 (1) 1 of the Act (limited to reductions or exemptions for a fixed term): The surviving corporation shall apply such reductions or exemptions on income generated by the business succeeded for each business year which ends within the residual reduction period as at the time of the merger;

2. For tax credits provided for in Article 59 (1) 3 of the Act (including foreign tax credits) which are the un-deducted amounts carried forward: The surviving corporation apply tax credits for each business year which ends within the remaining period for credits carried forward pursuant to the following items:

(a) Un-deducted amounts of foreign tax credits carried forward: The deduction shall be made up to the amount computed by multiplying the foreign source income accruing from the succeeded business divided by the tax base for the relevant business year by the amount of tax for the relevant business year;

(b) Un-deducted amounts carried forward under Article 144 of the Restriction of Special Taxation Act because the amount falls short of the minimum corporate tax provided for in Article 132 of that Act and it is not deducted (hereafter referred to as "minimum corporate tax" in this Article): The deduction shall be made up to the minimum corporate tax calculated by applying Article 132 of the Restriction of Special Taxation Act with respect to the succeeded business category. In such cases, the amount to be deducted shall not exceed the minimum corporate tax of the surviving corporation, etc.;

(c) Un-deducted amounts carried forward under Article 144 of the Restriction of Special Taxation Act because there is no tax payable other than tax referred to in the items (a) and (b) and the amount is not deducted: The deduction shall be made up to the amount of corporate tax computed with respect to the succeeded business category.

(4) Articles 80-2 (7) and 80-4 (8) shall apply mutatis mutandis to determination as to the continuation or closure of business and application thereof with respect to the deduction of losses; inclusion in gross income; addition of corporate tax; and inclusion of an amount exceeding the ceiling on donations in deductible expenses of a surviving corporation which has succeeded to the business of a merged corporation. <Amended on Jun. 8, 2010; Dec. 30, 2010; Feb. 13, 2018; Feb. 17, 2021>

(5) and (6) Deleted. <Feb. 4, 2009>

(6) Deleted. <2009. 2. 4.>

[Title Amended on Dec. 30, 2010]

Article 82(Calculation of capital gains or losses from transfer upon division) #

(1) The transfer value referred to in Article 46 (1) 1 of the Act means any of the following amounts: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 3, 2017; Feb. 12, 2019>

1. In cases of a qualified division: The net book value of assets as of the registration date of the division of a divided corporation, etc. (hereinafter referred to as "divided corporation, etc.") referred to in Article 46 (1) 2 of the Act;

2. In cases other than those falling under subparagraph 1: Sum total of the following amounts:

(a) Sum total of the value of the stocks (including stocks of the domestic corporation that holds the total number of outstanding stocks or the total amount of investment of the counterpart corporation as of the registration date of the division in cases of a division and merger; hereinafter the same shall apply) of a corporation established through division, etc. and money or the value of other property, paid to stockholders of the divided corporation upon division by the corporation established through division, etc.; provided, in cases of a division and merger, where the counterpart corporation to the division and merger acquired the stocks [for the new division and merger or the division and merger of at least three corporations, including the stocks of another divided corporation acquired by the divided corporation prior to the registration date of the division (limited to the stocks succeeded by the counterpart corporation to the division and merger following the division and merger), the stocks of the disappearing counterpart corporation to the division and merger acquired by the counterpart corporation to the division and merger prior to the registration date of the division or the stocks acquired by the disappearing counterpart corporation to the division and merger prior to the registration date of the division and the stocks of another disappearing counterpart corporation to the division and merger: hereinafter referred to as "shares subject to the spin-off merger"] of the divided corporation prior to the registration date of the division, although the stocks of the corporation established through division, etc. (hereinafter referred to the "spin-off merger consideration shares") are not granted with respect to such stocks, the stocks granted due to division and merger shall be deemed granted by the equity ratio for the purposes of calculating the value of the stocks of the counterpart corporation to the division and merger;

(b) Sum total of the corporate tax of the divided corporation paid by the corporation established through the division, etc., the national tax imposed on the corporate tax (including the amount of tax reduction or exemption) and the local corporate tax imposed under of Article 88 (2) of the Local Tax Act.

(2) Where any corporate tax is refunded under the Framework Act on National Taxes in calculating the net book value of assets of a divided corporation, etc., under Article 46 (1) 2 of the Act, the amount equivalent to such refunded amount shall be added to the net book value of assets as on the registration date of the division of the divided corporation, etc.

(3) Any divided corporation, etc., that wishes to qualify for paragraph (1) 1 shall file an application for special cases for taxation upon division in the form prescribed by Decree of the Ministry of Economy and Finance, together with any corporation established through division, etc., in filing a report on tax base under Article 60 of the Act, with the head of the tax office having jurisdiction over the place of tax payment. In such cases, the corporation established through division, etc., shall also submit the detailed statement on the asset adjustment account referred to in Article 82-4 (10) to the head of the tax office having jurisdiction over the place of tax payment of the corporation established through division, etc. <Amended on Dec. 30, 2010; Feb. 13, 2018>

[This Article Wholly Amended on Jun. 8, 2010]

Article 82-2(Requirements for qualified divisions) #

(1) "Inevitable circumstances prescribed by Presidential Decree" in the proviso to Article 46 (2) of the Act, with the exception of its subparagraphs, means the following circumstances: <Amended on Feb. 12, 2016; Feb. 13, 2018; Feb. 17, 2021>

1. Where inevitable circumstances are deemed to exist with respect to Article 46 (2) 2 of the Act: Where a stockholder referred to in paragraph (8) falls under any item of Article 80-2 (1) 1;

2. Where inevitable circumstances are deemed to exist with respect to Article 46 (2) 3 of the Act: Where a corporation established through division, etc., falls under any item of Article 80-2 (1) 2;

3. Where inevitable circumstances are deemed to exist with respect to Article 46 (2) 4 of the Act: Where a corporation established through division, etc. falls under any item of Article 80-2 (1) 3 or where the number of employees under Article 82-4 (9) who work for the divided division (referring to the division succeeded from a divided corporation; hereafter the same shall apply in this Article and subparagraph 1 of Article 85) as of one month before the registration date of division is less than five.

(2) "Business division prescribed by Presidential Decree, such as a business division mainly engaged in the real estate rental business" in Article 46 (3) of the Act means any of the following business divisions: <Added on Feb. 21, 2014; Feb. 12, 2019; Feb. 17, 2021>

1. A business division mainly engaging in real estate rental business prescribed by Decree of the Ministry of Economy and Finance;

2. A business division whose assets, as referred to in Article 94 (1) 1 and 2 of the Income Tax Act, are at least 80/100 of the value of assets for business use acquired by the divided corporation by succession (excluding the value of the assets for business use prescribed by Decree of the Ministry of Economy and Finance);

3. Deleted. <Feb. 17, 2021>

(3) The division of a business division consisting solely of stocks. etc. and assets and liabilities related thereto shall be deemed to be a division of an independent business division that can be operated separately pursuant to Article 46 (2) 1 (a) of the Act, provided that the business division to be divided falls under any of the following. <Added on Feb. 21, 2014; Feb. 17, 2021>

1. A business division composed only of all stocks, etc., that the divided corporation holds for the purpose of control on the day immediately preceding the registration date of the division (referring to stocks, etc., prescribed by Decree of the Ministry of Economy and Finance as stocks, etc., held for the purpose of control; hereafter in this Article the same shall apply) and assets and liabilities related to such stocks, etc.;

2. A business division (In cases of a division and merger falling under any of the following, including a business division that can establish a holding company) that establishes a holding company defined in the Monopoly Regulation and Fair Trade Act and the Financial Holding Companies Act (hereafter in this Article referred to as "holding company"); provided, the foregoing shall be limited to cases where a divided business division succeeds only to stocks, etc., held as a controlling stockholder and assets and liabilities related to such stocks, etc.:

(a) Where a counterpart corporation in a division and merger is converted into a holding company through the division and merger;

(b) Where a counterpart corporation in a division and merger is a holding company as at the registration date of division;

3. Cases prescribed by Decree of the Ministry of Economy and Finance, and similar to the cases of subparagraph 2.

(4) "Those prescribed by Presidential Decree, such as assets and liabilities that are indivisible, including the assets jointly used and the liabilities, the debtor of which cannot be changed" in the proviso to Article 46 (2) 1 (b) of the Act means the following assets and liabilities: <Amended on Feb. 2, 2012; Feb. 21, 2014>

1. Assets:

(a) Substation facilities, waste water treatment facilities, electricity facilities, water supply facilities, or steam facilities;

(b) Offices, warehouses, restaurants, training centers, company houses, and in-house training facilities;

(c) Joint production facilities, business supporting facilities and land attached thereto and assets which cannot be divided physically;

(d) Assets prescribed by Decree of the Ministry of Economy and Finance, and similar to those under items (a) through (c);

2. Liabilities:

(a) Notes payable;

(b) Borrowings with respect to which the change of the name of the borrower is limited on the conditions for borrowing;

(c) Borrowings with respect to which the conditions for borrowing of the borrower under the agreement are adversely changed due to a division;

(d) Joint loans that are not directly used in the divided business division;

(e) Liabilities prescribed by Decree of the Ministry of Economy and Finance, and similar to those under items (a) through (d);

3. Assets and liabilities that the divided division shall succeed to, which shall not exceed 20/100 of the total assets and total liabilities evaluated by the market value as at the time of the division. In such cases, the value of assets and liabilities that the divided division shall acquire by succession shall be calculated, as prescribed by Decree of the Ministry of Economy and Finance, but stocks, assets referred to in subparagraph 1, and liabilities referred to in subparagraph 2 shall be excluded therefrom.

(5) Where a divided business division succeed to stocks, etc., by succession, the assets and liabilities of the divided business division shall not be deemed those comprehensively acquired by succession under Article 46 (2) 1 (b) of the Act; provided, the same shall not apply where stocks, etc., are acquired by succession under any subparagraph of paragraph (3) or cases prescribed by Decree of the Ministry of Economy and Finance as similar to such cases. <Added on Feb. 21, 2014>

(6) The total costs of a division referred to in Article 46 (2) 2 of the Act shall be the amount provided for in Article 82 (1) 2 (a), and where the counterpart corporation to a division and merger acquired the shares subject to the spin-off merger of the divided corporation within two years prior to the registration date of the division for the purposes of determining whether the value of the stocks, etc., among the total costs of the division as prescribed in Article 46 (2) 2 of the Act exceeds the rate referred to in Article 44 (2) 2 of the Act in cases of the division and merger, any of the following amounts shall be deemed granted with money. In such cases, for the new division and merger, or division and merger of at least three corporations, where the divided corporation acquired the stocks of another divided corporation, the divided corporation that acquired the stocks of another divided corporation shall be deemed a counterpart corporation to the division and merger for the following purposes. Where the disappearing counterpart corporation to the division and merger acquired the stocks of the divided corporation, such disappearing counterpart corporation to the division and merger shall be deemed a counterpart corporation to the division and merger and the amount computed by applying each subparagraph shall be deemed granted with money: <Amended on Feb. 2, 2012>

1. Where the counterpart corporation to the division and merger is not the controlling stockholder, etc., of the divided corporation referred to in Article 43 (7) as of the registration date of the division: Where the shares subject to the spin-off merger acquired by the counterpart corporation to the division and merger within two years prior to the registration date of the division exceed 20/100 of the total number of issued stocks of the divided corporation, etc., the value of the spin-off merger consideration shares granted with respect to the shares subject to the spin-off merger (if the spin-off merger consideration shares are deemed granted under the proviso to Article 82 (1) 2 (a), it shall include such stocks, etc.);

2. Where the counterpart corporation to the division and merger is the controlling stockholder, etc., of the divided corporation referred to in Article 43 (7) as of the registration date of the division: The value of the shares subject to the spin-off merger granted with respect to the spin-off merger consideration shares (if the spin-off merger consideration shares are deemed granted under the proviso to Article 82 (1) 2 (a), it shall include such stocks, etc.) acquired within two years prior to the registration date of the division.

(7) Where shares are allocated to the shareholders of the demerged corporation, etc. as a result of a spin-off or spin-off merger under Article 46 (2) 2 of the Act, each shareholder falling under paragraph (8) shall be allocated shares having a value not less than the amount calculated by the following formula: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 21, 2014; Feb. 12, 2016; Feb. 28, 2025>

The total aggregate value of the shares of the spin-off company, etc. received by the shareholders, etc. of the divided company, etc., under Article 82 (1) 2 (a) x the equity ratio of each shareholder in the divided company, etc. under paragraph (8) (where shares of the spin-off company, etc., are not allocated for treasury shares of the divided company, etc., the equity ratio shall be calculated by excluding such treasury shares)

(8) "Stockholders of the divided corporation, etc., prescribed by Presidential Decree" in Article 46 (2) 2 of the Act means stockholders, other than the following persons, among controlling stockholders, etc., of the divided corporation, etc., as prescribed in Article 43 (3): <Amended on Feb. 21, 2014; Feb. 28, 2023>

1. Relatives by blood in the fourth degree, among relatives referred to in Article 43 (8) 1 (a);

2. Persons whose equity ratio in the divided corporation, etc., is less than 1/100 and the value of such equity appraised at the market price is less than one billion won as of the registration date of the division.

(9) Article 80-2 (7) shall apply mutatis mutandis to determination as to whether a corporation established through division, etc., continues the business acquired by succession from the divided corporation, etc. under Article 46 (2) 3 of the Act. <Amended on Dec. 30, 2010; Feb. 13, 2018>

(10) Article 80-2 (6) shall apply mutatis mutandis to the scope of employees specified by Presidential Decree pursuant to Article 46 (2) 4 of the Act, but any of the following employees may be excluded from the scope. In such cases, "registration date of merger" shall be construed as "registration date of division": <Added on Feb. 13, 2018>

1. Employees working for both the business division surviving the division and the divided business division;

2. Employees who are not deemed to work for the divided business division but who perform any of the duties specified by Decree of the Ministry of Economy and Finance.

[This Article Added on Jun. 8, 2010]

Article 82-4(Follow-up management based on special provisions concerning taxation upon qualified division) #

(1) Where a corporation established through division has assets transferred from the divided corporation at book value in accordance with Article 46-3 (1) of the Act, it shall recognize the market price as of the registration date of the division as the value of the assets and liabilities so transferred but shall include the difference between the market price and the book value in gross income and include the same amount in deductible expenses in the asset adjustment account, if the amount computed by subtracting the book value (where tax settlement matters provided for in subparagraph 1 of Article 85 exist, such value shall be calculated by adding the amount not included in gross income and by subtracting the amount not included in deductible expenses, among the tax settlement matters) of the divided corporation from the market price is greater than zero, while it shall include the difference between the market price and the book value in deductible expenses and shall include the same amount in gross income in the asset adjustment account, if the difference is smaller than zero. In such cases, Article 80-4 (1) shall apply mutatis mutandis to the handling of the asset adjustment account. <Amended on Feb. 21, 2014; Feb. 3, 2017>

(2) Where a corporation established through division, etc., has assets transferred from the divided corporation, etc., at book value under paragraph (1), it may obtain tax reductions or exemptions or tax credits upon succeeding to tax reductions or exemptions or tax credits provided for in Article 59 of the Act which applied to the merged corporation before the merger. In such cases, where there are provisions governing the requirements, etc., for tax reductions or exemptions or tax credits in the Act or other statutes, the same shall apply only where the corporation established through division, etc., meets such requirements, etc., and the corporation established through division, etc., may obtain tax reductions or exemptions or tax credits only applicable to the succeeded business by the following classifications: <Added on Dec. 30, 2010; Feb. 12, 2019>

1. Where tax reductions or exemptions or tax credits carried forward are related to a specific business or asset: To be deducted by the corporation established through division, etc., that has succeeded to the specific business or asset;

2. In cases of tax reductions or exemptions or tax credits carried forward, other than those falling under subparagraph 1: To be applied respectively by corporations, etc., established through the division by dividing proportionally at the rate of value of business assets succeeded by such corporations, etc., established through the division from among the value of business assets of the divided corporation, etc.

(3) "Period prescribed by Presidential Decree" in the main sentence of Article 46-3 (3) of the Act, with the exception of its subparagraphs, means two years (or three years in cases under Article 46-3 (3) 3 of the Act) beginning on the first day of the business year following the business year in which the registration date of a division falls. <Amended on Feb. 2, 2012; Feb. 13, 2018>

(4) Where a corporation, etc., established through a division falls under any subparagraph of Article 46-3 (3) of the Act, Article 80-4 (4) and (5) shall apply mutatis mutandis to the inclusion of losses, etc., in gross income and the inclusion of the amount equivalent to capital gains from the transfer or capital losses from the transfer in deductible expenses or gross income and other matters. <Amended on Dec. 30, 2010>

(5) Where a corporation, etc., established through a division falls under any subparagraph of Article 46-3 (3) of the Act, it shall add the amount not included in gross income and subtract the amount not included in deductible expenses among the tax settlement matters succeeded under subparagraph 1 of Article 85 for the purposes of calculating the amount of income and the tax base of the corporation, etc., established through the division and add the amount equivalent to the amount of tax reductions or exemptions or tax credits upon succession from a merged corporation to the corporate tax of the business year during which the relevant grounds arise and pay such amount, and it shall not apply from the business year during which the relevant grounds arise. <Added on Dec. 30, 2010; Feb. 2, 2012>

(6) "Inevitable circumstances prescribed by Presidential Decree" in the proviso to Article 46-3 (3) of the Act, with the exception of its subparagraphs, means the following circumstances: <Amended on Dec. 30, 2010; Feb. 13, 2018>

1. Where inevitable circumstances are deemed to exist with respect to Article 46-3 (3) 1 of the Act: 　 Where a corporation, etc., established through a division falls under any item of Article 80-2 (1) 2;

2. Where inevitable circumstances are deemed to exist with respect to Article 46-3 (3) 2 of the Act: 　 Where stockholders referred to in paragraph (8) falls under any item of Article 80-2 (1) 1;

3. Where inevitable circumstances are deemed to exist with respect to Article 46-3 (3) 3 of the Act: 　 Where a corporation, etc. established through a division falls under any provision of Article 80-2 (1) 3 (a) through (c).

(7) Article 80-4 (8) shall apply mutatis mutandis to determination as to whether a corporation, etc., established through a division continues the business succeeded to from a divided corporation, etc., under Article 46-3 (3) 1 of the Act. <Amended on Dec. 30, 2010>

(8) "Stockholders of a divided corporation, etc., prescribed by Presidential Decree" in Article 46-3 (3) 2 of the Act means the stockholders provided for in Article 82-2 (8). <Amended on Feb. 21, 2014>

(9) "Employees specified by Presidential Decree" in Article 46-3 (3) 3 of the Act, with the exception of its items, means Korean nationals employed under an employment contract entered into under the Labor Standards Act; provided, the employees who fall under any subparagraph of Article 82-2 (10), among employees working for the divided business division, may be excluded herefrom. <Added on Feb. 13, 2018>

(10) A corporation, etc., established through a division which has made appropriation in the asset adjustment account under paragraph (1) shall file a detailed statement on the asset adjustment account in the form prescribed by Decree of the Ministry of Economy and Finance with the head of the tax office having jurisdiction over the place of tax payment, accompanied by the report provided for in Article 60 of the Act.

[This Article Added on Jun. 8, 2010]

Article 83(Succession of losses carried forward upon division) #

(1) "Rate of value of assets prescribed by Presidential Decree" in Article 46-4 (1) of the Act means the rate of the value of the business assets of a divided corporation (limited to the business succeeded) and of a counterpart corporation to a division and merger (including a disappearing corporation; hereafter the same shall apply in this Article) as of the registration date of the division and merger. In such cases, the value of the business assets of the divided corporation, etc. succeeded by the corporation, etc. established through the division shall be limited to the assets held or used continuously (including acquisition of replacing assets after disposition) as of the end date of each business year during which the succeeded losses are deducted and shall be based on the value of such business assets as of the registration date of the division and merger. <Amended on Feb. 12, 2019>

(2) Losses succeeded to and deducted by a corporation, etc. established through a division when it calculates the tax base of each business year under Article 46-4 (2) of the Act shall be the losses that belong to the business succeeded to by the corporation, etc. established through the division among the amount of losses referred to in Article 13 (1) 1 of the Act (referring to the amount computed by deeming the registration date of the division to be the start date of the business year) of the divided corporation, etc. as at the registration date of the division, and the amount of such losses shall be calculated each year by deeming that one year has passed sequentially from the business year following the business year in which the registration date of the division falls. <Amended on Feb. 12, 2019>

(3) Losses that belong to the business succeeded as prescribed in paragraph (2) shall be the amount computed by proportionally dividing the losses of the divided corporation, etc. by the rate of the business assets succeeded to by corporations, etc. established through the division among the value of the business assets of the divided corporation, etc. as at the registration date of the division. <Amended on Feb. 12, 2019>

(4) Article 81 (3) shall apply mutatis mutandis where any corporation, etc. established through a division applies tax reductions or exemptions or tax credits succeeded from a divided corporation, etc. under Article 46-3 (2) of the Act. <Added on Dec. 30, 2010>

(5) An amount exceeding the ceiling on donations referred to in Article 46-4 (6) of the Act (hereinafter referred to as "amount exceeding the ceiling on donations") belonging to a business succeeded from a divided corporation, etc. pursuant to paragraph (7) of that Act shall be the amount exceeding the ceiling on donations of a divided corporation, etc. as at the registration date of division, divided by the ratio of the business asset value respectively succeeded by a corporation established through division, etc. to the business asset value of the divided corporation, etc. <Added on Feb. 17, 2021>

(6) Articles 80-2 (7) and 80-4 (8) shall apply mutatis mutandis to determination as to whether a corporation, etc. established through a division continues the business succeeded to from a divided corporation, etc. and the application thereof for the purposes of deduction of losses; inclusion in gross income; addition of corporate tax; inclusion of an amount exceeding the ceiling on donations in deductible expenses. <Amended on Dec. 30, 2010; Feb. 13, 2018; Feb. 17, 2021>

[This Article Wholly Amended on Jun. 8, 2010]

[Title Amended on Dec. 30, 2010]

Article 83-2(Special cases concerning calculation of income amount for divided corporations surviving division) #

(1) The transfer value referred to in Article 46-5 (1) 1 of the Act shall be any of the following amounts: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 3, 2017>

1. In cases of a qualified division: 　 The net book value of assets as on the registration date of the division of the business category divided by a divided corporation, etc., under Article 46-5 (1) 2 of the Act;

2. In cases other than those falling under subparagraph 1: Sum total of the following amounts:

(a) Sum total of the value of the stocks of a corporation established through division, etc., money or other property value paid by the corporation established through division, etc., to the stockholders of the divided corporation due to the division; provided, in cases of a division and merger, where a counterpart corporation to the division and merger acquired the shares subject to the spin-off merger, although the spin-off merger consideration shares are not granted with respect to such stocks, the spin-off merger consideration shares shall be deemed granted by the equity ratio for the purposes of calculating the value of the stocks of the counterpart corporation to the division and merger;

(2) Where any corporate tax is refunded under the Framework Act on National Taxes in calculating the net book value of assets of a divided corporation, etc., under Article 46-5 (1) 2 of the Act, the amount equivalent to such refunded amount shall be added to the net book value of assets as on the registration date of the division of the divided corporation, etc.

[This Article Wholly Amended on Jun. 8, 2010]

Article 84(Inclusion of amount equivalent to capital gains from transfer of assets upon split-off in deductible expenses) #

(1) Of the value of stocks, etc., acquired from a corporation established through a division (hereafter in this Article referred to as "stocks, etc. of a corporation established through a division"), the amount that a divided corporation may include in deductible expenses under Article 47 (1) of the Act shall be the amount equivalent to capital gains from the transfer of assets generated by the split-off. <Amended on Feb. 2, 2012; Feb. 15, 2013>

(2) The amount included in deductible expenses under paragraph (1) shall be recognized as accelerated depreciation allowances of stocks, etc., of a corporation established through division. <Amended on Feb. 2, 2012; Feb. 15, 2013>

(3) "Amount prescribed by Presidential Decree" in the main sentence of Article 47 (2) of the Act, with the exception of its subparagraphs, means the amount computed by multiplying the accelerated depreciation allowances of stocks, etc., of a corporation established through division as of the last day (referring to the registration date of the division for the business year in which the registration date of the division falls; hereafter in this Article the same shall apply) of the immediately preceding business year by the rate calculated by subtracting the rate calculated by multiplying the rates provided for in subparagraphs 1 and 2 from the rate calculated by adding the rates provided for in subparagraphs 1 and 2: <Amended on Feb. 2, 2012; Feb. 15, 2013>

1. The ratio of the book value of stocks, etc., of a corporation established through division disposed of pursuant to Article 47 (2) 1 of the Act in the relevant business year to the book value of stocks, etc., of the corporation established through division, acquired pursuant to Article 47 (1) of the Act and held by a divided corporation as of the last day of the immediately preceding business year;

2. The ratio of capital gains from the transfer of the succeeded assets disposed of in the relevant business year to capital gains from the transfer of the assets provided for in paragraph (4) succeeded to from a divided corporation pursuant to Article 47 (1) of the Act (hereafter in this Article referred to as "succeeded assets") and held by a corporation established through division as of the last day of the immediately preceding business year.

(4) "Assets prescribed by Presidential Decree" in Article 47 (2) 2 of the Act means depreciable assets (including assets provided for in Article 24 (3) 1), land, stocks, etc. <Amended on Feb. 2, 2012>

(5) "Where a corporation established through division becomes subject to a qualified merger or qualified division or where such corporation is in other extenuating circumstances specified by Presidential Decree" in the proviso to Article 47 (2) of the Act means any of the following: <Amended on Feb. 17, 2021>

1. Where a divided corporation or a corporation established through division disposes of stocks, etc. and assets for the first time through a qualified merger, a qualified division, a qualified split-off, a qualified investment in kind, an all-inclusive exchange, etc. of stocks on which taxation has been deferred under Article 38 of the Restriction of Special Taxation Act, or an in-kind investment of stocks on which taxation has been deferred under Article 38-2 of that Act (hereafter in this Article and Article 84-2 referred to as "qualified restructuring");

2. Where a divided corporation owns all of the issued stocks or the total amount of investment of a corporation established through division in cases falling under any of the following:

(a) Where a divided corporation qualifiedly merges with a corporation established through division (including a qualified division and merger referred to in Article 46-4 (3) of the Act; hereafter in this Article the same shall apply) or is qualifiedly merged by a corporation established through division, and the divided corporation or corporation established through division disposes of stocks, etc. and assets;

(b) Where a divided corporation or corporation established through division disposes of stocks, etc. and assets in a qualified merger, qualified division, qualified split-off, or qualified investment in-kind; provided, this shall be limited to cases where the relevant divided corporation owns all of the issued shares or total investment amount of the merging corporation, corporation established through division or invested corporation following such qualified merger, qualified division, qualified split-off, or qualified investment in-kind, either directly or indirectly as prescribed by Decree of the Ministry of Economy and Finance;

3. Where a divided corporation or corporation established through division disposes of stocks, etc. and assets in a qualified division or qualified split-off of a business division falling under any subparagraph of Article 82-2 (3).

(6) Where a divided corporation becomes subject to the proviso to Article 47 (2) of the Act on the grounds specified in paragraph (5), the accelerated depreciation allowances of the stocks, etc., of the corporation established through division, held by the divided corporation, shall be set aside as follows: <Amended on Feb. 3, 2017>

1. The amount computed by multiplying the balance of the accelerated depreciation allowances of the stocks, etc., of the corporation established through division by the ratio specified in paragraph (3) 2 [transferred assets disposed of for purposes of computing the rate mean those that constitute transferred assets disposed of to the corporation (hereafter in this Article referred to as "corporation succeeding to assets") that succeeds to assets of the corporation established through division from the corporation established through division through qualified restructuring] shall be set aside as accelerated depreciation allowances of the stocks, etc. of the corporation succeeding to assets (hereafter in this Article referred to as "stocks, etc., of the corporation succeeding to assets"), which the divided corporation or the corporation established through division newly acquires; provided, if the corporation succeeding to assets is the divided corporation, the amount computed by apportioning the balance of accelerated depreciation allowances of the stocks, etc., of the corporation established through division in proportion to capital gains accruing from assets at the time of the initial split-off, among assets transferred to the divided corporation, shall be set aside as temporary depreciation allowances, if the assets are depreciated assets, or as accelerated depreciation allowances of such assets, if such assets are not depreciated assets;

2. The amount computed by multiplying the balance of accelerated depreciation allowances of the stocks, etc., of the corporation established through division by the ratio specified in paragraph (3) 1 [stocks disposed of for purposes of computing the rate mean those that constitute stocks, etc., of the corporation established through division, which have been disposed of to the corporation (hereafter in this Article referred to as "corporation succeeding to stocks") that succeeds stocks, etc. of the corporation established through division from the divided corporation through qualified restructuring] shall be set aside as accelerated depreciation allowances of the stocks, etc., of the corporation established through division, to which the corporation succeeding to stocks has succeeded.

(7) Where either of the following events occurs in relation to a divided corporation that has newly set aside accelerated depreciation allowances pursuant to paragraph (6), the corporation established through division, or the corporation succeeding to stocks, the corporation shall include the amount computed by applying paragraph (3) mutatis mutandis in gross income when computing the amount of income for the business year in which such event occurs; however, in cases of the proviso to paragraph (6) 1, the amount computed by the methods prescribed in Article 64 (4) shall be included in gross income; provided, this shall not apply to cases falling under subparagraph 2 or 3 of paragraph (5). <Added on Feb. 15, 2013; Feb. 12, 2016; Feb. 3, 2017; Feb. 17, 2021>

1. Where a divided corporation or the corporation established through division disposes of the stocks, etc. of the corporation succeeding to assets, which it newly acquired upon qualified restructuring, or where the corporation succeeding to stocks disposes of the stocks, etc., of the corporation established through division, to which it succeed upon qualified restructuring;

2. Where the corporation succeeding to assets disposes of assets provided for in paragraph (4), among assets to which it succeeded from the corporation established through division, or where the corporation established through division disposes of transferred assets. In such cases, the corporation established through division or corporation succeeding to assets shall notify the divided corporation, corporation established through division, corporation succeeding to stocks, or corporation succeeding to assets of the disposition of such assets within one month from the date of the disposition.

(8) Where a divided corporation, corporation established through division or corporation succeeding to stocks becomes subject to the proviso, with the exception of the subparagraphs, of paragraph (7) on the grounds specified in paragraph (5) 2 or 3, paragraph (6) shall apply mutatis mutandis to the method for substituting compressed account reserve funds of the stocks, etc., of the corporation established through division or corporation succeeding to stocks, held by the divided corporation. <Added on Feb. 17, 2021>

(9) If either of the following events occurs in relation to a divided corporation that has set aside accelerated depreciation allowances pursuant to paragraph (6), a corporation established through division, or a corporation succeeding to assets during the period set forth in paragraph (13), such corporation shall include the balance of the accelerated depreciation allowances fully in gross income when computing the amount of income for the business year in which such event occurs: <Added on Feb. 15, 2013; Feb. 21, 2014; Feb. 12, 2016; Feb. 3, 2017; Feb. 17, 2021>

1. Where the corporation succeeding to assets closes the business to which it succeeded from the corporation established through division upon qualified restructuring, or where the corporation established through division closes the business to which it succeeded from the divided corporation;

2. Where the ratio of the stocks, etc., of the corporation succeeding to assets, which are held by the divided corporation or the corporation established through division, to the total number of outstanding stocks or the total amount of investment of the corporation succeeding to assets (hereafter in this Article referred to as "ratio of shares of the corporation succeeding to assets") is less than 50/100 of the ratio of shares of the corporation succeeding to assets on the acquisition date of stocks, etc., of the corporation succeeding to assets, or where the ratio of the stocks, etc., of the corporation established through division, which are held by the corporation succeeding to assets, to the total number of outstanding stocks or the total amount of investment of the corporation established through division (hereafter in this Article referred to as "ratio of shares of the corporation established through division") is less than 50/100 of the ratio of shares of the corporation established through division on the acquisition date of stocks, etc., of the corporation established through division.

(10) A divided corporation, corporation established through division or corporation succeeding to stocks that establishes compressed account reserve funds pursuant to paragraph (8) shall, if any reason prescribed in the subparagraphs of paragraph (7) occurs, include an amount calculated by applying mutatis mutandis paragraph (3) in its gross income for the purpose of calculating the amount of income for the business year in which the date of the occurrence of the relevant reason falls; however, in cases falling under the proviso of paragraph (6) 1, the amount shall be included in gross income in the manner prescribed in each subparagraph of Article 64 (4); provided, this shall not apply to cases falling under paragraph (5) 2 or 3. <Added on Feb. 17, 2021>

(11) A divided corporation, corporation established through division or corporation succeeding to stocks that establishes compressed account reserve funds pursuant to paragraph (8) shall, if any reason prescribed in the subparagraphs of paragraph (9) occurs within the period prescribed in paragraph (13), include the entire balance of the compressed account reserve funds in its gross income for the purpose of calculating the amount of income for the business year in which the date of the occurrence of the relevant reason falls. <Added on Feb. 17, 2021>

(12) "Extenuating circumstances prescribed by Presidential Decree" in the proviso to Article 47 (1) of the Act, with the exception of its subparagraphs, and the proviso to Article 47 (3) of the Act means the following circumstances: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 13, 2018; Feb. 17, 2021>

1. Where such circumstances are related to Article 46 (2) 2 or 47 (3) 2 of the Act: 　 Where a divided corporation falls under any item of Article 80-2 (1) 1;

2. Where such circumstances are related to Article 46 (2) 3 or 47 (3) 1 of the Act: 　 Where a corporation established through division, etc., falls under any item of Article 80-2 (1) 2;

3. Where such circumstances are related to Article 46 (2) 4 or 47 (3) 3 of the Act: 　 In either of the following cases:

(a) Where such circumstances are related to Article 46 (2) 4 of the Act: Where a corporation established through division, etc. falls under any provision of Article 80-2 (1) 3 (a) through (c) or where the number of employees under Article 82-4 (9) who work for the divided division as of one month before the registration date of division is less than five;

(b) Where such circumstances are related to Article 47 (3) 3 of the Act: Where a corporation established through division, etc. falls under any provision of Article 80-2 (1) 3 (a) through (c).

(13) "Period prescribed by Presidential Decree" in the main sentence of Article 47 (3) of the Act, with the exception of its subparagraphs, means two years (or three years in cases under Article 47 (3) 3 of the Act) beginning on the first day of the business year following the business year in which the registration date of the division falls. <Amended on Feb. 2, 2012; Feb. 3, 2017; Feb. 13, 2018; Feb. 17, 2021>

(14) "Employees specified by Presidential Decree" in Article 47 (3) 3 of the Act means Korean nationals employed under an employment contract entered into under the Labor Standards Act; provided, the employees who fall under any subparagraph of Article 82-2 (10), among employees working for the divided business division, may be excluded herefrom. <Added on Feb. 13, 2018; Feb. 17, 2021>

(15) Where a divided corporation recognized accelerated depreciation allowances in accordance with paragraph (1) or (2), the corporation established through division may succeed to the tax reductions, exemptions or credits under Article 59 of the Act, which the divided corporation was entitled before the division, to be entitled to such tax reductions, exemptions or credits. In such cases, if the Act or other statutes provides for requirements, etc. for such tax reductions, exemptions or credits, such provisions shall apply only where a corporation established through division meets such requirements, etc. and a corporation established through division may be entitled only to the tax reductions, exemptions or credits applicable to the business to which the corporation succeeds as follows: <Added on Feb. 13, 2018; Feb. 17, 2021>

1. Where carried-over tax reductions, exemptions or credits are related to a specific business or asset: The corporation established through division who succeeded to the specific business or asset shall be entitled to deductions;

2. Where carried-over tax reductions, exemptions or credits are not related to any specific business or asset referred to in subparagraph 1: The corporation established through division shall be entitled to deductions in proportion to the ratio of the value of the fixed assets for business year to which the corporation established through division succeeded to the value of fixed assets of the divided corporation for business use.

(16) Article 81 (3) shall apply mutatis mutandis where a corporation established through division applies to the tax reductions, exemptions or credits succeeded by the divided corporation under Article 47 (4) of the Act. <Added on Feb. 13, 2018; Feb. 17, 2021>

(17) Articles 80-2 (7) and 80-4 (8) shall apply mutatis mutandis to determination as to whether a corporation established through division or a corporation succeeding to assets continues or closes the succeeded business and the application thereof. <Amended on Dec. 30, 2010; Feb. 15, 2013; Feb. 3, 2017; Feb. 13, 2018; Feb. 17, 2021>

(18) A domestic corporation which wishes to qualify for Article 47 (1) of the Act shall file an application for special taxation on split-off in the form prescribed by Decree of the Ministry of Economy and Finance and the detailed statement on capital gains on a transfer of assets with the head of the tax office having jurisdiction over the place of tax payment at the time of filing a return pursuant to Article 60 of the Act, jointly with the corporation established through division or the corporation succeeding to assets. <Amended on Feb. 2, 2012; Feb. 12, 2016; Feb. 3, 2017; Feb. 17, 2021>

(19) When a newly established spin-off company or an asset-succeeding company disposes of succeeded assets, it shall submit a statement of capital gains on the assets, as provided in paragraph (18), to the head of the competent tax office at the time of filing the tax base return under Article 60 of the Act for the business year in which the disposal date falls.

[This Article Wholly Amended on Jun. 8, 2010]

Article 84-2(Inclusion of amount equivalent to capital gains from transfer of assets upon investment in kind in deductible expenses) #

(1) Of the value of stocks, etc., acquired from an invested corporation (hereafter in this Article referred to as "stocks, etc., of an invested corporation"), the amount that an investing corporation shall include in deductible expenses under Article 47-2 (1) of the Act shall be the amount equivalent to capital gains from the transfer of assets accruing from the investment in kind. <Amended on Feb. 2, 2012; Feb. 15, 2013>

(2) The amount included in deductible expenses under paragraph (1) shall be recognized as accelerated depreciation allowances of the stocks, etc., of the invested corporation. <Amended on Feb. 2, 2012; Feb. 15, 2013>

(3) "Amount prescribed by Presidential Decree" in the main sentence of Article 47-2 (2) of the Act, with the exception of its subparagraphs, means the amount computed by multiplying accelerated depreciation allowances of the stocks, etc., of an invested corporation as on the last day (referring to the date of the investment in kind for the business year in which the date of the investment in kind falls; hereafter in this Article the same shall apply) of the immediately preceding business year, by the rate calculated by subtracting the rate calculated by multiplying the ratios provided for in subparagraphs 1 and 2 from the rate calculated by adding the rates provided for in subparagraphs 1 and 2: <Amended on Feb. 2, 2012; Feb. 15, 2013>

1. The ratio of the book value of stocks, etc., of an invested corporation disposed of pursuant to Article 47-2 (2) 1 of the Act in the relevant business year to the book value of stocks, etc., of the invested corporation acquired pursuant to Article 47-2 (1) of the Act and held by an investing corporation as on the last day of the immediately preceding business year;

2. The ratio of capital gains from the transfer of the succeeded assets disposed of in the relevant business year to the capital gains (referring to the amount computed by subtracting the book value of the succeeded assets held by an investing corporation, etc., on the date preceding the date of the investment in kind from the market price of the succeeded assets as on the date of the investment in kind) from the transfer of the assets provided for in paragraph (4) succeeded to from the investing corporation, etc., pursuant to Article 47-2 (1) of the Act (hereafter in this Article referred as "succeeded assets") and held by an invested corporation as on the last day of the immediately preceding business year.

(4) "Assets prescribed by Presidential Decree" in Article 47-2 (2) 2 of the Act means depreciable assets (including the assets provided for in Article 24 (3) 1), land, stocks, etc. <Amended on Feb. 2, 2012>

(5) "Where an invested corporation becomes subject to a qualified merger or qualified division, or where such corporation is in other extenuating circumstances prescribed by Presidential Decree" in the proviso to Article 47-2 (2) of the Act, with the exception of its subparagraphs, means any of the following cases: <Amended on Feb. 17, 2021>

1. Where an investing corporation or invested corporation disposes of its stocks, etc. and assets for the first time pursuant to qualified restructuring;

2. Where an investing corporation owns all of the issued stocks or the total amount of investment of an invested corporation in cases falling under any of the following:

(a) Where an investing corporation qualifiedly merges with an invested corporation (including a qualified division and merger referred to in Article 46-4 (3) of the Act; hereafter in this Article the same shall apply) or is qualifiedly merged by an invested corporation, and the investing corporation or invested corporation disposes of stocks, etc. and assets;

(b) Where an investing corporation or invested corporation disposes of stocks, etc. and assets through a qualified merger, qualified division, qualified split-off, or qualified investment in-kind; provided, this shall be limited to cases where the relevant investing corporation owns all of the issued shares or the total investment amount of the merging corporation, corporation established through division or invested corporation following such qualified merger, qualified division, qualified split-off, or qualified investment in-kind, either directly or indirectly as prescribed by Decree of the Ministry of Economy and Finance;

3. Where an investing corporation or invested corporation disposes of stocks, etc. and assets through a qualified division or qualified split-off of a business division falling under any subparagraph of Article 82-2 (3).

(6) Where an investing corporation becomes subject to the proviso to Article 47-2 (2) of the Act pursuant to paragraph (5), the accelerated depreciation allowances of the stocks, etc., of the invested corporation, held by the investing corporation, shall be set aside as follows: <Amended on Feb. 3, 2017>

1. The amount of accelerated depreciation allowances of the stocks, etc., of the corporation succeeding to assets, which the investing corporation or the invested corporation shall newly acquire (hereafter in this Article referred to as "stocks, etc., of the corporation succeeding to assets") shall be computed by multiplying the balance of the accelerated depreciation allowances of the stocks, etc., of the invested corporation by the ratio specified in paragraph (3) 2 (the transferred assets disposed of for purposes of calculating the ratio means those that constitute transferred assets disposed of to the corporation that succeeds to assets of the invested corporation from the invested corporation (hereafter in this Article referred to as "corporation succeeding to assets")); provided, if the corporation succeeding to assets is the investing corporation, the amount computed by apportioning the balance of accelerated depreciation allowances of the stocks, etc., of the invested corporation in proportion to capital gains accruing from assets at the time of the initial investment in kind, among assets transferred to the investing corporation, shall be set aside as the temporary depreciation allowances, if the assets are depreciated assets, or as compressed accounts reserve funds of such assets, if such assets are not depreciated assets;

2. The amount computed by multiplying the balance of accelerated depreciation allowances of the stocks, etc., of the invested corporation by the ratio specified in paragraph (3) 1 [stocks disposed of for purposes of computing the rate mean those that constitute stocks, etc., of the corporation established through division, which have been disposed of to the corporation (hereafter in this Article referred to as "corporation succeeding to stocks") that succeeds stocks, etc., of the invested corporation from the investing corporation through qualified restructuring] shall be set aside as accelerated depreciation allowances of the stocks, etc., of the invested corporation, to which the corporation succeeding to stocks has succeeded.

(7) Where either of the following events occurs in relation to an investing corporation, an invested corporation, or a corporation succeeding to stocks, which has newly set aside as accelerated depreciation allowances pursuant to paragraph (6), the amount computed by applying paragraph (3) mutatis mutandis shall be included in gross income at the time of computing the amount of income for the business year in which such event occurs; however, in cases of the proviso to paragraph (6) 1, such amount shall be included in gross income by the methods prescribed in Article 64 (4); provided, this shall not apply in cases falling under the ground prescribed in paragraph (5) 2 or 3: <Added on Feb. 15, 2013; Feb. 3, 2015; Feb. 3, 2017; Feb. 17, 2021>

1. Where the investing corporation or the invested corporation disposes of stocks, etc., of the corporation succeeding to assets, newly acquired upon qualified restructuring, where the corporation succeeding to assets disposes of the stocks, etc., of the invested corporation, to which it has succeeded upon qualified restructuring;

2. Where the corporation succeeding to assets disposes of assets provided for in paragraph (4), to which it has succeeded from the invested corporation upon qualified restructuring, or where the invested corporation disposes of transferred assets. In such cases, the invested corporation or corporation succeeding to assets shall notify the investing corporation, invested corporation, corporation succeeding to stocks, or corporation succeeding to assets of the disposition of such assets within one month from the date of the disposition.

(8) Where an investing corporation, invested corporation or corporation succeeding to stocks becomes subject to the proviso, with the exception of the subparagraphs, of paragraph (7) on the ground specified in paragraph (5) 2 or 3, paragraph (6) shall apply mutatis mutandis to the method for substituting compressed account reserve funds of the stocks, etc., of the invested corporation or corporation succeeding to stocks, held by the relevant corporation. <Added on Feb. 17, 2021>

(9) Where either of the following events occurs in relation to an investing corporation that has newly set aside as accelerated depreciation allowances pursuant to paragraph (6), an invested corporation, or a corporation succeeding to assets during the period set forth in paragraph (13), the accelerated depreciation allowances shall be fully included in gross income in computing the amount of income for the business year in which such event occurs: <Added on Feb. 15, 2013; Feb. 3, 2015; Feb. 12, 2016; Feb. 3, 2017; Feb. 17, 2021>

1. Where the corporation succeeding to assets closes the business to which it succeeded from the invested corporation upon qualified restructuring, or where the invested corporation closes the business to which it succeeded from the investing corporation;

2. Where the ratio of the stocks, etc., of the corporation succeeding to assets, which are held by the investing corporation or the invested corporation, to the total number of outstanding stocks or the total amount of investment of the corporation succeeding to assets (hereafter in this Article referred to as "ratio of shares of the corporation succeeding to assets") is less than 50/100 of the ratio of shares of the corporation succeeding to assets on the acquisition date of stocks, etc., of the corporation succeeding to assets, or where the ratio of the stocks, etc., of the invested corporation, which are held by the corporation succeeding to assets, to the total number of outstanding stocks or the total amount of investment of the invested corporation (hereafter in this Article referred to as "ratio of shares of the invested corporation") is less than 50/100 of the ratio of shares of the invested corporation on the acquisition date of stocks, etc. of the invested corporation.

(10) An investing corporation, invested corporation or corporation succeeding to stocks that newly establishes compressed account reserve funds pursuant to paragraph (8) shall, if any reason prescribed in the subparagraphs of paragraph (7) occurs, include an amount calculated by applying mutatis mutandis paragraph (3) in its gross income for the purpose of calculating the amount of income for the business year in which the date of the occurrence of the relevant reason falls; however, in cases falling under the proviso to paragraph (6) 1, the amount shall be included in gross income in the manner prescribed in each subparagraph of Article 64 (4); provided, this shall not apply to cases falling under paragraph (5) 2 or 3. <Added on Feb. 17, 2021>

(11) An investing corporation, invested corporation or corporation succeeding to stocks that establishes compressed account reserve funds pursuant to paragraph (8) shall, if any reason prescribed in the subparagraphs of paragraph (9) occurs within the period prescribed in paragraph (13), include the entire balance of the compressed account reserve funds in its gross income for the purpose of calculating the amount of income for the business year in which the date of the occurrence of the relevant reason falls. <Added on Feb. 17, 2021>

(12) "Extenuating circumstances prescribed by Presidential Decree" in the provisos to Article 47-2 (1) and (3) of the Act, with the exception of their subparagraphs, means the following cases: <Amended on Mar. 31, 2011; Feb. 2, 2012; Feb. 17, 2021>

1. Where such circumstances are related to Article 47-2 (1) 4 or (3) 2 of the Act: 　 Where an investing corporation falls under any item of Article 80-2 (1) 1;

2. Where such circumstances are related to Article 47-2 (1) 2 or (3) 1 of the Act: 　 Where an invested corporation falls under any item of Article 80-2 (1) 2.

(13) "Period prescribed by Presidential Decree" in the main sentence of Article 47-2 (3) of the Act, with the exception of its subparagraphs, means two years beginning on the first day of the business year following the business year in which investment in kind is made. <Amended on Feb. 2, 2012; Feb. 3, 2017; Feb. 17, 2021>

(14) Articles 80-2 (7) and 80-4 (8) shall apply mutatis mutandis to determination as to whether an invested corporation or a corporation succeeding to assets continues or closes the business to which it succeeded and the application thereof. <Amended on Dec. 30, 2010; Feb. 15, 2013; Feb. 3, 2017; Feb. 13, 2018; Feb. 17, 2021>

(15) Deleted. <Feb. 13, 2018>

(16) Deleted. <Feb. 13, 2018>

(17) A investing corporation or corporation succeeding to stocks that wishes to qualify for Article 47-2 (1) of the Act shall file an application for special taxation on investment in kind in the form prescribed by Decree of the Ministry of Economy and Finance and the detailed statement on the capital gains on the transfer of assets, with the head of the tax office having jurisdiction over the place of tax payment, jointly with the invested corporation or the corporation succeeding to assets, at the time of filing a return under Article 60 of the Act. <Amended on Feb. 2, 2012; Feb. 3, 2017; Feb. 17, 2021>

(18) When the investee corporation or the asset-succeeding corporation disposes of the succeeded assets, it shall submit a statement detailing the capital gains on the assets, as provided in paragraph (17), to the head of the competent tax office at the time of filing the tax base return under Article 60 of the Act for the business year in which the disposal date falls. <Added on Feb. 28, 2025>

[This Article Wholly Amended on Jun. 8, 2010]

Article 86(Inclusion of amount equivalent to transfer marginal profits of assets due to exchange in deductible expenses) #

(1) "Business prescribed by Presidential Decree" in Article 50 (1) of the Act means business, other than the business provided for in Articles 29 (3) and 60 (1) 1 through 3 of the Enforcement Decree of the Restriction of Special Taxation Act. <Amended on Dec. 31, 2001; Mar. 22, 2004; Feb. 19, 2005; Feb. 22, 2008; Dec. 30, 2010; Feb. 15, 2022>

(2) "Assets prescribed by Presidential Decree" in Article 50 (1) of the Act means land, buildings, assets eligible for deduction provided for in Article 24 (1) 1 of the Act on Restriction on Special Cases concerning Taxation, and other assets prescribed by Decree of the Ministry of Economy and Finance. <Amended on Aug. 14, 2001; Feb. 19, 2005; Feb. 29, 2008; Feb. 18, 2010; Jun. 3, 2011; Feb. 17, 2021>

(3) "Exchange among several corporations prescribed by Presidential Decree" in Article 50 (1) of the Act means an exchange of assets among at least three corporations under one exchange contract. <Amended on Jun. 3, 2011>

(4) The amount equivalent to the transfer marginal profits included in deductible expenses under Article 50 (1) of the Act shall be an amount computed by subtracting the amount provided for in subparagraph 2 (if the amount is in excess of the amount computed by subtracting the book value from the market price of the business assets, such excess amount shall be excluded) from the amount provided in subparagraph 1: <Amended on Dec. 31, 2001; Feb. 12, 2019>

1. The value of assets acquired through exchange;

2. If some payments are made in cash, such amount and the book value of business assets.

(5) Article 64 (3) through (5) shall apply mutatis mutandis to the inclusion of an amount equivalent to transfer marginal profits included in deductible expenses under paragraph (4) in the calculation of deductible expenses or gross income. <Amended on Feb. 12, 2019>

(6) A domestic corporation that intends to be applicable under Article 50 (1) of the Act shall submit a detailed statement on assets exchanges in the form stipulated by Decree of the Ministry of Economy and Finance, along with the report provided for in Article 60 of the Act, to the head of the tax office having jurisdiction over the place of tax payment. <Amended on Feb. 29, 2008>

Article 86-3(Income deductions for special purpose companies) #

(1) "Distributable profits prescribed by Presidential Decree" in Article 51-2 (1) of the Act, with the exception of its subparagraphs, means the amount calculated by subtracting corporate tax expenses on the financial statements prepared in accordance with the Korean Financial Accounting Standards, adding carried-over retained earnings to the profit for the year or deducting carried-over losses from the net income, and then deducting earned surplus reserves accumulated under Article 458 of the Commercial Act (hereafter referred to in this paragraph as "distributable profit"). In such cases, the following amounts shall be excluded from the distributable profit: <Amended on Feb. 12, 2016; Feb. 28, 2025>

1. Dividends provided for in subparagraph 8 of Article 18 of the Act;

2. The following asset valuation gains or losses shall be excluded from the current net income, retained earnings carried forward, or accumulated deficit carried forward:

(a) Asset valuation gains or losses under subparagraph 2 (a) through (c) of Article 73; provided, asset valuation gains or losses under subparagraph 2 (c) of Article 73 held by investment companies, etc., which are valued at fair market value under Article 75 (3) shall be included in distributable profits;

(b) Gains or losses from the valuation of assets held by an entrusted management real estate investment trust or a corporate restructuring real estate investment company under the Real Estate Investment Company Act.

(2) "Corporation prescribed by Presidential Decree" in Article 51-2 (1) 6 of the Act means a corporation incorporated upon meeting the requirements for investment companies referred to in Article 4 (2) 3 (c) of the Enforcement Decree of the Special Act on Private Rental Housing to engage in rental business. <Added on Feb. 9, 2006; Jun. 20, 2008; Dec. 30, 2010; Dec. 28, 2015; Sep. 26, 2023>

(3) Deleted. <Feb. 17, 2021>

(4) Deleted. <Feb. 17, 2021>

(5) Deleted. <Feb. 17, 2021>

(6) Deleted. <Feb. 17, 2021>

(7) Deleted. <Feb. 17, 2021>

(8) Deleted. <Feb. 17, 2021>

(9) Any corporation that wishes to qualify for Article 51-2 (1) of the Act shall file an application for income deduction in the form stipulated by Ordinance of the Ministry of Economy and Finance with the head of the tax office having jurisdiction over the place of tax payment, along with the report on the tax base provided for in Article 60 of the Act and a statement by real beneficiary of the relevant dividend income (referring to a person who holds the right to dispose of the relevant income, taking legal or economic risks in connection with the income, and actually holds the ownership of such income; hereinafter the same shall apply): Provided, That any corporation that wishes to qualify for Article 51-2 (1) of the Act pursuant to the proviso to Article 51-2 (2) 1 shall submit the written confirmation of the application of special case of taxation on partnership enterprise and the partnership taxation in the form stipulated by Ordinance of the Ministry of Economy and Finance which is submitted by the partnership enterprise (including the higher-level partnerships if all or part of the partners constitute the higher-level partnerships under Article 100-15 (3) of the Act on Restriction on Special Cases concerning Taxation) that receives dividends by the filing deadline specified under Article 100-23 (1) of the Restriction of Special Taxation Act. <Amended on Feb. 18, 2010; Feb. 28, 2023; Feb. 29, 2024>

(10) "Corporation meeting the standards prescribed by Presidential Decree" in Article 51-2 (2) 2 of the Act means a corporation that meets all of the following requirements: <Added on Feb. 9, 2006; Feb. 18, 2010>

1. The corporation shall be incorporated by means of private offering of shares;

2. Not more than two individuals or one individual and his or her relatives (hereafter in this subparagraph referred to as "individuals, etc.") shall own at least 95/100 of the total number of issued stocks or the total amount of investment; provided, this shall not apply where the individuals, etc., do not have the right to claim the distribution of dividends and residual assets.

[This Article Added 16658, Dec. 31, 1999]

[Moved from Article 86-2 <Feb. 15, 2022>]

Article 88(Types of wrongful calculations) #

(1) "Where ... the tax burden of a domestic corporation has been unjustly reduced" in Article 52 (1) of the Act means any of the following cases: <Amended on Feb. 19, 2005; Feb. 9, 2006; Feb. 28, 2007; Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Feb. 18, 2010; Jun. 8, 2010; Jun. 3, 2011; Feb. 2, 2012; Feb. 12, 2016; Feb. 13, 2018; Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021>

1. Where assets are purchased or received as investments in kind at a price higher than the market price or the assets are over-depreciated;

2. Where unprofitable assets are purchased or received as investments in kind or expenses are borne for such assets;

3. Where assets are transferred or invested in kind gratuitously or at a price lower than the market price; provided, excluded herefrom shall be the cases where stocks are transferred upon the exercise or grant of stock options, etc. under the main sentence of subparagraph 19-2 of Article 19, with the exception of its items;

3-2. For a merger (including a division and merger) or division of corporations which are related parties, where capital gains or losses from a transfer upon the merger or division are reduced because the merger or division is made at an unfair ratio; provided, excluded herefrom shall be a merger (including a division and merger) or division referred to in Article 165-4 of the Financial Investment Services and Capital Markets Act;

4. Where doubtful or inferior assets are refunded or non-performing loans are transferred;

5. Where contributions are made in place of another party;

6. Where money, other assets or services are lent or provided gratuitously or at an interest rate, tariff, or rent lower than the market price; provided, this shall not apply to any of the following cases:

(a) Where money is paid to the exercise or grant of stock options, etc. referred to in the subparagraph 19-2 of Article 19 with the exception of its items;

(b) Where company houses (including rental company houses prescribed by Decree of the Ministry of Economy and Finance) are provided to executive officers (including executive officers who are minority stockholders, etc.) and employees, other than stockholders, contributors, etc.;

(c) Providing services pursuant to the requirements prescribed by Decree of the Ministry of Economy and Finance, such as the absence of any change in the amount of consolidated corporate tax among consolidated corporations subject to the consolidated tax return system prescribed in Article 76-8 of the Act;

7. Where money, other assets or services are borrowed or received at an interest rate, tariff, or rental rate higher than the market price; provided, excluded herefrom shall be cases of receiving services in compliance with the requirements prescribed by Decree of the Ministry of Economy and Finance, such as the absence of any change in the amount of consolidated corporate tax among consolidated corporations subject to the consolidated tax return system prescribed in Article 76-8 of the Act;

7-2. Where profits are distributed in such a manner as not exercising the derivative-based rights prescribed by Decree of the Ministry of Economy and Finance or as adjusting the period of exercise;

8. Where profits are distributed by a corporation which is a stockholder (excluding minority shareholders, etc.; hereafter in this Article the same shall apply) to another stockholder, etc., who is a related party of the corporation through any of the following capital transactions:

(a) Where stocks are evaluated higher or lower than their market price and a merger is made at an unfair ratio in the merger (including a division and merger) between corporations that are related parties; provided, this shall not apply to any merger (including a division and merger) prescribed in Article 165-4 of the Financial Investment Services and Capital Markets Act;

(b) Where the right to allot and assume control of new stocks (including convertible bonds, warrant bonds, exchangeable bonds, etc.; hereafter in this item the same shall apply) in transactions that increases the capital (including the amount of investments) of a corporation is partially or fully waived (excluding where the waived stocks are allotted by means of public offering provided for in Article 9 (7) of the Financial Investment Services and Capital Markets Act) or bought at a price higher than the market price of the new stocks;

(c) Where stocks held by some stockholders are retired in the reduction of capital of a corporation at a rate which is not proportional to the stocks held by the relevant stockholders;

8-2. Cases other than those provided for in subparagraph 8, where it is deemed that a corporation has distributed its profits through a capital transaction, such as the increase or reduction of capital, a merger (including a division and merger), a division, the conversion or exchange of stocks through convertible bonds, etc., into or for stocks or the acceptance of stocks with convertible bonds, etc., pursuant to Article 40 (1) of the Inheritance Tax and Gift Tax Act; provided, excluded herefrom shall be where stocks are issued upon the exercise of stock options, among the stock options, etc., provided for in subparagraph 19-2 of Article 19 with the exception of its items;

9. Other cases in which it is deemed that activities, calculations, or other distributions of the profit of a corporation equivalent to those provided for in subparagraphs 1 through 3, 3-2, 4 through 7, 7-2, 8 and 8-2 have occurred.

(2) Paragraph (1) shall apply to transactions between the relevant corporation and any related party (including transactions made through a person, other than a related party) as at the time of the activities; provided, the determination as to whether a corporation is a related party for the purposes of paragraph (1) 8 (a) shall be made based on the period beginning on the first day of the business year immediately preceding the business year which includes the registration date of the merger (in cases of a merger between corporations with different starting dates, it shall be the earlier date) and ending on the registration date of the merger. <Amended on Dec. 31, 2001; Feb. 2, 2012>

(3) Paragraph (1) 1, 3, 6, 7 and 9 (limited to any activity or calculation similar to those provided for in paragraph (1) 1, 3, 6 and 7) shall only apply where the difference between the market price and the transaction price is at least three hundred million won or at least an amount equivalent to 5/100 of the market price. <Added on Feb. 28, 2007>

(4) Paragraph (3) shall not apply where stocks issued by a listed corporation are traded. <Added on Feb. 28, 2007; Feb. 4, 2009; Feb. 17, 2021>

Article 89(Scope of market price) #

(1) In applying Article 52 (2) of the Act, where there is a price at which the relevant corporation has continuously made transactions with many and unspecified persons, other than a related party, or a price at which transactions have been made ordinarily between third parties who are not related parties in a situation similar to the relevant transaction, such price shall be used; provided, where shares issued by a listed corporation are traded in any of the following methods, the market value of such shares shall be the final market value (referring to the final market value immediately preceding the trading day if the shares are traded during the closure of an exchange) of an exchange referred to in Article 8-2 (2) of the Financial Investment Services and Capital Markets Act (hereinafter referred to as the "exchange") of the trading day; where a de facto transfer of management rights is involved as prescribed by Decree of the Ministry of Economy and Finance (excluding where the relevant shares fall under any subparagraph of Article 53 (8) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act), 20/100 of the value shall be added: <Amended on Feb. 28, 2007; Feb. 4, 2009; Feb. 2, 2012; Feb. 17, 2021; Feb. 28, 2023>

1. Trading outside the securities market prescribed in Article 8-2 (4) 1 of the Act on the Capital Market and Financial Investment Business.

2. Methods prescribed by Decree of the Ministry of Economy and Finance, including bulk trading.

(2) If the market value is unclear when applying Article 52 (2) of the Act, the amount shall be computed by sequentially applying the following subparagraphs: <Amended on Dec. 30, 2002; Dec. 30, 2003; Feb. 19, 2005; Dec. 30, 2010; Feb. 15, 2013; Feb. 21, 2014; Feb. 12, 2016; Aug. 31, 2016; Feb. 3, 2017; Feb. 13, 2018; Feb. 12, 2019; Feb. 17, 2021>

1. The value appraised by an appraisal firm under the Act on Appraisal and Certified Appraisers (the average appraised value, if the value is appraised by at least two appraisal firms), if such value is available; provided, this shall not apply to stocks, etc. and virtual assets;

2. The value appraised by applying mutatis mutandisArticles 38, 39, 39-2, 39-3, and 61 through 66 of the Inheritance Tax and Gift Tax Act. In such cases, the appraised value of stocks (limited to stocks issued by a listed corporation) held by the corporation that issued the relevant unlisted stocks in appraising the unlisted stocks pursuant to Article 63 (1) 1 (b) of the Inheritance Tax and Gift Tax Act and Article 54 of the Enforcement Decree of that Act shall be the closing price at the exchange on the base date for the appraisal, and "immediately preceding six months (three months for stocks, etc., upon which gift tax is imposed)" shall be construed as "immediately preceding six months" in applying mutatis mutandisArticle 63 (2) 1 and 2 of the Inheritance Tax and Gift Tax Act and Article 57 (1) and (2) of the Enforcement Decree of that Act.

(3) In lending or borrowing money referred to in Article 88 (1) 6 and 7, the lessee’s incremental borrowing rate of interest (hereinafter referred to as "lessee’s incremental borrowing rate of interest") prescribed by Decree of the Ministry of Economy and Finance shall be the rate prevailing in the market, notwithstanding paragraphs (1) and (2); provided, in any of the following cases, the interest rate prevailing in the market on overdraft (hereinafter referred to as "interest rate on overdraft") prescribed by Decree of the Ministry of Economy and Finance according to the classification in each subparagraph shall apply: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 21, 2014>

1. Where it is impracticable to apply the lessee’s incremental borrowing rate of interest and there exists a ground prescribed by Decree of the Ministry of Economy and Finance: The interest rate prevailing in the market on overdraft shall apply only to relevant loans or borrowings;

1-2. Where there are loans, the maturity period of which exceeds five years, and other cases prescribed by Decree of the Ministry of Economy and Finance: The interest rate prevailing in the market on overdraft shall apply only to relevant loans or borrowings;

2. Where the relevant corporation chooses the interest rate prevailing in the market on overdraft, as prescribed by Decree of the Ministry of Economy and Finance, upon filing a report under Article 60 of the Act: The interest rate prevailing in the market on overdraft shall apply to the business year for which interest rate prevailing in the market on overdraft is chosen and two consecutive business years thereafter.

(4) Where paragraphs (1) and (2) cannot apply to the provision of assets (excluding money) or services referred to in Article 88 (1) 6 and 7, the amount computed as follows shall be deemed their market price: <Amended on Dec. 29, 2000; Dec. 31, 2001; Feb. 2, 2012; Feb. 17, 2021>

1. Where tangible or intangible assets are provided or received, the amounts calculated by multiplying the term deposit interest rate by the amount equivalent to 50/100 of the market value of the relevant assets less the amount of rental key money or deposits received in connection with such assets;

2. Where construction or other services are provided or received, the sum of the amount required to provide the relevant services (including direct and indirect expenses; hereafter in this subparagraph referred to as "costs") and costs multiplied by the rate of profit (referring to the rate divided by the balance of sales calculated according to Korean Financial Accounting Standards less the costs, divided by the costs) during the relevant business year from transactions providing similar services to persons other than related parties or from general service provision transactions between third parties who are not special related persons.

(5) If a corporation has conducted any of the wrongful calculations provided for in Article 88, the difference, etc., of the market price prescribed in paragraphs (1) through (4) shall be included in gross income for purposes of calculating the amount of the income of that corporation for each business year under Article 52 (1) of the Act; provided, this shall not apply to any cash loan prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 29, 2008>

(6) Articles 38, 39, 39-2, 39-3, 40 and 42-2 of the Inheritance Tax and Gift Tax Act and Articles 28 (3) through (7), 29 (2), 29-2 (1) and (2), 29-3 (1), 30 (5), and 32-2 of the Enforcement Decree of that Act shall apply mutatis mutandis to the calculation of the amounts to be included in gross income under paragraph (5) if profits are distributed to a related party under Article 88 (1) 8 and 8-2. In such cases, "large stockholder" and "related party" shall be construed as "related party" provided for in this Decree, and "profits" and "profits prescribed by Presidential Decree" as "profits distributed to a related party", respectively. <Amended on Dec. 31, 1999; Dec. 30, 2002; Feb. 19, 2005; Feb. 9, 2006; Feb. 28, 2007; Feb. 22, 2008; Jun. 3, 2011; Feb. 2, 2012; Feb. 12, 2016>

Article 91-2(Application for and change of calculation method of tax bases for corporations adopting functional currencies) #

(1) A corporation that intends to apply the calculation method of tax bases provided for in Article 53-2 (1) 2 or 3 of the Act shall submit a report on the calculation method of tax bases in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, along with the report provided for in Article 60 of the Act for the business year during which it intends to first apply the calculation method of tax base provided for in Article 53-2 (1) 2 or 3 of the Act.

(2) "Circumstances prescribed by Presidential Decree" in Article 53-2 (2) of the Act means any of the following cases:

1. Where the reported functional currency is changed;

2. Where corporations using a different calculation method of tax bases provided in each subparagraph of Article 53-2 (1) of the Act merge (including a division and merger) (hereafter referred to as "calculation method of tax bases" in this Article and Article 91-3);

3. Where a corporation assumes charge of the business of another corporation using a different calculation method of tax bases;

4. Where the calculation method of tax bases of a domestic corporation to which the consolidated tax return system first applies is different from the calculation method of tax base of the relevant consolidated group (limited to change to the calculation method of tax base of the relevant consolidated group).

(3) Where a corporation which applies the calculation method of tax bases provided for in Article 53-2 (1) 2 or 3 of the Act intends to change the calculation method of tax bases as it falls under any subparagraph of paragraph (2), it shall submit an application for changing the calculation method of tax bases in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, by the end date of the business year during which it intends to apply the changed calculation method of tax bases.

(4) Upon receipt of an application submitted under paragraph (3), the head of the tax office having jurisdiction over the place of tax payment shall determine whether to grant approval and notify the relevant corporation of the determination within one month from the end date of the business year.

(5) Where a corporation changes the calculation method of tax bases without obtaining approval under paragraph (4), the tax base shall be calculated in accordance with the calculation method of tax bases before the change.

[This Article Added on Dec. 30, 2010]

Article 91-3(Detailed regulations on calculation method of tax bases for corporations adopting functional currencies) #

(1) For the purpose of applying the calculation method of tax bases provided for in Article 53-2 (1) 1 of the Act, with respect to the items included in deductible expenses in calculating the amount of income in each business year only when they are appropriated as deductible expenses, the amount to be appropriated as deductible expenses shall be calculated based on the amount on the financial statements to be otherwise prepared when no currency, other than Korean won, is adopted as the functional currency (hereafter referred to as "won-denominated financial statements" in this Article and Article 91-5). <Amended on Feb. 12, 2019>

(2) For the purpose of applying the calculation method of tax bases provided for in Article 53-2 (1) 2 of the Act, gross income and deductible expenses referred to in the Act and this Decree and losses referred to in Article 13 (1) 1 of the Act, non-taxable income referred to in subparagraph 2 of the same paragraph, and the amount of income deductions referred to in subparagraph 3 of the same paragraph shall be denominated in the functional currency and the tax base shall be calculated and the calculated tax base shall be converted into Korean won. <Amended on Feb. 12, 2019>

(3) A corporation which applies the calculation method of tax bases provided for in Article 53-2 (1) 2 of the Act shall apply the rate of exchange reported to the head of the tax office having jurisdiction over the place of tax payment, along with the report provided for in Article 91-2 (1) or (3), among the basic rate of exchange, etc. as of the end date of the business year or the average rate of exchange provided for in paragraph (5) in any of the following cases: <Amended on Feb. 12, 2019; Feb. 17, 2021; Feb. 28, 2023>

1. Where the tax base denominated in the functional currency is converted into Korean won;

2. Where the limit of business promotion expenses referred to in each subparagraph of Article 25 (4) of the Act is converted into the functional currency;

3. Where the tax credits are calculated by applying Articles 57 and 57-2 of the Act, Articles 10, 24, 25-6, 94 and 104-5 of the Restriction of Special Taxation Act and such amount is converted into Korean won.

(4) The foreign currency referred to in subparagraphs 3 and 5 of Article 73, and Article 76 (1) and (2) in applying the calculation method of tax bases provided for in Article 53-2 (1) 2 or 3 shall be in a currency, other than the functional currency.

(5) The exchange rate referred to in Article 53-2 (1) 3 and (3) 2 of the Act shall be the basic rate of exchange, etc. on the relevant day and the average exchange rate of the business year shall be the average exchange rate (hereafter referred to as "average exchange rate" in this Article and Article 91-5) of the relevant business year prescribed by Decree of the Ministry of Economy and Finance.

(6) "Items prescribed by Presidential Decree" in Article 53-2 (1) 3 of the Act means the depreciation costs, retirement benefit appropriation funds, appropriation for bad debts, appropriation for redemption of claims for indemnity, the amount of equivalent to the realization balance referred to in Article 68 (6), profits and losses from provision of construction, etc. referred to in the main sentence of Article 69 (1), interest and discounts referred to in the proviso to Article 70 (1) 1 and 2, the amount equivalent to insurance premiums, etc. referred to in the proviso to Article 70 (3), interest, discounts and dividend income referred to in Article 70 (4), the amount equivalent to the rental fee and expenses corresponding thereto referred to in the proviso to the part other than the subparagraphs of Article 71 (1), bond discount referred to in Article 71 (3), and other similar items prescribed by Decree of the Ministry of Economy and Finance.

(7) For the purpose of applying the calculation method of tax bases provided for in Article 53-2 (1) 3 of the Act, with respect to the depreciation costs, retirement insurance premiums (referring to the charges of the defined contribution retirement pension, etc. referred to in Article 44-2 (4)), allowances for retirement benefits, allowances for bad debts, allowances to redeem claims for indemnity, and other similar items prescribed by Decree of the Ministry of Economy and Finance, the amount included in deductible expenses shall be determined by indicating the amount appropriated as deductible expenses and the ceilings on inclusion in deductible expenses in the functional currency, respectively.

(8) The amount included in gross income under Article 53-2 (3) of the Act shall be included in deductible expenses upon appropriating it as lump-sum depreciation reserve funds or compressed accounts reserve funds by applying mutatis mutandisArticle 64 (3) and the amount included in deductible expenses shall be included in gross income by applying mutatis mutandisArticle 64 (4) and (5).

[This Article Added on Dec. 30, 2010]

Article 91-5(Detailed regulations on calculation method of tax bases for overseas place of business) #

(1) For the purpose of applying the calculation method of tax bases provided for in Article 53-3 (1) 1 of the Act, with respect to the items included in deductible expenses in calculating the amount of income in each business year only when they are appropriated as deductible expenses, the amount to be appropriated as deductible expenses shall be calculated based on the amount on the won-denominated financial statements.

(2) For the purpose of applying the calculation method of tax bases provided for in Article 53-3 (1) 2 of the Act, the gross income and deductible expenses of the overseas place of business established under the Act and other statutes shall be denominated in the functional currency of the overseas place of business and the tax base shall be calculated and the calculated tax base shall be converted into Korean won. The tax base of the relevant corporation shall be calculated by applying mutatis mutandisArticle 13 of the Act to the sum total of the tax base of the overseas place of business converted into Korean won and the tax base of its headquarters.

(3) For the purpose of applying the calculation method of tax bases provided for in Article 53-3 (1) 2 of the Act, the tax base of the overseas place of business denominated in the functional currency shall be converted into Korean won by applying the exchange rate reported to the head of the tax office having jurisdiction over the place of payment, along with the report provided for in Article 91-4 (2), among the basic rate of exchange, etc. or average exchange rate as at the end date of the business year. <Amended on Mar. 31, 2011>

(4) For the purpose of applying the calculation method of tax bases provided for in Article 53-3 (1) 2 of the Act, the donations, business promotion expenses, reserve funds for principal purpose business, liability reserve funds, contingency reserve funds, retirement benefits, retirement insurance premiums (referring to the charges of the defined contribution retirement pension, etc. under Article 44-2 (4)), retirement benefit appropriation funds, appropriation for bad debts, appropriation for redemption of claims for indemnity, and other deductible expense items with the ceilings on inclusion in deductible expenses under the Act and this Decree shall not be included in deductible expenses. <Amended on Mar. 31, 2011; Feb. 28, 2023>

(5) The amount not included in deductible expenses under paragraph (4) shall be converted into Korean won by applying the exchange rate referred to in paragraph (3) and the converted amount shall be added to the corresponding item of the headquarters. Then it shall be included in deductible expenses up to the ceilings on inclusion in deductible expenses of the relevant corporation (including the headquarters and the overseas place of business; hereafter the same shall apply in this Article) for the purpose of calculating the amount of income. In such cases, for the purpose of calculating the ceiling on inclusion in deductible expenses of the relevant corporation, the financial statements of the overseas place of business shall be converted into Korean won by applying the exchange rate referred to in paragraph (3).

(6) For the purpose of applying the calculation method of tax bases provided for in Article 53-3 (1) 2 and 3 of the Act, the foreign currency referred to in subparagraphs 3 and 5 of Article 73 and Article 76 (1) and (2) shall be a currency other than the functional currency of the overseas place of business.

(7) "Exchange rate as at the end date of the business year" in Article 53-3 (1) 3 of the Act means the basic rate of exchange, etc. as of the end date of the business year and "exchange rate prescribed by Presidential Decree" means the following exchange rates:

1. In case of items falling under Article 91-3 (6): The average exchange rate;

2. In other cases than those falling under subparagraph 1: The exchange rate reported to the head of the tax office having jurisdiction over the place of payment, along with the report provided for in Article 91-4 (2) among the basic rate of exchange, etc. or average exchange rate as at the last of the trading day of the relevant item.

[This Article Added on Dec. 30, 2010]

Article 92-2(Special provisions concerning taxation on capital gains on transfer of land) #

(1) Deleted. <Jun. 8, 2009>

(2) "Residential house prescribed by Presidential Decree" in the main sentence of Article 55-2 (1) 2 of the Act means any residential house located in the Republic of Korea, except the following: Provided, That if the registration of a rental house (limited to houses governed by Article 5 (1) of the Addenda of the Special Act on Private Rental Housing, amended by Act No. 17482) falling under subparagraphs 1, 1-2, 1-4 and 1-12 is cancelled on the date when the period of mandatory rental expires pursuant to Article 6 (5) of the Special Act on Private Rental Housing, it shall be deemed that the rental period requirements prescribed in subparagraphs 1, 1-2, 1-4 and 1-12 are met on the date when the period of mandatory rental expires:<Newly Inserted on Dec. 30, 2003; Feb. 19, 2005; Dec. 31, 2005; Feb. 9, 2006; Feb. 22, 2008; Feb. 29, 2008; Jul. 24, 2008; Oct. 7, 2008; Apr. 21, 2009; Sep. 29, 2009; Dec. 31, 2009; Jun. 8, 2010; Sep. 20, 2010; Mar. 31, 2011; Jun. 3, 2011; Oct. 14, 2011; Feb. 21, 2014; Jun. 30, 2015; Dec. 28, 2015; Aug. 11, 2016; Feb. 13, 2018; Jul. 16, 2018; Feb. 12, 2019; Aug. 7, 2020; Oct. 7, 2020; Aug. 2, 2022; Feb. 28, 2025>

1. Any house that meets each of the following requirements and has been rented by the relevant corporation as buy-to-rent private housing defined in subparagraph 3 of Article 2 of the Special Act on Private Rental Housing, or buy-to-rent public housing defined in subparagraph 1-3 of Article 2 of the Special Act on Public Housing; provided, the housing of rental business entities, as defined in subparagraph 7 of Article 2 of the Special Act on Private Rental Housing shall be limited to the housing for which the registration of a rental business entity under Article 5 of said Act and the registration of a business operator under Article 111 of the Act have been completed (hereafter in this Article, referred to as "registration of a business operator, etc."):

(a) Deleted; <Feb. 15, 2013>

(b) That it shall have been rented for at least five years;

(c) That the total amount of the standard market prices (referring to the standard market prices defined in Article 99 of the Income Tax Act; hereafter in this paragraph, the same shall apply) of the relevant house and the land appurtenant thereto as on the date rental began after being registered for private rental housing under Article 5 of the Special Act on Private Rental Housing or built or buy-to-rent public housing defined in subparagraph 1 (a) of Article 2 of the Special Act on Public Housing, shall not exceed 600 million won [300 million won where the house in an area outside the Seoul Metropolitan Area defined in subparagraph 1 of Article 2 of Seoul Metropolitan Area Readjustment Planning Act (hereinafter referred to as "Seoul Metropolitan Area")];

1-2. The houses that meet each of the following requirements, where at least two houses are rented by the relevant corporation as buy-to-rent private housing defined in subparagraph 2 of Article 2 of the Special Act on Private Rental Housing, or are rented as built-to-rent public housing defined in subparagraph 1-2 of Article 2 of the Special Act on Public Housing; provided, the housing of rental business entities defined in subparagraph 7 of Article 2 of the Special Act on Private Rental Housing shall be limited to the housing for which the registration of a business operator, etc. was completed on or before March 31, 2018:

(a) That the area of its building site shall not exceed 298 square meters and that the floor area of the house (including the area of the part deemed a residential house under the Enforcement Decree of the Income Tax Act and the area of the basement used exclusively for dwelling; and referring to the exclusive area in cases of multi-family housing) shall not exceed 149 square meters;

(b) That it shall have been rented for at least five years;

(c) That the total amount of the standard market prices of the relevant house and the land appurtenant thereto as on the date that rental begins after being registered for private rental housing under Article 5 of the Special Act on Private Rental Housing or built or buy-to-rent public housing defined in subparagraph 1 (a) of Article 2 of the Special Act on Public Housing, shall not exceed 600 million won;

1-3. The houses that meet each of the following requirements, where at least five houses are acquired during the period from January 1, 2008 to December 31, 2008 and rented by a real estate investment company defined in subparagraph 1 of Article 2 of the Real Estate Investment Company Act or a real estate indirect investment fund defined in subparagraph 3 of Article 27 of the Indirect Investment Asset Management Business Act, as buy-to-rent private housing defined in subparagraph 3 of Article 2 of the Special Act on Private Rental Housing, or buy-to-rent public housing defined in subparagraph 1-3 of Article 2 of the Special Act on Public Housing:

(b) That the housing unit has been rented for at least ten years;

1-4. The houses that meet each of the following requirements for buy-to-rent private housing defined in subparagraph 3 of Article 2 of the Special Act on Private Rental Housing, or for buy-to-rent public housing defined in subparagraph 1-3 of Article 2 of the Special Act on Public Housing [limited to unsold housing units (referring to housing units supplied by a project operator referred to in Article 54 of the Housing Act in accordance with the same Article on a first-come first-served basis, because the project operator fails to sign sale contracts for the housing units by June 10, 2008 in a housing complex for which the deadline for concluding contracts with buyers according to the public notice of inviting buyers has elapsed; hereafter in this subparagraph, the same shall apply), for which sale contracts are signed with down payments made during the period from June 11, 2008 to June 30, 2009]. In such cases, the corporation that sells such housing units shall submit a copy of the certificate of unsold housing units, which is issued by the head of the relevant Si/Gun/Gu, accompanied by the copies of sale contracts for purchasing the housing units, to the head of the tax office having jurisdiction over the place of tax payment, at the time of filing the return on the tax base for the business year in which such houses are sold:

(b) That it shall have been rented for at least five years;

(d) That the number of buy-to-rent housing units meeting all requirements provided for in items (a) thorough (c) (hereafter in this Article, referred to as "unsold housing unit") shall be at least five in the same Si (including the Seoul Special Metropolitan City and any Metropolitan City)/Gun [where the number of buy-to-rent housing units referred to in subparagraph 1 is at least five or the number of buy-to-rent housing units referred to in subparagraph 1-3 is at least five, the total number of buy-to-rent housing units and the unsold housing units referred to in subparagraph 1 or 1-3 shall be at least five];

(e) It shall not be a buy-to-rent private house where the rental property is an apartment from among long-term private rental housing referred to in subparagraph 5 of Article 2 of the Special Act on Private Rental Housing (referring to the Special Act on Private Rental Housing prior to it being amended by Act No. 17482; hereinafter the same shall apply) or short-term private rental house referred to in subparagraph 6 of the same Article with respect to which an application for registration of a rental business entity (including a report on changes in registered matters filed to add a house to be rent) is filed under Article 5 of that Act after July 11, 2020;

(f) It shall not be a short-term private rental house defined in subparagraph 6 of Article 2 of the previous Special Act on Private Rental Housing registered under Article 5 of that Act for which a report on change to a long-term private rental house, etc. is filed after July 11, 2000 under Article 5 (3) of that Act;

1-5. An unsold housing unit (referring to housing supplied by a project operator referred to in Article 54 of the Housing Act under the same Article on a first-come first-served basis after the deadline for signing a contract has elapsed, followed by the publication of recruitment of occupants; hereafter in this paragraph, the same shall apply) directly acquired by February 11, 2010 (including conclusion of a sale and purchase contract and making a down payment by February 11, 2011) by a corporate restructuring real estate investment company defined in subparagraph 1 (c) of Article 2 of the Real Estate Investment Company Act, or a real estate fund provided for in subparagraph 2 of Article 229 of the Financial Investment Services and Capital Markets Act (hereafter in this paragraph, referred to as "corporate restructuring real estate investment company, etc."), which meets each of the following requirements:

(a) That all real estate acquired by the corporate restructuring real estate investment company, etc., shall be unsold housing units located outside the Seoul Special Metropolitan City (excluding the designated area under Article 104-2 of the Income Tax Act; hereafter in this Article, the same shall apply) and the ratio of the housing units located outside the Seoul Metropolitan Area shall be at least 60/100;

(b) That the period of existence of the corporate restructuring real estate investment company, etc., shall not exceed five years;

1-6. An unsold housing unit acquired by a person who has signed a purchase agreement at the time a corporate restructuring real estate investment company, etc., acquired the unsold housing unit under subparagraph 1-5, 1-8 or 1-10 under the purchase agreement (in cases falling under subparagraph 1-8, limited to unsold housing units locate outside the Seoul Metropolitan Area), and three years have not passed since the acquisition date of the unsold housing unit at issue;

1-7. An unsold housing unit directly acquired by February 11, 2010 (including cases of concluding a sale and purchase contract and making the down payment by February 11, 2010) by a trust business entity (hereafter in this subparagraph, referred to as "trust business entity") as provided for in the Financial Investment Services and Capital Markets Act as trust property under a trust contract, which meets each of the following requirements:

(a) That money financed by a housing constructor (hereafter in this Article, referred to as "constructor") by issuing bonds shall be trusted to a trust business entity and the bonds issued by the relevant constructor shall be securitized under the Asset-Backed Securitization Act upon obtaining the credit guarantee of the Korea Housing Finance Corporation incorporated under the Korea Housing Finance Corporation Act;

(b) That the real estate acquired by the trust business entity as trust property shall be unsold housing units located outside the Seoul Special Metropolitan City (limited to housing units constructed under the guarantee for sale by the Korea Housing and Urban Guarantee Corporation established under the Housing and Urban Fund Act) and the ratio of the number of housing units (where many constructors trust money to the trust business entity, such housing units mean all unsold housing units acquired by the trust business entity as trust property) located outside the Seoul Metropolitan Area shall be at least 60/100;

(c) That the period of management (where the trust contract is extended, including such period extended) of the trust property shall not exceed five years;

1-8. An unsold housing unit directly acquired (including conclusion of a sale and purchase contract and making a down payment by April 30, 2011) by a corporate restructuring real estate investment company, etc., by April 30, 2011, which are located outside the Seoul Metropolitan Area and meets each of the following requirements:

(a) That all real estate acquired by the corporate restructuring real estate investment company, etc., shall be unsold housing units as of February 11, 2010 located outside the Seoul Special Metropolitan City and the ratio of the housing units located outside the Seoul Metropolitan Area shall be at least 50/100;

(b) That the period of existence of the corporate restructuring real estate investment company, etc., shall not exceed five years;

1-9. An unsold housing unit directly acquired (including conclusion of a sale and purchase contract and making a down payment by April 30, 2011) by a trust business entity (hereafter in this subparagraph, referred to as "trust business entity") as provided for in the Financial Investment Services and Capital Markets Act as trust property under a trust contract which meets each of the following requirements, by April 30, 2011:

(a) That money financed by a constructor by issuing bonds shall be trusted to a trust business entity and the bonds issued by the relevant constructor shall be securitized under the Asset-Backed Securitization Act upon obtaining the credit guarantee by the Korea Housing Finance Corporation incorporated under the Korea Housing Finance Corporation Act;

(b) That all real estate acquired by the trust business entity as trust property shall be unsold housing units as of February 11, 2010 located outside the Seoul Special Metropolitan City (limited to housing units constructed under the guarantee for sale by the Korea Housing and Urban Guarantee Corporation established pursuant to the Housing and Urban Fund Act) and the ratio of the housing units (where many constructors trust money to the trust business entity, such housing units shall be all unsold housing units acquired by the trust business entity as trust property) located outside the Seoul Metropolitan Area shall be at least 50/100;

(c) That the period of management (where the trust contract is extended, including such extended period) of the trust property shall not exceed five years;

1-10. An unsold housing unit directly acquired (including conclusion of a sale and purchase contract and making a down payment by December 31, 2014) by a corporate restructuring real estate investment company, etc., which meets each of the following requirements, by December 31, 2014:

(a) That all real estate acquired by the corporate restructuring real estate investment company, etc., shall be unsold housing units;

(b) That the period of existence of the corporate restructuring real estate investment company, etc., shall not exceed five years;

1-11. An unsold housing unit (limited to housing units constructed under the credit guarantee of the Korea Housing and Urban Guarantee Corporation established under the Housing and Urban Fund Act) directly acquired by December 31, 2012 (including conclusion of a sale and purchase contract and making down payment by December 31, 2012) by a trust business entity (hereafter in this subparagraph, referred to as "trust business entity") as provided for in the Financial Investment Services and Capital Markets Act as trust property under a trust contract, which meets each the following requirements:

(b) That the period of management (where the trust contract is extended, including such extended period) of the trust property shall not exceed five years;

1-12. A public support private rental housing unit defined in subparagraph 4 of Article 2 of the Special Act on Private Rental Housing, or a long-term private rental housing unit defined in subparagraph 5 of Article 2 of said Act, (hereafter referred to as "long-term private rental housing unit, etc." in this Article), which meets each of the following requirements, among buy-to-rent private housing units defined in subparagraph 3 of Article 2 of said Act [in the case of long-term private rental housing defined in subparagraph 5 of Article 2 of the Special Act on Private Rental Housing, limited to housing units with respect to which the registration of rental business entities is filed before June 17, 2020 (including a report on changes in registered matters to add houses to be rent)]; provided, this shall not apply to short-term private rental housing, defined in subparagraph 6 of Article 2 of the previous Special Act on Private Rental Housing, registered under Article 5 of that Act for which a report on change to long-term private rental housing, etc. is filed after July 11, 2020 under Article 5 (3) of that Act;

(a) That the housing unit has been rented for at least ten years;

(b) That the sum of the reference market value of the house and the land appurtenant thereto as at the date on which the house was registered as a private rental housing unit and began to be leased under Article 5 of the Special Act on Private Rental Housing shall not exceed 600 million won (or 300 million won in cases of an area outside of the Seoul Metropolitan area);

1-13. At least two long-term private rental housing units, etc. that meet each the following requirements among privately constructed rental housing units defined in subparagraph 2 of Article 2 of the Special Act on Private Rental Housing; provided, this shall not apply to short-term private rental housing, defined in subparagraph 6 of Article 2 of the previous Special Act on Private Rental Housing, registered under Article 5 of that Act for which a report on change to long-term private rental housing, etc. is filed after July 11, 2020 under Article 5 (3) of that Act;

(b) That the housing unit has been rented for at least ten years;

(c) That the sum of the reference market value of the house and the land appurtenant thereto as at the date on which the house was registered as a private rental housing unit and began to be leased under Article 5 of the Special Act on Private Rental Housing shall not exceed 900 million won;

(d) No rental agreement has been concluded in excess of 5/100 of the rate of increase in the rental security deposits or rents (hereafter in this subparagraph referred to as "rent, etc.") compared with the immediately preceding rental agreement. In such cases, where the rental security deposit and monthly rent are converted in concluding a rental agreement in which the rent, etc. is increased, the rate of increase in rent, etc. shall be calculated pursuant to the standards prescribed in Article 44 (4) of the Special Act on Private Rental Housing;

(e) No rental agreement requiring an increase in rent, etc. has been concluded within one year after concluding a rental agreement or increasing rent, etc. in accordance with an agreement.

1-14. As a rental house (limited to houses governed by Article 5 (1) of the Addenda of the Special Act on Private Rental Housing, amended by Act No. 17482) falling under subparagraphs 1, 1-2, 1-4 and 1-12, where the registration thereof is cancelled as a rental business entity files an application for cancellation of registration within the mandatory rental period pursuant to Article 6 (1) 11 of the Special Act on Private Rental Housing (limited to where at least 1/2 of the mandatory rental period referred to in Article 43 of that Act has passed), a house transferred within one year after the cancellation of the relevant registration;

1-15. In cases where there are 2 or more housing units that constitute private rental housing constructed by private entities under subparagraph 2 of Article 2 of the Special Act on Private Rental Housing and also constitute short-term private rental housing as defined in subparagraph 6-2 of that Article (hereinafter referred to in this subparagraph as "short-term private rental housing"), and each of such units satisfies all of the following requirements, such housing units:

(a) The area of its building site shall not exceed 298 square meters and the floor area of the house (including the area of the part deemed a residential house under the main clause of Article 154 (3) of the Enforcement Decree of the Income Tax Act and the area of basement used exclusively for dwelling; and referring to the exclusive area in cases of multi-family housing) shall not exceed 149 square meters;

(b) The housing unit has been rented for at least 6 years;

(c) The sum of the standard market values of the relevant housing units and the land appurtenant thereto shall not exceed 600 million Korean won as of the date on which the lease of 2 or more short-term private rental housing units, registered as such under Article 5 of the Special Act on Private Rental Housing, commences (in the case of a housing unit for which the lease commences after the date on which the lease of 2 or more units has commenced, the relevant date shall be the date on which the lease of that housing unit commences);

(d) The rate of increase in the lease deposit or rent (hereafter in this subparagraph referred to as "rent, etc.") compared to the previous lease contract shall not exceed 5 percent. In such cases, a request for an increase in rent, etc. may not be made within 1 year from the date of the conclusion of the lease contract or from the date of the most recent increase in the agreed rent, etc., and where the lessor claims an increase in rent, etc. by converting part of the lease deposit into monthly rent or vice versa, the standards prescribed in Article 44 (4) of the Special Act on Private Rental Housing shall apply mutatis mutandis;

2. A company house provided to an executive officer who is neither a stockholder, etc. nor a contributor, or an employee, and a house owned by a corporation and gratuitously provided, the provision period of which as company house or gratuitous provision period of which is at least 10 years;

3. A house acquired upon exercising a mortgage or in place of disbursement of liabilities, for which three years have yet to lapse from the date of acquisition;

4. A houses held on inevitable grounds, which are determined by Decree of the Ministry of Economy and Finance.

(3) "Circumstances prescribed by Presidential Decree" in Article 55-2 (4) 2 of the Act means circumstances provided for in Article 153 (1) of the Enforcement Decree of the Income Tax Act. In such cases, "cultivation while residing in the location of farmland" in the proviso to subparagraph 3 of the same paragraph shall be construed as "cultivation." <Amended on Feb. 19, 2005; Dec. 31, 2005; Jun. 3, 2011>

(4) "Income accruing on the grounds prescribed by Presidential Decree" in Article 55-2 (4) 3 of the Act means any of the following incomes: <Amended on Feb. 19, 2005; Dec. 31, 2005; Feb. 9, 2006; Feb. 29, 2008; Sep. 21, 2009; Jun. 8, 2010; Jun. 3, 2011; Feb. 2, 2012; Feb. 3, 2015; Dec. 28, 2015; Feb. 12, 2016; Jul. 16, 2018; Feb. 17, 2021; Aug. 2, 2022; Nov. 12, 2024>

1. Income accruing from change of the land category or lot number following the disposition of replotting land or from the appropriation of a land secured by the authorities for the development outlay referred to in the Urban Development Act and other statutes. In such cases, the disposition of replotting land and an area of land secured by the authorities for the development outlay shall be as provided for in Article 152 of the Enforcement Decree of the Income Tax Act;

1-2. Income accruing from the exchange provided for in Article 152 (3) of the Enforcement Decree of the Income Tax Act;

2. Income accruing from a qualified division, qualified merger, qualified split-off, qualified investment in kind, the alteration of organization or exchange (limited to any alteration of organization or any exchange meeting the requirements provided for in Article 50 of the Act);

3. Income accruing from the transfer of housing construction sites among land created by a development project performed under the Korea Land and Housing Corporation Act by the Korea Land and Housing Corporation established under that Act;

4. Income that accrues to a corporation that builds new housing units for sale (including where built-to-rent private housing units defined in subparagraph 2 of Article 2 of the Special Act on Private Rental Housing or built-to-rent public housing units defined in subparagraph 1-2 of Article 2 of the Special Act on Public Housing are provided to tenants referred to in that Act or are sold to another rental business operator) from the sale of such housing units and the land appurtenant thereto with the area specified in either of the following items, whichever is greater:

(a) The total floor area of the housing units (excluding the basement area, the parking lot area on the ground, and the area of joint facilities for residents provided for in subparagraph 3 of Article 2 of the Regulations on Standards for Housing Construction);

(b) Five times the area on which the building is built (10 times where the building is located in any area outside an urban area provided for in Article 6 of the National Land Planning and Utilization Act);

5. Income accruing from a transfer of land to a rental business operator defined in subparagraph 7 of Article 2 of the Special Act on Private Rental Housing, who acquired or intends to acquire at least 300 long-term private rental housing units or households;

6. Income accruing from transferring land for house construction by December 31, 2027 to a person (limited to a person who has concluded an agreement with a public housing project operator referred to in Article 4 of the Special Act on Public Housing for constructing and transferring buy-to-rent public housing) who intends to construct buy-to-rent public housing defined in subparagraph 1-3 of Article 2 of that Act (hereafter in this subparagraph referred to as "buy-to-rent public housing");

7. Other income accruing on any grounds prescribed by Decree of the Ministry of Economy and Finance, including a transfer for public purposes.

(5) "Land, etc., prescribed by Presidential Decree" in the proviso to Article 55-2 (5) of the Act means any of the following: <Amended on Dec. 31, 2005; Jun. 3, 2011>

1. Land, etc., the registration of acquisition of which is impracticable at the time of its transfer under the provisions of statutes or a court ruling;

2. Farmland provided for in Article 55-2 (4) 2 of the Act.

(6) Article 68 shall apply mutatis mutandis to the business year to which capital gains on the transfer of land, etc., revert under Article 55-2 (1) of the Act, the timing for transfer or acquisition thereof; provided, Article 68 (1) 3 shall apply to the transfer of land, etc., on a long-term installment plan under Article 68 (4), notwithstanding Article 68 (2). <Amended on Dec. 30, 2003; Feb. 11, 2020>

(7) In applying Article 55-2 (1) 1 of the Act, where land, etc., is transferred through subscription sale, such land, etc., shall be deemed transferred on the date of contract for such subscription sale. <Amended on Dec. 30, 2003>

(8) With respect to capital gains on the transfer of land, etc., deemed transferred on the date of contract under paragraph (7), profits and expenses respectively generated during the period for which the land, etc., are included in the designated area provided for in Article 55-2 (1) 1 (a) and (b) shall be calculated as gross income and deductible expenses of the relevant business year among profits and expenses calculated based on the progress rate of work provided for in Article 69 (2); provided, where it is deemed impracticable to calculate the progress rate of work provided for in Article 69 (2) in circumstances determined by Decree of the Ministry of Economy and Finance, the amount that accrues and is incurred during the period for which the land, etc., are included in the designated area provided for in Article 55-2 (1) 1 (a) and (b) of the Act shall be calculated as gross income and deductible expenses, respectively, of the relevant business year among the amount computed by equally distributing the contract amount and the estimated total construction cost during the period from the date of commencement to the date of transfer of the object of contract. <Amended on Dec. 30, 2003; Feb. 29, 2008; Jun. 8, 2009>

(9) Where a corporation transfers at least two parcels of land, etc., to which Article 55-2 of the Act applies in each business year, capital gains on the transfer of such land, etc., shall be the sum of the amounts calculated as prescribed in Article 55-2 (6) of the Act by asset transferred in the relevant business year. In such cases, where there is land, etc., the book value of which at the time of transfer exceeds the amount of transfer among the transferred assets, capital gains on the transfer of land, etc., shall be calculated by deducting the excess amount (hereafter in this paragraph referred to as "capital losses from transfer") sequentially from capital gains from the transfer of the following assets: <Amended on Feb. 4, 2009>

1. Capital gains from the transfer of assets, to which the same tax rate as that of assets with capital losses from transfer applies;

2. Capital gains from the transfer of assets to which the tax rate different from that of assets with capital losses from transfer applies.

[This Article Added on Dec. 31, 2001]

Article 92-5(Scope of farmland) #

(1) "Farmland" in Article 55-2 (2) 1 of the Act means a dry field, a paddy field, and an orchard that is actually used as the land for cultivation, regardless of its land category in the Cadastral Record. In such cases, the pieces of land, including a farm hut, barnyard, pumping station, pond, marsh, farm road, or waterway, which are directly used for the management of the farmland, shall be included.

(2) In applying Article 55-2 (2) 1 (a) of the Act, the main business shall be determined according to the following standards:

1. Where a corporation runs at least two different kinds of business, the main business shall be the business that accrues larger revenue among such businesses;

2. Notwithstanding subparagraph 1, if a corporation uses agricultural products produced from the farmland that it directly uses for farming as raw materials to manufacture and produce goods and keeps separate accounting for the agriculture and the manufacturing business, etc., the main business of that corporation shall be deemed agriculture. In such cases, if the ratio of agricultural products used as raw materials to manufacture and produce goods (hereafter referred to as "use ratio" in this paragraph) among the agricultural products produced by the corporation does not exceed 50/100, such corporation shall be deemed to run agriculture as its main business to the extent of the farmland area, which is up to two times the area equivalent to the use ratio of the relevant farmland area.

(3) "Farmland prescribed by Presidential Decree" in the proviso to Article 55-2 (2) 1 (a) of the Act means any of the following farmlands: <Amended on Feb. 22, 2008; Feb. 29, 2008; Jun. 3, 2011; Feb. 3, 2015>

1. Farmland falling under Article 6 (2) 2, 6 and 10 (a) or (c) of the Farmland Act;

2. Farmland owned by any corporation that has obtained farmland conversion permission or has filed a report on farmland conversion under Article 6 (2) 7 of the Farmland Act or farmland used for the relevant conversion purpose after completing the farmland conversion consultation under Article 6 (2) 8 of that Act;

3. Farmland acquired under Article 6 (2) 10 (d) through (f) of the Farmland Act and used for the relevant business purposes;

4. Farmland owned by a clan (limited to farmland acquired on or before December 31, 2005);

5. Farmland used directly by any non-profit business operator referred to in Article 22 of the Enforcement Decree of the Local Tax Act for memorial services, religion, charity, academic purpose, arts and crafts, or any other public service;

6. Farmland prescribed by Decree of the Ministry of Economy and Finance that is permitted to be owned under the Farmland Act and other statutes.

(4) "Area designated by Presidential Decree" in the main sentence of Article 55-2 (2) 1 (b) of the Act means a green belt area and a development restriction area classified under the National Land Planning and Utilization Act. <Amended on Jun. 3, 2011>

(5) "Period set by Presidential Decree" in the proviso to Article 55-2 (2) 1 (b) of the Act means three years. <Amended on Jun. 3, 2011; Feb. 3, 2015>

[This Article Added on Dec. 31, 2005]

Article 92-6(Scope of forest land) #

(1) "Forest land prescribed by Presidential Decree" in Article 55-2 (2) 2 (a) of the Act means any of the following forest lands: <Amended on Feb. 28, 2007; Feb. 29, 2008; Apr. 3, 2008; Sep. 22, 2008; Jun. 9, 2009; Mar. 9, 2010; Jun. 3, 2011; May 7, 2024>

1. A seed-gathering forest and an experimental forest created under the Creation and Management of Forest Resources Act and a forest protection zone classified under the Forest Protection Act;

2. A temple forest or forest owned by a village;

3. Forest land in a park nature preservation area or a park natural environmental area classified under the Natural Parks Act;

4. Forest land in an urban park created under Act on Urban Parks, Green Areas;

5. Forest land within a protection zone under the Act on Conservation and Utilization of Cultural Heritage or a protection zone under the Act on the Conservation and Utilization of Natural Heritage;

6. A courtyard owned by any traditional temple preserved under the Korea Traditional Temples Preservation and Support Act;

7. Forest land in a development restriction area classified under the Act on Special Measures for Designation and Management of Development Restriction Zones;

8. Forest land in a military base or a military installations protection zone provided for in the Protection of Military Bases and Installations Act;

9. Forest land in a clearance area provided for in the Road Act;

10. A forest land in a railroad protection area provided for in the Railroad Safety Act;

11. Forest land in a flood management area provided for in the River Act;

12. Forest land in a water source protection area provided for in the Water Supply and Waterworks Installation Act;

13. Other forest land, prescribed by Decree of the Ministry of Economy and Finance, which is necessary for public interests and for protecting and fostering forests.

(2) In applying Article 55-2 (2) 2 (b) of the Act, if a corporation runs at least two different kinds of business, the corporation's main business shall be the business with the larger value of assets among its total value of assets as at the end date of the business year.

(3) "Forest land prescribed by Presidential Decree" in Article 55-2 (2) 2 (b) of the Act means any of the following forest lands in any mountain area provided for in the Mountainous Districts Management Act; provided, any forest in an urban area (excluding any green conservation area classified under Article 30 of Enforcement Decree of the National Land Planning and Utilization Act; hereafter the same shall apply in this paragraph) defined by the National Land Planning and Utilization Act for which three years have passed from the date it is included in the urban area shall be excluded: <Amended on Feb. 28, 2007; Jun. 3, 2011; Feb. 3, 2015>

1. Forest land for which the afforestation work is being conducted upon authorization for the afforestation plan granted under the Creation and Management of Forest Resources Act;

2. Forest land in a special afforestation project zone provided for in the Creation and Management of Forest Resources Act.

(4) "Forest land prescribed by Presidential Decree" in Article 55-2 (2) 2 (c) of the Act means any of the following forest lands: <Amended on Feb. 28, 2007; Feb. 29, 2008; Jun. 3, 2011; Feb. 3, 2015; Jul. 20, 2015; Jan. 5, 2021>

1. Forest land used to produce tree seeds and saplings for forests by any seed and sapling business operator registered under the Creation and Management of Forest Resources Act;

2. Forest land used for a project to create, manage, and operate any natural recreation forest pursuant to the Forestry Culture and Recreation Act;

3. Forest land used for a project to create, manage, and operate an arboretum pursuant to the Act on the Creation and Furtherance of Arboretums and Gardens;

4. Forest land directly used by any forest association or forest fraternity for its proper purpose business;

5. Forest land directly used by any non-profit business operator referred to in Article 22 of the Enforcement Decree of the Local Tax Act for memorial services, religion, charity, academic purpose, arts and crafts, or any other public services;

6. Forest land owned by a clan (limited to forest land acquired on or before December 31, 2005);

7. Forest land prescribed by Decree of the Ministry of Economy and Finance and directly related to a corporation's business, in consideration of its owner, location, utilization, holding period, area, etc.

[This Article Added on Dec. 31, 2005]

Article 92-7(Scope of ranch areas) #

(1) "Ranch area" in Article 55-2 (2) 3 of the Act means a barn, the land on which appurtenant facilities are installed, grassland and grazing fields, all of which are used for livestock purposes.

(2) "Ranch area prescribed by Presidential Decree" in the proviso to Article 55-2 (2) 3 of the Act, with the exception of its items, means any of the following ranch areas: <Amended on Feb. 29, 2008; Jun. 3, 2011>

1. A ranch area owned by a clan (limited to a ranch area acquired on or before December 31, 2005);

2. A ranch area used by a school provided for in the Elementary and Secondary Education Act and the Higher Education Act, an agency in charge of overall control over the livestock improvement or livestock improvement agency to conduct experiments, research, and practical training pursuant to the Livestock Industry Act;

3. A ranch area directly used by any non-profit business operator referred to in the main sentence of subparagraph 1 of Article 186 of the Local Tax Act for memorial services, religion, charity, academic purpose, arts and crafts, and public services;

4. A ranch area prescribed by Decree of the Ministry of Economy and Finance and directly related to a corporation's business, in consideration of its owner, location, utilization, holding period, area, etc.

(3) In applying Article 55-2 (2) 3 (a) of the Act, the main business shall be determined based on the following:

1. Where a corporation runes at least two different kinds of business, the main business shall be the business with larger revenue; provided, any agricultural cooperative and the National Agricultural Cooperative Federation established under the Agricultural Cooperatives Act shall be deemed a corporation, the main business of which is the livestock business;

2. Notwithstanding the main sentence of subparagraph 1, where a corporation uses livestock products produced in the ranch area directly used for running its livestock business as raw materials to process them and keeps separate accounting of the livestock business and the processing business, the corporation's main business shall be deemed the livestock business. In such cases, if the ratio of livestock products used as raw materials to process them among the livestock products produced by the relevant corporation (hereafter referred to as "use ratio" in this paragraph) is less than 50/100, such corporation shall be deemed to run the livestock business as its main business to the extent of the relevant ranch area, which is up to two times the area equivalent to the use ratio among the area of the relevant ranch area.

(4) "Standard size of the livestock area prescribed by Presidential Decree" in Article 55-2 (2) 3 (a) of the Act means the land size calculated by applying the standard size by domestic animal and the number of domestic animals prescribed in Appendix 1-2. <Amended on Feb. 18, 2010; Jun. 3, 2011; Feb. 29, 2024>

(5) "Area prescribed by Presidential Decree" in Article 55-2 (2) 3 (a) of the Act means a green area or development restriction zone classified under the National Land Planning and Utilization Act. <Added on Feb. 22, 2008; Jun. 3, 2011>

(6) "Period set by Presidential Decree" in Article 55-2 (2) 3 (a) of the Act means three years. <Amended on Jun. 3, 2011; Feb. 3, 2015>

[This Article Added on Dec. 31, 2005]

Article 92-8(Scope of other land used for business) #

(1) "Land prescribed by Presidential Decree" in Article 55-2 (2) 4 (c) of the Act means any of the following lands: <Amended on Feb. 29, 2008; Dec. 14, 2009; Sep. 20, 2010; Jun. 3, 2011; Jun. 1, 2015; Jun. 21, 2016; Jan. 5, 2021; Jan. 10, 2023>

1. Any of the following lands used for sports facilities, including sports stadiums or fields:

(a) Land used for sports facilities exclusive for athletes:

(i) Land used for sports facilities exclusive for athletes, which continues to be furnished by any corporation that has a company sports team pursuant to the National Sports Promotion Act and is not wider than the standard area prescribed by Decree of the Ministry of Economy and Finance; provided, the same shall not apply where the company sports team fails to meet the requirements for athletes and coaches, which are prescribed by Decree of the Ministry of Economy and Finance;

(ii) Land on which sports facilities are installed and used directly by any corporation that runs the business of athletic sports and is not wider than the standard area prescribed by Decree of the Ministry of Economy and Finance;

(b) Land used for sports facilities for employees: Land not wider than the standard area for sports facilities installed for employees, which is prescribed by Decree of the Ministry of Economy and Finance among the lands used to install sports facilities for the welfare of employees; provided, the same shall not apply where the sports facilities fails to meet the standards for sports facilities for employees, which are prescribed by Decree of the Ministry of Economy and Finance;

(b) Land used for sports facilities for employees: Land not wider than the standard area for sports facilities installed for employees, which is prescribed by Ministerial Decree of the Economy and Finance among the lands used to install sports facilities for the welfare of employees; provided, the same shall not apply where the sports facilities fails to meet the standards for sports facilities for employees, which are prescribed by Ministerial Decree of the Economy and Finance;

(c) Land used directly by any corporation that runs the business of sports facilities provided for in the Installation and Utilization of Sports Facilities Act after installing the sports facilities and equipment that meet the standards therefor pursuant to that Act;

(d) Land used directly by any corporation that runs the business of operating the sports stadiums;

2. Any of the following lands used for parking lots:

(a) An annexed parking lot (excluding any parking lot annexed to housing; hereafter in this item the same shall apply) provided for in the Parking Lot Act, which is within the standard area for parking lots pursuant to that Act; provided, the land used for an annexed parking lot in the land used for the recreational establishment business provided for in subparagraph 6 shall be subject to subparagraph 6;

(b) Land used for a parking lot for business motor vehicles (excluding any passenger motor vehicles, motorcycle, or bus used for transporting employees) that are indispensably owned by any corporation, other than business operators provided for in Article 101 (3) 1 of the Enforcement Decree of the Local Tax Act; provided, such land shall be limited to the land within the area computed by multiplying 1.5 by the area (hereinafter referred to as "minimum standard area for the parking lot") aggregating the area calculated by multiplying the number of business cars by each car type by the minimum standard area for the parking lot per car by car type to be secured under the Passenger Transport Service Act or the Trucking Transport Business Act;

3. Land created through any public-private partnership project performed by a project operator designated under the Act on Public-Private Partnerships in Infrastructure and other land created by the project operator pursuant to other statutes, both of which are prescribed by Decree of the Ministry of Economy and Finance; provided, any land for which two years have passed from the date its creation is completed shall be excluded;

(c) Land used for the parking lot business: Land owned by any corporation that mainly operates parking lots, and used as an off-road parking lot provided for in the Parking Lot Act and the ratio of the amount of annual revenue to the value of the land is the same as or more than the ratio set by Ministerial Decree of the Economy and Finance;

4. Land used for juvenile training facilities established under the Juvenile Activity Promotion Act, which meets facility and equipment standards provided for in that Act; provided, excluded herefrom is any land which exceeds the standard area set by Decree of the Ministry of Economy and Finance;

5. Land owned for conducting reservists training for employees, etc., which meets all of the following requirements:

(a) The land category shall not be a housing site or factory site;

(b) The land shall not be located in any residential area, commercial area, or industrial area in an urban area designated under National Land Planning and Utilization Act;

(c) The land shall meet the facility standards set by Decree of the Ministry of Economy and Finance and be within the standard area set by Decree of the Ministry of Economy and Finance;

(d) The land shall be owned by a person entrusted with the reservists training from the head of mandatory corps;

6. Land used for recreation establishment business prescribed by Decree of the Ministry of Economy and Finance, such as the specialized recreation business and the integrated recreation business registered under the Tourism Promotion Act and be within the standard area set by Decree of the Ministry of Economy and Finance;

7. Land for depositories, etc.:

10. Land that is a mineral water spring (referring to the land used to run the business of bottling refreshing beverages and the hot spring business, etc., which is an outlet from which hot water or mineral water spout from underground and a site for maintaining it) and the ratio of annual revenue to the value of the land is the same as or more than the ratio set by Decree of the Ministry of Economy and Finance;

8. Land for aggregate collection places:

(a) Land used for a business of cultivation in inland seawater with permission under the Fisheries Act or a business producing seeds for fisheries with permission under the Fisheries Seed Industry Promotion Act;

9. Land used by a corporation that runs wastes treatment business upon obtaining permission therefor pursuant to the Wastes Control Act;

11. Any of the following lands, which is used for a fish farm, lake, or pond (referring to a dam, reservoir, small pond, naturally formed lake or marsh used to operate an inland fish farming business or fishing pond business and the site necessary to maintain such facility), as defined in the Act on the Establishment, Management of Spatial Data:

(a) Land used for a business of cultivation in inland seawater with permission under the Aquaculture Industry Development Act or a business producing seeds for fisheries with permission under the Fisheries Seed Industry Promotion Act;

(b) Land used by anyone who obtains a license or permission from the head of a Si/Gun/Gu (referring to the head of an autonomous Gu, and in cases of Han River of the Seoul Special Metropolitan City, referring to the head of the agency in charge of managing Han River; hereafter in this item the same shall apply) or file a report with the head of a Si/Gun/Gu pursuant to the Inland Water Fisheries Act, for his or her licensed fishing business, permitted fishing business, or reported fishing business;

(c) Land, other than the lands referred to in items (a) and (b), whose ratio of annual revenue to the value of the land is the same as or more than the ratio set by Decree of the Ministry of Economy and Finance;

12. Land used to engage in the business of producing blocks, stone products, and earthen pipes, the land used to run facilities business for selling flowering plants, the land used to engage in the business of planting landscape trees, the land used by any private institute that teaches how to repair automobiles and heavy vehicles and to drive heavy vehicles or teaches farming courses, and other land similar to the former, whose ratio of annual revenue to the value of the land is the same as or more than the ratio set by Decree of the Ministry of Economy and Finance;

13. Other land similar to the lands referred to in subparagraphs 1 through 12, which is prescribed by Decree of the Ministry of Economy and Finance, as being directly related to the business of a corporation, in consideration of its current utilization and its observance, etc., of the relevant statutes or regulations.

1. The amount of annual revenue accruing from the business related to the relevant land, building, facility, etc., for one business year, and if key money or security deposit is received after a lease or rental contract is concluded on such land, building, facility, etc., an amount calculated by applying mutatis mutandis the formula provided for in Article 65 (1) of the Enforcement Decree of the Value-Added Tax Act shall be added;

1. The ratio computed by dividing annual revenue in the relevant business year by the value of land in the relevant business year;

2. (Annual revenue in the relevant business year + Annual revenue in the immediately preceding business year) ÷ (the value of land in the relevant business year + the value of land in the immediately preceding business year).

(3) "Annual revenue" in paragraph (2) means the amount calculated by any of the following formulae: <Amended on Jun. 28, 2013>

2. Where the revenue amount for one business year is commonly related to the relevant land, building, facility, etc. (hereafter in this subparagraph referred to as "relevant land, etc.") and other land, building, facility, etc. (hereafter in this subparagraph referred to as "other land, etc."), making it impracticable to tell from which such revenue accrues, the revenue amount for one business year related to the relevant land, etc., shall be calculated by the following formula:

The revenue amount for one business year related to the relevant land, etc. = the revenue amount in the one business year commonly related to the relevant land, etc., and other land, etc. × (the value of the relevant land in the relevant business year ÷ the total amount of the value of the relevant land in the relevant business year and the value of other land);

3. Where the period during which the business is run on the relevant land during one business year is less than one year due to the commencement of a new business, the closure of business, the transfer of land, a prohibition on use of land imposed pursuant to statutes or regulations or on other inevitable grounds, the revenue amount during such period shall be calculated as the revenue amount in one business year after converting the revenue amount accruing during the relevant period to that of one year.

(4) "Value of land in the relevant business year" in paragraphs (2) and (3) means the standard market price on the last day of the relevant business year (referring to the date of transfer, where such land is transferred during the relevant business year).

(5) In applying Article 55-2 (2) of the Act, where several lots of contiguous land is used for one purpose and the total area of the land exceeds the standard area, based on which whether such land is idle land (hereafter in this paragraph referred to as "standard area"), all or part of such land shall be deemed a portion in excess of the standard area in the following order:

1. Where no building or facility exists on the land:

(a) The land that is acquired later;

(b) Where the land is acquired at the same time, the land chosen by the relevant corporation.

2. Where any building or facility exists on the land:

(a) The land that is acquired later, among the lands except the floor area of the building or the horizontal projection area of the facility;

(b) Where the land is acquired at the same time, the land chosen by the relevant corporation.

(6) In applying Article 55-2 (2) of the Act, where at least one building (including facilities, etc.; hereafter in this paragraph the same shall apply) stands on the land and the building that is divided into the portion (including the portion of a building used for a specific business among multiple buildings; hereafter in this paragraph referred to as "portion for the specific use"), which is used for the specific business of a corporation and the portion that is not used for the specific business thereof, the area, etc., of the appurtenant land, etc., for the portion for the specific use among the floor area of the building and the area of the appurtenant land (hereafter in this paragraph referred to as "area of the appurtenant land, etc.") shall be calculated by the following formulae:

1. Where one building is used for multiple purposes:

The area of the appurtenant land, etc., for the portion for the specific use = the area of the appurtenant land, etc., to the building × the total floor area of the portion for the specific use ÷ the floor area of the building;

2. Where multiple buildings with different uses stand within the same boundary:

The area of the appurtenant land for the portion for the specific use = the area of the entire land appurtenant to the multiple buildings × the floor area for the portion for the specific use ÷ the entire floor area of the multiple buildings.

(7) In applying Article 55-2 (2) of the Act, the types of business shall be classified according to the Korean Standard Industrial Classification publicly notified by the Commissioner of Statistics Korea pursuant to Article 17 of the Statistics Act, except as otherwise provided for in this Decree.

[This Article Added on Dec. 31, 2005]

Article 92-11(Criteria for determining land that is not deemed idle lands on grounds of inevitability) #

(1) Pursuant to Article 55-2 (3) of the Act, any of the following land shall be deemed not to fall under any subparagraph of Article 55-2 (2) of the Act during the period specified in the corresponding subparagraph for the purposes of determining whether the land is the idle land (hereafter referred to as "idle land" in this Article) as provided for in Article 55-2 (2) of the Act: <Amended on Feb. 29, 2008; Feb. 4, 2009; Jan. 5, 2021; May 7, 2024>

1. The land, the use of which is prohibited or restricted pursuant to statutes or regulations after it is acquired: The period during which its use is prohibited or restricted;

2. Land within a protection zone designated under the Act on Conservation and Utilization of Cultural Heritage or the Act on Conservation and Utilization of Natural Heritage after the land is acquired: Period of time designated as a protection zone;

3. Land that falls under the grounds of inevitability prescribed by Decree of the Ministry of Economy and Finance, in consideration of the public interest, legal restriction due to corporate restructuring or inevitable reasons, current state of land, grounds for acquiring the land, current state of utilization of the land, etc: The period prescribed by Decree of the Ministry of Economy and Finance.

(2) Pursuant to Article 55-2 (3) of the Act, any of the following land shall be deemed transferred on the date specified in the corresponding subparagraph for the purposes of determining whether it is the idle land by applying Article 92-3: <Amended on Feb. 29, 2008>

1. Land transferred by means of auction under the Civil Execution Act: The first auction date;

2. Land transferred by means of public auction under the National Tax Collection Act: The public auction date;

3. Land that requires a certain period for its transfer and falls under the grounds of inevitability prescribed by Decree of the Ministry of Economy and Finance: The date prescribed by Decree of the Ministry of Economy and Finance.

(3) Pursuant to Article 55-2 (3) of the Act, none of the following land shall be deemed the idle land: <Amended on Feb. 9, 2006; Feb. 29, 2008; Oct. 7, 2008; Feb. 4, 2009; Feb. 21, 2014; Jan. 5, 2021; May 4, 2021>

1. Land to be transferred within three years from the date of acquisition due to a merger or division of a corporation;

2. Land purchased by means of consultation or expropriated under the Act on Acquisition of and Compensation for Land for Public Works Projects and other statutes, falling under any of the following:

(a) Land of which business authorization is published on or before December 31, 2006

(b) Land, the acquisition date of which is five years before the project authorization is publicly notified;

3. Farmland owned by a clan (limited to the farmland acquired on or before December 31, 2005) as farmland falling under Article 55-2 (2) 1 (b) of the Act;

4. Land donated (including contribution) to an educational foundation under the Private School Act;

5. Land that falls under the grounds of inevitability prescribed by Decree of the Ministry of Economy and Finance, in consideration of the public interest, legal restriction due to corporate restructuring or inevitable reasons, current state of land, grounds for acquiring the land, current state of utilization of the land, etc.

[This Article Added on Dec. 31, 2005]

[Title Amended on Jan. 5, 2021]

Article 94(Deduction of foreign tax credits) #

(1) "Amount of foreign corporate tax prescribed by Presidential Decree" in Article 57 (1) of the Act, with the exception of the calculation formula, means the following amounts of tax (excluding additional tax) paid or payable by a foreign government (including a local government; hereinafter the same shall apply); provided, where the amount imposed by a foreign government on amounts not returned to a foreign-related party and reserved to a domestic corporation among the amounts of the domestic corporation reduced as prescribed in Article 12 (1) of the Adjustment of International Taxes Act and the relevant tax amount exceed the amount of tax calculated pursuant to the provisions on non-taxation, tax exemption, or restrictive tax rates of the tax treaty, such excess tax amount shall be excluded, but the amount of tax assessed by the Government of the Russian Federation in excess of the amount of tax computed pursuant to the regulations on non-taxation, tax exemption, and limited tax rates under the provisions of tax treaties based on the statutes and regulations of the Russian Federation with the content of suspending the implementation of tax treaties with non-friendly countries shall be included: <Amended on Feb. 19, 2005; Feb. 4, 2009; Jun. 3, 2011; Feb. 2, 2012; Feb. 12, 2019; Feb. 17, 2021; Feb. 15, 2022; Feb. 29, 2024>

1. The amount of excess profit tax and other taxes imposed with other income, etc., of the corporation as the tax base;

2. The amount of value-added tax imposed with the income, etc., of the corporation as the tax base;

3. The amount of tax imposed with the amount of earnings, other than income, as the tax base and other corresponding taxes falling under the same tax items as the tax imposed with the income, etc., of the corporation as the tax base.

(2) Foreign source income to which Article 57 (1) of the Act applies shall be income generated abroad and calculated pursuant to the regulations governing the calculation of the tax base of income for each business year of a domestic corporation; and the amount of the foreign source income for the purpose of calculating a deduction limit amount referred to in the same paragraph shall be the relevant foreign source income minus the following expenses corresponding to the foreign source income (hereafter in this Article referred to as "expenses corresponding to foreign source income") as an amount included in deductible expenses in calculating the tax base for the relevant business year (excluding an amount included in deductible expenses at the time of taxation in the country where the foreign source income is generated). In such cases, where a domestic corporation applies the calculation method prescribed by Decree of the Ministry of Economy and Finance with respect to expenses prescribed by Decree of the Ministry of Economy and Finance, such as expenses related to research and development, the amount calculated accordingly shall be the expenses corresponding to foreign source income; and if a domestic corporation applies the calculation method prescribed by Decree of the Ministry of Economy and Finance, such calculation method shall be applied for five consecutive business years from the business year for which the calculation method is to be adopted: <Amended on Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021>

1. Direct expenses: expenses that directly relate and correspond to the relevant foreign source income. In such cases, expenses commonly related to the relevant foreign source income and other income shall be excluded;

2. Distributed expenses: expenses related to foreign source income calculated pursuant to the distribution method prescribed by Decree of the Ministry of Economy and Finance, out of the expenses commonly related to the relevant foreign source income and other income.

(3) The amount of tax paid in a foreign country under Article 57 (1) of the Act shall be deducted from the calculated amount of tax for the business year in which the relevant foreign source income is included in the tax base. In such cases, a domestic corporation that wishes to qualify for Article 57 (1) of the Act shall submit a tax statement on foreign tax credits in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment, along with the report provided for in Article 60 of the Act. <Amended on Feb. 4, 2009; Feb. 17, 2021>

(5) Paragraph (4) shall apply mutatis mutandis where the amount of tax paid in a foreign country is revised due to the correction of determination made by the foreign government on the amount of corporate tax on the foreign source income. In such cases, if a tax refund is granted, it may be appropriated or refunded as prescribed in Article 51 of the Framework Act on National Taxes. <Amendedon Feb. 4, 2009>

(6) For the purposes of paragraph (2), if there is any loss carried forward, non-taxable income, or income deduction (hereafter in this paragraph referred to as "amount of deduction, etc.") deducted at the time of calculating the tax base for each business year, the foreign source income shall be the amount gained by subtracting the amount of deduction, etc. calculated by applying mutatis mutandis the subparagraphs of Article 96. In such cases, "business subject to reductions or exemptions" referred to in the subparagraphs of Article 96 shall be deemed "foreign source income". <Amended on Feb. 12, 2019>

(7) If a corporation has overseas places of business in at least two countries, it shall calculate the limit on the tax credits under Article 57 (1) of the Act separately for each country. <Amended on Feb. 3, 2015; Feb. 12, 2019; Feb. 17, 2021>

(8) "Amount computed, as prescribed by Presidential Decree" in Article 57 (4) of the Act means the amount computed by the following formula. In such case, the amount of corporate tax of a foreign subsidiary for the relevant business year shall be calculated by including the amount equivalent to 50/100 of either of the following amounts of tax, if the foreign subsidiary had the amount deducted or deductible as the amount of tax paid in the foreign country or had the amount of tax fully or partially exempted for overseas income in a country where the foreign subsidiary is located, with regard to the relevant amount of dividend income or the income imputed to a branch in a third country (referring to a country other than the country in which a corporation has its head office, principal place of business, or actual place of business control), while the amount of dividend income (including the amount of dividend income that the foreign subsidiary has received from the foreign second-tier subsidiary) shall be deemed allocated or distributed in the order of accrual of profits or surpluses, starting from the amount accruing first: <Amended on Feb. 3, 2015>Amount of corporate tax of the foreign subsidiary for the relevant business year × (Dividend income ÷ (Amount of income of the foreign subsidiary for the relevant business year - Amount of corporate tax of the foreign subsidiary for the relevant business year)

1. The amount of tax that a foreign subsidiary paid in the country where a foreign second-tier subsidiary is located, for the dividends received from the foreign second-tier subsidiary pursuant to the law of the country;

2. The amount of tax that a foreign subsidiary paid in a third country for the income imputed to a branch or a similar entity in the third country.

(9) "Corporation that meets the requirements prescribed by Presidential Decree" in Article 57 (5) of the Act means a domestic corporation which directly holds (where a domestic corporation succeeds to the stocks, etc. of a foreign subsidiary owned by another domestic corporation through a qualified merger, qualified division, qualified split-off, or qualified investment in-kind, the domestic corporation shall be deemed to have held such stocks, etc. since the time when such another domestic corporation acquired the stocks, etc. of the foreign subsidiary before such succession) at least 10/100 (5/100 in the case of a foreign corporation conducting an overseas resources development project under Article 22 of the Act on Restriction on Special Cases concerning Taxation) of the total number of outstanding voting stocks or the total amount of investment of the foreign company for at least six consecutive months as on the determination date of dividends. <Amended on Feb. 28, 2023>

(10) "Foreign second-tier subsidiary" in paragraph (8) means a corporation that meets all of the following requirements: <Added on Feb. 22, 2008; Feb. 18, 2010; Feb. 3, 2015; Feb. 28, 2023>

1. The relevant foreign subsidiary shall directly hold at least 10/100 (referring to 5/100 in cases of a foreign corporation which operates overseas resources development business under Article 22 of the Restriction of Special Taxation Act) of the total number of outstanding voting stocks or total amount of investment of a foreign second-tier subsidiary for at least six consecutive months as on the dividend record date of the foreign second-tier subsidiary;

2. A domestic corporation shall indirectly hold at least 10/100 (referring to 5/100 in cases of a foreign corporation which operates overseas resources development business under Article 22 of the Restriction of Special Taxation Act) of the total number of outstanding voting stocks or total amount of investment of a foreign second-tier subsidiary through a foreign subsidiary pursuant to Article 57 (5) of the Act. In such cases, the indirect holding ratio of stocks shall be calculated by multiplying the ratio of stocks of the foreign subsidiary held by the domestic corporation by the ratio of stocks of the foreign second-tier subsidiary held by the foreign subsidiary.

(11) and (12) Deleted. <Feb. 3, 2015>

(12) Deleted. <Feb. 3, 2015>

(13) "Otherwise meets the requirements prescribed by Presidential Decree" in Article 57 (6) of the Act means: <Added on Dec. 30, 2010>

1. Where the income of a foreign corporation accrues in a country in which its headquarters or main office is located (hereafter in this paragraph referred to as "residential country"): Where a domestic corporation which is a stockholder or investor not the relevant foreign corporation shall directly have a tax liability for the income of the relevant foreign corporation pursuant to the tax law of the residential country;

2. Where the income of a foreign corporation accrues in the country other than the residential country (hereafter in this paragraph referred to as "withholding country"): All of the following requirements are met:

(a) That the domestic corporation which is a stockholder or investor not the relevant foreign corporation shall directly have a tax liability for the income of the relevant foreign corporation pursuant to the tax law of the residential country;

(b) That the domestic corporation which is a stockholder or contributor not the relevant foreign corporation shall directly have a tax liability for the income of the relevant foreign corporation pursuant to the tax law of the withholding country.

(14) "Amount computed, as prescribed by Presidential Decree" in Article 57 (6) of the Act means the amount computed by the following formula: <Added on Dec. 30, 2010>Amount of corporate tax that a domestic corporation paid for income of the foreign corporation for the relevant business year ×Dividend income(Income of the foreign corporation for the relevant business year x the ratio of distribution of profits of the domestic corporation for the relevant business year) - Amount of corporate tax that a domestic corporation paid for income of the foreign corporation for the relevant business year

(15) The main clause of Article 57 (2) of the Act shall not apply to foreign corporate tax related to expenses corresponding to foreign source income (referring to an amount pursuant to subparagraph 1 minus an amount pursuant to subparagraph 2) out of foreign corporate tax exceeding the deduction limit amount referred to in Article 57 (1) of the Act. In such cases, the relevant foreign corporate tax may be included in deductible expenses for the purpose of calculating the amount of income for the business year following the business year for which the tax credit is not applied: <Amended on Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021; Feb. 28, 2023>

1. Deduction limit amount calculated based on foreign source income to which Article 57 (1) of the Act is applied, calculated pursuant to the former part, with the exception of the subparagraphs, of paragraph (2);

2. Deduction limit amount pursuant to Article 57 (1) of the Act.

(16) Except as otherwise provided for in paragraphs (8) through (10), procedures for calculating the amount of tax deductible for a foreign subsidiary or foreign second-tier subsidiary and other necessary matters shall be prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 22, 2008; Feb. 29, 2008; Dec. 30, 2010; Feb. 3, 2015>

Article 94-2(Special cases concerning foreign tax credits on income paid by indirect investment companies) #

(1) Where a company falling under any item of Article 57-2 (1) 1 of the Act (hereafter in this Article and Article 111 referred to as "indirect investment company, etc.") has paid indirect investment foreign corporate tax referred to in subparagraph 2 of the same paragraph (hereafter in this Article and Article 111 referred to as the "indirect investment foreign corporate tax"), the indirect investment foreign corporate tax corresponding to the income paid by the indirect investment company, etc. to each domestic corporation is the amount computed by aggregating each of the following:

1. Where an indirect investment company, etc. makes an investment in a manner other than acquiring securities issued by another indirect investment company, etc.: The sum of the amounts calculated for each day according to the following formula: The daily amount of indirect investment foreign corporate tax for each domestic corporation = A x BA: The daily amount of foreign corporate tax paid by an indirect investment company, etc. per unit or per share (referring to the total amount of foreign corporate tax paid by an indirect investment company, etc. divided by the total number of units or shares issued by an indirect investment company, etc.); B. The number of units or shares held by a domestic corporation in an indirect investment company, etc. (referring to the number of units or shares held by a domestic corporation at the time an indirect investment company, etc. pays foreign corporate tax

2. Where an indirect investment company, etc. makes an investment in a manner of acquiring securities issued by another indirect investment company, etc.: The sum of the amounts calculated for each day according to the following formula: The daily amount of indirect investment foreign corporate tax for a domestic corporation = A x B x CA: The daily amount of foreign corporate tax paid by another indirect investment company, etc. per unit or per share (referring to the total amount of foreign corporate tax paid by another indirect investment company, etc. divided by the total number of units or shares issued by such another indirect investment company, etc.); B. The number of units or shares held by an indirect investment company, etc. in another indirect investment company, etc. (referring to the number of units or shares held by an indirect investment company, etc. at the time such another indirect investment company, etc. pays foreign corporate tax); C. The ratio of the number of units or shares held by a domestic corporation in an indirect investment company, etc. (referring to the number of units or shares held by a domestic corporation at the time when another indirect investment company, etc. pays the foreign corporate tax, divided by the total number of units or shares issued by the indirect investment company, etc.).

(2) "Amount calculated as prescribed by Presidential Decree" in the proviso to Article 57-2 (2) 1 of the Act means an amount calculated under Article 117-2 (2) of the Enforcement Decree of the Income Tax Act from the actual sale price. <Amended on Dec. 31, 2024; Feb. 28, 2025>.>

(3) The amount to be deducted from the calculated tax amount of a domestic corporation pursuant to Article 57-2 (2) 2 of the Act is the amount of indirect investment foreign corporate tax for each domestic corporation under paragraph (1), multiplied by the rate calculated pursuant to the formula classified as follows:

1. In the case of investment trust proceeds referred to in Article 73 (1) 2 of the Act:

(a) When the withholding tax rate referred to in Article 73 (1) of the Act is lower than the foreign withholding tax rate applied to the amount of indirect investment foreign corporate tax: Withholding tax rate pursuant to Article 73 (1) of the Act / Foreign withholding tax rate applied to indirect investment foreign corporate tax - Restrictive tax rate for corporate tax base referred to in Article 55 (1) of the Act

(b) When the withholding tax rate referred to in Article 73 (1) of the Act is greater than or equal to the foreign withholding tax rate applied to the amount of indirect investment foreign corporate tax; 1 ? Restrictive tax rate for corporate tax base referred to in Article 55 (1) of the Act

2. In the case of income, other than that of subparagraph 1, received from an indirect investment company, etc. 1 ? Restrictive tax rate for corporate tax base referred to in Article 55 (1) of the Act

(4) When applying paragraph (3) 1, the foreign withholding tax rate shall be the aggregate of the ratios calculated for each investment target in which the indirect investment company, etc. has invested through any of the methods specified in the subparagraphs of paragraph (1), in accordance with the following formula: <Amended on Feb. 28, 2025>

┌─────────────────────────────────────────┐

│ │

│ A × C │

│ ─────────────── │

│ B │

│ │

│ A: Indirect investment foreign corporate tax calculated according to the classification of each subparagraph of paragraph (1) │

│ corresponding to the income generated in the investment target │

│ B: The total amount of foreign corporate tax on indirect investment by investment target │

│ C: Foreign withholding tax rate by investment target (Amount of foreign taxes paid by indirect investment companies, etc. during the preceding fiscal year or accounting period │

│ ÷ Amount of foreign source income corresponding to the amount of foreign tax paid). │

│ In such cases, if it is impossible to calculate the foreign withholding tax rate due to reasons │

│ such as the amount of foreign tax paid or the amount of foreign source income for the preceding fiscal year or accounting period is unknown, │

│ the relevant foreign withholding tax rate shall be 14%. │

│ │

└─────────────────────────────────────────┘

(5) Deleted. <Feb. 28, 2025>

(6) Where the indirect investment foreign corporate tax paid by an indirect investment company, etc. (if the indirect investment company, etc. makes an investment by acquiring securities issued by another indirect investment company, etc., including such another indirect investment company, etc.) is fully or partially refunded after the relevant business year or fiscal period, the indirect investment company, etc. shall pay the refund to the head of the tax office having jurisdiction over the place of taxation as prescribed by the Ministry of Economy and Finance.

(7) For the purposes of paragraph (6), a collective investment business entity that manages investment trust property pursuant to the Financial Investment Services and Capital Markets Act shall be deemed to act on behalf of the investment trust.

(8) Where a domestic corporation intends to claim a foreign tax credit under Article 57-2 (1) of the Act, it shall submit, together with the tax base return under Article 60 of the Act, a calculation statement of the foreign tax credit for indirect investment companies, etc., as prescribed by Decree of the Ministry of Economy and Finance, to the head of the competent tax office. <Added on Feb. 28, 2025>

[This Article Added on Feb. 28, 2023]

Article 95(Tax Credits for losses from disasters) #

(1) "Total amount of assets prescribed by Presidential Decree" in the former part of Article 58 (1) of the Act, with the exception of it subparagraphs, means the sum of the following assets: <Amended on Jun. 3, 2011>

1. Business assets (excluding land);

2. Assets held by another person, the responsibility for compensation for the loss of which is borne by the relevant corporation.

(2) In applying Article 58 (1) of the Act, the asset loss ratio shall be calculated based on the book value of the relevant corporation as of the date a disaster occurs, and where the book value is unavailable due to the loss or damage of the account books, it shall be calculated based on the value as of the date the disaster occurs as investigated and verified by the head of the tax office having jurisdiction over the place of tax payment.

(3) Additional tax referred to in Article 75-3 of the Act and Articles 47-2 through 47-5 of the Framework Act on National Taxes shall be included in the amount of corporate tax provided for in each subparagraph of Article 58 (1) of the Act. <Amended on Feb. 28, 2007; Feb. 22, 2008; Feb. 12, 2019>

(4) Deleted. <Feb. 22, 2008>

(5) A domestic corporation which intends to obtain a tax credit for losses from disasters pursuant to Article 58 (1) of the Act shall submit an application for tax credits for losses from disasters in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment within the deadlines classified as follows: <Amended on Feb. 29, 2008; Feb. 15, 2022>

1. For corporate tax, the filing deadline of the tax base of which has not expired as at the date of the disaster, the filing deadline; provided, where the period from the date of the disaster to the filing deadline is less than three months, three months from the date of the disaster;

2. For corporate tax unpaid or payable as at the date of the disaster, three months from the date of the disaster.

(6) The head of the tax office having jurisdiction over the place of tax payment may, with respect to the corporate tax of the corporation deductible under Article 58 (1) of the Act, extend the due date for payment or the due date specified in a payment reminder under the National Tax Collection Act, or suspend the notice of payment, until the tax credit is verified. <Amended on Feb. 19, 2005; Feb. 17, 2021>

Article 95-3(Tax credits upon correction of wrongful accounting) #

(1) "Sanctions prescribed by Presidential Decree, such as a warning or caution" in Article 58-3 (1) 2 of the Act means any of the following measures: <Amended on Oct. 30, 2018>

1. Measures specified in the subparagraphs of Article 175 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act, such as recommending dismissal of an executive officer;

2. Imposing a penalty surcharge under Article 429 (3) of the Financial Investment Services and Capital Markets Act;

3. Sentencing to imprisonment with labor or a fine under subparagraph 13 of Article 444 or subparagraph 28 of Article 446 of the Financial Investment Services and Capital Markets Act;

4. Cancelling registration of an auditor or any of its certified public accountants, recommending suspension of service or performance of duties, or restricting the performance of audit for specified companies under Article 29 (3) and (4) of the Act on External Audit of Stock Companies;

5. Recommending dismissal of an executive officer at the general meeting of stockholders or restricting the issuance of securities under Article 29 (1) of the Act on External Audit of Stock Companies;

6. Sentencing to imprisonment with labor or a fine under Articles 39 through 44 of the Act on External Audit of Stock Companies.

(2) Where any ground for requiring a correction, other than the grounds for requiring a correction under the main sentence of Article 58-3 (1) of the Act, exists in applying Article 58-3 of the Act, the amount of the tax credit shall be computed by the following formula:Overpaid tax amount x (Overstated tax base due to wrongful accounting under Article 58-3 (1) of the Act ÷ Sum of overstated tax bases)

[This Article Added on Feb. 3, 2017]

Article 97(Report of tax bases) #

(1) In filing a report under Article 60 (1) of the Act, the tax base and amount of corporate tax on income for each business year calculated under Articles 14 through 54 of the Act (including the corporate tax on capital gains from the transfer of land under Article 55-2 of the Act) and other necessary matters shall be stated on the report, based on the account books kept under Article 112 of the Act. In such cases, when a corporation subject to external audit under Article 4 of the Act on External Audit of Stock Companies intends to report the tax base and amount of corporate tax through electronic filing under subparagraph 19 of Article 2 of the Framework Act on National Taxes, it shall file a written report, with its representative’s signature or seal affixed thereon, to the head of the tax office having jurisdiction over the place of tax payment. <Amended on Dec. 31, 2001; Feb. 15, 2013; Oct. 30, 2018; Feb. 12, 2019>

(2) The report referred to in paragraph (1) shall be filed in the corporate tax base and amount form prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 29, 2008>

(3) Where any currency, other than Korean won, is adopted as the functional currency according to the Korean Financial Accounting Standards, the statement of financial position, the consolidated income statement, and the earned surplus settlement statement (or deficits settlement statement) referred to in Article 60 (2) 1 of the Act and the cash flow chart referred to in paragraph (5) 1 of this Article (hereafter in this Article referred to as "financial statements") mean the financial statements denominated in the functional currency (hereafter in this Article referred to as "functional currency-denoted financial statements") which is prepared by applying mutatis mutandis the Korean Financial Accounting Standards. <Added on Dec. 30, 2010; Mar. 31, 2011>

(4) The tax settlement invoice referred to in Article 60 (2) 2 of the Act shall be the corporate tax base and amount settlement invoice prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 29, 2008>

(5) "Documents prescribed by Presidential Decree" in Article 60 (2) 3 of the Act means the following documents; provided, a corporation that has filed a report under Article 60 (1) of the Act through electronic filing as defined in subparagraph 19 of Article 2 of the Framework Act on National Taxes may choose not to submit the documents prescribed by Decree of the Ministry of Economy and Finance among the accompanying documents: <Amended on Jun. 8, 2010; Dec. 30, 2010; Oct. 30, 2018>

1. Accompanying documents of the tax settlement invoice prepared as prescribed by Decree of the Ministry of Economy and Finance and the cash flow chart prepared according to the Korean Financial Accounting standards (limited to corporations subject to external audit under Article 4 of the Act on External Audit of Stock Companies);

1-2. Where the currency, other than Korean won, is adopted as the functional currency according to the Korean Financial Accounting Standards, the financial statements converted from the functional currency-denoted financial statements according to the Korean Financial Accounting Standards by having Korean won as the denomination currency (hereafter in this Article referred to as "denomination currency-denoted financial statements");

1-3. Where a corporation which adopts the currency, other than Korean won, as the functional currency according to the Korean Financial Accounting Standards applies the calculation method of tax base provided for in Article 53-2 (1) 1 of the Act, the financial statements to be otherwise prepared by such corporation when it prepares the financial statements in Korean won by continuously applying mutatis mutandis the Korean Financial Accounting Standards without adopting the functional currency other than Korean won (hereafter in this Article, referred to as "Korean won-denoted financial statements");

2. Any of the following documents, in cases of a merger or division (limited to the surviving corporation, etc.):

(a) A statement of financial position of the merged corporation, etc., as on the registration date of the merger or the registration date of the division and a statement of the assets and liabilities that the surviving corporation, etc., has succeeded to due to the merger or division;

(b) Documents stating the location of the headquarters, etc., of the surviving corporation, etc., the name of its representative, the name of the merged corporation, etc., the registration date of the merger or the registration date of the division, and other necessary matters.

(6) Where the head of the tax office having jurisdiction over the place of tax payment or the commissioner of the competent regional tax office demands in writing that the documents not submitted accompanied by the report under the proviso to paragraph (5) be submitted in order to analyze the details of the report, the relevant corporation shall submit such documents. <Amended on Feb. 15, 2013>

(7) "Documents prescribed by Presidential Decree" in Article 60 (4) 2 of the Act means the documents stating the location of the headquarters, etc., of the surviving corporation, etc., the name of its representative, the name of the merged corporation, etc., the registration date of the merger or division, and other necessary matters. <Added on Jun. 8, 2010>

(8) In applying Article 60 (5) of the Act, where a disappearing corporation due to a merger or division has filed the report on tax base and amount for the last business year, it shall be deemed to have filed a report under this Act although it has failed to submit the earned surplus settlement statement (or deficits settlement statement) among the documents provided for in paragraph (2) 1 of the same Article. <Amended on Feb. 18, 2010>

(9) and (10) Deleted. <by Feb. 12, 2016>

(10) Deleted. <Feb. 12, 2016>

(11) The submission of financial statements, functional currency-denoted financial statements, Korean won-denoted financial statements, and denomination currency-denoted financial statements may be replaced with the submission of standard statement of financial position, standard income statements, and standard particulars, accompanying income statements (hereafter in this Article, referred to as "standard financial statements") prescribed by Decree of the Ministry of Economy and Finance through national tax information and communications networks provided for in subparagraph 19 of Article 2 of the Framework Act on National Taxes; provided, a corporation which applies the K-IFRS shall submit the standard financial statements. <Amended on Dec. 30, 2010; Feb. 12, 2019; Jan. 5, 2021>

(12) A domestic corporation that wishes to qualify for Article 60 (7) of the Act shall file an application for the extension of the filing deadline in the form prescribed by Decree of the Ministry of Economy and Finance with the head of the tax office having jurisdiction over the place of tax payment, by three days before the expiration of the filing deadline specified in Article 60 (1). <Added on Feb. 18, 2010; Feb. 12, 2016>

(13) "Interest rate prescribed by Presidential Decree" in the former part of Article 60 (8) of the Act means the interest rate specified in the main clause of Article 43-3 (2) of the Enforcement Decree of the Framework Act on National Taxes. <Added on Feb. 18, 2010; Feb. 3, 2015; Feb. 11, 2020>

Article 97-2(Corporations subject to external tax settlement) #

(1) "Domestic corporation specified by Presidential Decree" in Article 60 (9) of the Act, with the exception of its subparagraphs, means any of the following corporations (hereinafter referred to as "corporation subject to external tax settlement"); provided, the corporations entitled to taxation on the profit for the year under Article 72 of the Restriction of Special Taxation Act shall be excluded herefrom: <Amended on Oct. 30, 2018; Feb. 12, 2019>

1. A corporation whose revenue for the immediately preceding business year is at least 7 billion won or a corporation that should undergo audit by an external auditor under Article 4 of the Act on External Audit of Stock Companies;

2. A corporation whose revenue for the immediately preceding business year is at least 300 million won and who is eligible for the special taxation provided for in Articles 29 through 31 and 45 of the Act or the Restriction of Special Taxation Act (excluding the special taxation provided for in Article 104-8 of that Act);

3. A corporation whose revenue for the immediately preceding business year is at least 300 million won and whose balance of reserves under the Act and the Restriction of Special Taxation Act as at the end of the relevant business year is at least 300 million won;

4. A corporation in which case two years or less have passed since the end of the relevant business year and whose revenue for the relevant business year is at least 300 million won;

5. A corporation whose tax base and tax amount of corporate tax for the immediately preceding business year has been determined or corrected under the proviso to Article 66 (3) of the Act;

6. A surviving corporation, divided corporation, a corporation established through division, or the counterpart corporation to a division and merger, in which case three years or less has passed since the merger or division retroactively from the end of the relevant business year;

7. A corporation that has a place of business abroad or a foreign subsidiary, referred to in Article 57 (5) of the Act.

(2) A corporation that is not subject to external tax settlement may submit a tax settlement statement prepared by a person referred to in any subparagraph of Article 60 (9) (hereinafter referred to as "certified tax accountant or other qualified person") for correct tax settlement at the time of filing a tax return on tax base, etc.

(3) In applying paragraph (1) 1 through 3 to a corporation established in the relevant business year, the amount computed by converting its revenue for the relevant business year into revenue for one year shall be deemed its revenue for the immediately preceding business year.

[This Article Added on Feb. 12, 2016]

Article 97-4(Submission of certificate of confirmation on compliant filing) #

(1) "Any of the persons specified by Presidential Decree, such as a certified public tax accountant" in the main sentence of Article 60-2 (1) of the Act means a certified public tax accountant (including certified public accountants registered pursuant to Article 20-2 of the Certified Tax Accountant Act; hereafter the same shall apply in this Article), a tax accounting corporation or an accounting corporation (hereafter referred to as "certified public tax accountant or other relevant corporation" in this Article).

(2) "Domestic corporation whose main business is real estate lease business and who meets the criteria prescribed by Presidential Decree" in Article 60-2 (1) 1 of the Act means a domestic corporation that meets all the criteria prescribed in Article 42 (2) (excluding domestic corporations falling under any subparagraph of Article 51-2 (1) of the Act and domestic corporations prescribed in Article 104-31 (1) of the Act on Restriction on Special Cases concerning Taxation). <Amended on Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021>

(3) "Methods prescribed by Presidential Decree, such as in-kind investment of assets for business use" in Article 60-2 (1) 2 of the Act means the in-kind investment of tangible and intangible assets for business use, the transfer and acquisition of a business, etc. <Amended on Feb. 12, 2019>

(4) In applying Article 60-2 (1) 2 of the Act, business operators subject to confirmation of compliant filing shall be limited to those who meet the criteria for a business operator subject to confirmation of compliant filing under Article 70-2 of the Income Tax Act in the year in which the relevant domestic corporation is established or the immediately preceding year.

(5) Except as otherwise provided for in paragraphs (1) through (4), matters necessary for submitting a certificate of confirmation of compliant filing shall be determined by the Minister of Economy and Finance. <Amended on Feb. 12, 2019; Feb. 15, 2022>

[This Article Added on Feb. 13, 2018]

[Title Amended on Feb. 12, 2019]

Article 99-2(Special cases concerning reporting capital gains on transfer of assets by non-profit domestic corporations) #

(1) "Stocks, etc. prescribed by Presidential Decree" in Article 62-2 (1) 1 of the Act means assets under Article 94 (1) 4 (b) (limited to stocks, etc.), (c), and (d) of the Income Tax Act. <Added on Dec. 31, 2024>

(2) The special provisions concerning the taxation of capital gains on transfer of assets prescribed in each subparagraph of Article 62-2 (1) of the Act shall apply to each business year in which includes the date on transfer of assets provided for in each subparagraph of paragraph (1) of the same Article falls. In such cases, when such special provisions do apply by each business year, Article 62-2 of the Act shall not apply to any capital gain on transfer of assets during the relevant business year.

(3) "Asset prescribed by Presidential Decree" in the proviso to Article 62-2 (4) of the Act means any asset transferred within three years from the date on of contribution; provided, any assets directly used for any of the following businesses (excluding any profit-making business under Article 3 (1), other than health services) for at least one year shall be excluded: <Amended on Jun. 3, 2011; Feb. 13, 2018; Feb. 12, 2019>

1. Any business prescribed by statutes or regulations;

2. Any business permitted or authorized by the relevant administrative agency.

3. In other cases than that referred to subparagraphs 1 and 2, the business stipulated as the proper purpose business on the corporate register.

(4) paragraph (3) shall not apply where a tax liability arises with respect to any contributed asset not included in the taxable value of the inheritance tax or the taxable value of the gift tax under the Inheritance Tax and Gift Tax Act and the amount equivalent to the total amount of the inheritance tax or gift tax not included in such taxable value is subsequently imposed. <Amended on Feb. 19, 2005>

(5) A non-profit domestic corporation may file a report on its tax base under Article 60 (1) of the Act even after having made voluntary payments upon filing a preliminary return on the tax base of capital gains under Article 62-2 (7) of the Act. In such cases, the amount of tax paid upon filing a preliminary return shall be deducted from the amount of tax payable under Article 64 of the Act.

(6) A preliminary return on tax base on capital gains referred to in Article 62-2 (7) of the Act shall be filed in the form prescribed by Decree of the Ministry of Economy and Finance. <Amended on Feb. 29, 2008>

[This Article Added on Dec. 31, 2001]

[Title Amended on Feb. 12, 2019]

Article 104(Determinations and corrections by estimation) #

(1) "Grounds prescribed by Presidential Decree" in the proviso to Article 66 (3) of the Act means any of the following: <Amended on Jun. 3, 2011; Feb. 12, 2019>

1. Where there are no account books or evidentiary documents necessary for calculating the income amount or important details are incomplete or false;

2. Where it is clear that the entered details are false in light of the scale of facilities, the number of employees, or the market prices of raw materials, commodities, manufactured goods, or various fees and charges;

3. Where it is clear that the entered details are false in light of the amount of raw materials used, power consumption, and other operational matters.

(2) A determination by estimation or correction under the proviso to Article 66 (3) of the Act shall be made by any of the following methods: <Amended on Dec. 31, 2001; Dec. 30, 2003; Feb. 19, 2005; Feb. 4, 2009; Feb. 15, 2013; Feb. 21, 2014; Feb. 12, 2019>

1. The method of determining or correcting the amount of tax based on the tax base computed by deducting the following amounts from the amount of business revenue. In such cases, if the amount to be deducted is in excess of the amount of business revenue, the excess amount shall be deemed nil:

(a) The amount expended or to be expended based on evidentiary documents as purchase expenses (excluding any expenses for the purchase of tangible or intangible business assets; hereafter the same shall apply in this Article) or rental fees for tangible or intangible business assets;

(b) The amount paid or payable based on evidentiary documents as pays, wages and retirement benefits of the representative, executive officers or employees;

(c) The amount computed by multiplying the standard expense rate provided for in Article 145 of the Enforcement Decree of the Income Tax Act (hereinafter referred to as "standard expense rate") by the amount of business revenue;

2. The method of determining or correcting the tax base with reference to the income amount of another corporation of the same business type which is deemed to have the most accurate accounting records where the standard expense rate is not determined or the account books and other evidentiary documents are destroyed by any natural disaster, etc.; provided, when there is no other corporation of the same business type and the account books and other evidentiary documents are destroyed after filing of the tax base report, the determination or correction of the tax base shall be made based on the report filed under Article 60 of the Act and the accompanying evidentiary documents, and where the account books and other evidentiary documents are destroyed before filing of the tax base, it shall be made based on the income rate of the immediately preceding business year;

3. The method of determining or correcting the amount of tax based on the tax base computed using the amount computed in accordance with either of the following items, whichever is smaller, where a small enterprise defined under Article 7 (1) 2 (a) of the Restriction of Special Taxation Act closed its business (excluding where a ground specified by Decree of the Ministry of Economy and Finance exists to believe that it is suspected to have evaded taxation):

(a) An amount calculated by subtracting the amount computed by multiplying revenue by the applicable simple expense rate under Article 145 of the Enforcement Decree of Income Tax Act from revenue;

(b) An amount calculated by multiplying revenue by the income rate for the immediately preceding business year;

(3) In making determination or correction by estimation under the proviso to Article 66 (3) of the Act, the sum of the amount computed under paragraph (2) and any of the following amounts shall be the tax base and the amount of tax shall be determined or corrected accordingly: <Amended on Feb. 2, 2012; Feb. 12, 2019>

1. The amount computed by subtracting the following amounts from the amount of earnings (limited to earning accruing from the profit-making business under Article 4 (3) of the Act in the case of a non-profit corporation; hereafter referred to as "non-business earnings" in this subparagraph) provided for in Article 11 (excluding subparagraph 1):

(a) The amount equivalent to costs which are directly corresponding to the non-business earnings and are verified by evidentiary documents or objective data;

(b) Where any returned amount among the deductible expenses spent in the relevant business year is included in the non-business earnings, such returned amount;

(c) Where the interest income of a corporation that leases real estate is included in the non-business earnings, the amount equivalent to the interest income accruing from key money or deposit money in real estate rent;

2. The amount included in gross earnings in the transactions with any related party under Articles 88 and 89;

3. In case of a corporation with reserve funds or appropriation funds to be included in gross income under Article 34 of the Act or the Restriction of Special Taxation Act, such reserve funds or appropriation funds to be included in gross income.

Article 105(Calculation of business revenue when making determinations or corrections by estimation) #

(1) Where the amount of business revenue for each business year of a domestic corporation cannot be calculated based on the account books or other evidentiary documents, such amount of business revenue shall be calculated by the following methods: <Amended on Feb. 12, 2019; Jan. 5. 2021>

1. The method of calculating the amount of business revenue with reference to the amount of business revenue of other similar corporations of the same business type determined through investigation of the account books deemed proper;

2. Where there is an operational efficiency rate set by the Commissioner of the National Tax Service in consideration of the type, region, etc. of business, the quantity of business related personnel, physical facilities (such as employees, guest rooms, places of business, motor cars, waterworks, and electricity), or the value and sales, the method of calculating the amount of business revenue by applying such rate;

3. Where there is a production rate set by the Commissioner of the National Tax Service through investigation of the input of raw materials by each business type, the method of calculating the amount of business revenue by applying such rate and then applying the production output so computed to the market price of the amount sold during the relevant business year;

4. The method of calculating the amount of business revenue in accordance with any of the following standards prescribed by the Commissioner of the National Tax Service according to each business type or region:

(a) A unit input amount which determines the relationship between the quantity of all or some of the raw materials and secondary materials put into production and the production output;

(b) An expense related rate which determines the relationship between all or some of the labor costs, lease costs, raw materials costs, water, light, and heat costs, and other operating expenses and the sales;

(c) A commodities turnover rate which determines the relationship between the average stock amount during a fixed period and the sales or the sales cost;

(d) A transactions profit rate which determines the ratio of the sales to the total profits from sales during a fixed period;

(e) A value-added rate which determines the ratio of the sales to the value-added amount during a fixed period;

5. Where the rates referred to in subparagraphs 2 through 4 can be calculated for corporations subject to determinations or corrections by estimation, the method of calculating the amount of business revenue by applying such rate;

6. For the business type which primarily engage in transactions with final consumers, the method of calculating the amount of business revenue in accordance with the direct investigation standards determined by the Commissioner of the National Tax Service.

(2) Even when determining or correcting the amount of income by estimation under paragraph (1), where the amount of income can be calculated based on newly found account books and other evidentiary documents, the tax base and the amount of tax for the relevant business year shall be determined or corrected through on-site investigations. <Amended on Feb. 12, 2019>

[Title Amended on Feb. 12, 2019]

Article 106(Disposal of income) #

(1) The amount included in gross income under Article 67 of the Act shall be disposed of as follows. This shall also apply to non-profit domestic corporations and non-profit foreign corporations: <Amended on Dec. 31, 2001; Dec. 30, 2002; Feb. 19, 2005; Feb. 9, 2006; Feb. 28, 2007; Feb. 22, 2008; Feb. 4, 2009; Feb. 2, 2012; Feb. 15, 2013; Feb. 12, 2016; Feb. 12, 2019; Feb.11, 2020; Feb. 17, 2021>

1. Where it is clear that the amount included in gross income (including the amount not included in deductible expenses under Article 27-2 (2) of the Act) has flowed out of the company, it shall be disposed of as a dividend, bonus by disposal of profits, other income, or other outflow from the company under any of the following categories depending upon the person to whom it belongs; provided, if it is not clear to whom it belongs, it shall be deemed to belong to the representative (where an executive officer who is not a minority stockholder, etc., and persons who have the special relationship provided for in Article 43 (8) with such executive officer hold at least 30/100 of the total number of outstanding stocks or total investment amount of the relevant corporation and the executive officer actually controls the management of the corporation, the executive officer shall be deemed the representative, and where there are at least two representatives, the de facto representative shall be deemed the representative; hereafter in this Article the same shall apply):

(a) Where a person to whom the income belongs is a stockholder, etc. (excluding stockholders, etc., who are executive officers or employees), a dividend to the person;

(b) Where a person to whom the income belongs is an executive officer or employee, bonus to the person;

(c) Where a person to whom the income belongs is a corporation or an individual operating a business, other outflows from the company; provided, this shall be limited to where the distributed profits constitute the income for each business year of a domestic corporation or the domestic place of business of a foreign corporation or the business revenue of a resident or the domestic place of business of a non-resident under Article 120 of the Income Tax Act;

(d) Where a person to whom the income belongs is a person other than those provided for in items (a) through (c), the other income of the person;

2. Where the amount included in gross income has not flowed out of the company, it shall be deemed internal reserves;

3. The following amounts shall be deemed other outflows from the company, notwithstanding subparagraph 1:

(a) An amount included in gross income in excess of the amount includible in deductible expenses for donations prescribed in Article 24 (2) 1 of the Act or donations prescribed in paragraph (3) 1 of the same Article pursuant to Article 24 of the Act;

(b) The amounts included in gross income under Article 25 of the Act and Article 136 of the Restriction of Special Taxation Act;

(c) The amount included in gross income under Article 27-2 (3) (limited to the amount under subparagraph 2 of the same paragraph) and (4) of the Act;

(d) The amount equivalent to the amount of withholding tax for interest, discounts, and marginal profits included in gross income under Article 28 (1) 1 and 2 of the Act;

(e) The amount included in gross income Article 28 (1) 4 of the Act;

(f) Deleted; <Feb. 9, 2006>

(g) The amount included in gross income under Article 138 of the Restriction of Special Taxation Act;

(h) Where the amount included in gross income under the proviso to subparagraph 1, with the exception of its items, and paragraph (2) is deemed disposed of, deeming that it belongs to the representative, the amount included in gross income which the relevant corporation pays as income tax, etc. on such disposal on behalf of the representative and appropriates as losses or does not collect until the special relationship with the representative ceases;

(i) The amount included in gross income under Article 88 (1) 8, 8-2 and 9 (limited to any acts or calculations corresponding to those prescribed in subparagraphs 8 and 8-2 of the same paragraph), which is the amount imposed on a person to which such amount belongs as gift tax under the Inheritance Tax and Gift Tax Act;

(j) In reporting, determining or correcting the corporate tax base on the income in each business year of the domestic business place of a foreign corporation, the income vested in the foreign corporation, which is an amount included in gross income; and income, which is an amount included in gross income pursuant to Articles 6, 7, 9, 12, and 15 of the Adjustment of International Taxes Act that has not been returned from a foreign related person.

(2) The difference (referring to the amount before deduction of the amount of equivalent to the corporate tax) between the tax base determined under Article 104 (2) and the profit for the year on the statement of financial position of the corporation shall be the bonus to the representative upon disposal of profits; provided, in cases falling under the proviso to Article 68 of the Act, it shall be other outflows from the company. <Amended on Jan. 5, 2021>

(3) In cases of paragraph (2), when a corporation reports losses, the losses shall be deemed nil.

(4) Where a domestic corporation recovers any amount of illegal outflows, including the omission of sales from records and the processing costs and subsequently includes the recovered amount in gross income through tax adjustment within the filing deadline of revised returns specified under Article 45 of the Framework Act on National Taxes, the disposed income shall be deemed internal reserves; provided, the same shall not apply to any of the following cases where the domestic corporation includes the amount of outflows in gross income, knowing in advance that there would be the correction of tax: <Added on Presidential Decree No. 18706, Feb. 19, 2005; Feb. 18, 2010; Feb. 15, 2013>

1. Where it receives a notice on the tax investigation;

2. Where it learns that the tax investigation has started;

3. Where a tax official goes on a local business trip or starts confirmation affairs to collect tax data or handle civil petitions;

4. Where it is notified of explanation of tax data from the head of the tax office having jurisdiction over the place of tax payment;

5. Where outflows are confirmed in the course of investigation by the investigation agency or trial;

6. Where it is deemed that it has learned the correction of tax in advance and it is similar to cases provided for in subparagraphs 1 through 5.

Article 108(Determination of occasional imposition) #

(1) "Grounds prescribed by Presidential Decree" in the former part of Article 69 (1) of the Act means any of the following cases: <Amended on Feb. 22, 2008>

1. Where the headquarters, etc. is moved without reporting thereon;

2. Where the business is suspended or closed due to a slump in business or other causes;

3. Where there are other reasonable grounds to believe that the relevant corporation could evade tax.

(2) Where the head of the tax office having jurisdiction over the place of tax payment or the commissioner of the competent regional tax office occasionally imposes corporate tax under Article 69 (1) of the Act on a corporation which the has any grounds provided in each subparagraph of paragraph (1), he or she shall determine the tax base and the amount of tax by applying mutatis mutandisArticles 103 (2) and 104 (2) of this Decree and Article 55 (2) of the Act. In such cases, Articles 75 and 75-2 through 75-9 of the Act shall not apply. <Amended on Feb. 12, 2019>

(3) Where a corporation receives the amount of business revenues from the United Nations Forces in Korea or a foreign institution through a foreign exchange bank in the form of foreign exchange certificates or Korean won, the head of the tax office having jurisdiction over the place of tax payment may determine the tax base for the amount to received under Article 69 of the Act.

(4) Where corporate tax is occasionally imposed under paragraph (3), the amount thereof shall be an amount computed by applying mutatis mutandisArticle 104 (2), multiplied by the tax rate provided in Article 55 of the Act. <Amended on Dec. 31, 2001>

(5) In applying mutatis mutandisArticle 104 (2) pursuant to paragraph (2), the head of the tax office having jurisdiction over the place of tax payment or the commissioner of the competent regional tax office recognizes that there is no any clear tax evasion as a result of a tax investigation in cases falling under paragraph (1) 2, he or she shall determine the tax base and the amount of tax according to the method prescribed in the main sentence of Article 104 (2) 2 and if there exists no corporation of the same business type, he or she may determine the tax base and the amount of tax according to the method prescribed in the proviso to the same subparagraph. <Added on Dec. 31, 1999; Feb. 12, 2019>

Article 110(Calculation of tax refunds by retroactive deduction of losses) #

(1) "Amount of corporate tax for the immediately preceding business year prescribed by Presidential Decree" in paragraph (1), with the exception of the subparagraphs, of Article 72 of the Act means the amount of corporate tax calculated for the immediately preceding business year (excluding the corporate tax on capital gains on transfer of land, etc. under Article 55-2 of the Act; hereafter the same shall apply in this Article) minus the amount of corporate tax deducted, reduced or exempted (hereinafter referred to as "amount of tax reduced or exempted") from the corporate tax on income for the immediately preceding business year (hereafter referred to as "amount of corporate tax for the immediately preceding business year" in this Article). <Amended on Dec. 31, 2001; Feb. 4, 2009; Jun. 3, 2011; Feb. 12, 2019>

(2) A corporation which intends to obtain refund under Article 72 (2) of the Act shall file an application (including filing such application through the national tax information and communications network) for refund of retroactively deducted corporate tax in the form stipulated by Decree of the Ministry of Economy and Finance within the filing deadline specified under Article 60 of the Act to the head of the tax office having jurisdiction over the place of tax payment. <Amended on Mar. 17, 2004; Feb. 29, 2008; Feb. 12, 2019>

(3) The amount of corporate tax to be collected as losses have decreased under Article 72 (5) of the Act shall be calculated by the following formula; provided, where only some losses referred to in Article 14 (2) of the Act have been retroactively deducted, the losses which have not been retroactively deducted shall be deemed to have been first reduced: <Amended on Feb. 12, 2019>The amount of tax refunded under Article 72 (3) of the Act (hereafter in this Article referred to as “initial tax refund”) × An amount in excess of the reduced losses which have not been retroactively deducted / The amount of retroactively deducted losses.

(4) "An amount equivalent to the interest calculated, as prescribed by Presidential Decree" in Article 72 (5) of the Act, with the exception of its subparagraphs, means the amount calculated by multiplying the amount under subparagraph 1 by the rate under subparagraph 2: <Amended on Dec. 30, 2002; Feb. 4, 2009; Feb. 2, 2012; Feb. 15, 2013; Feb. 12, 2019; Feb. 11, 2020; Feb. 15, 2022>

1. The amount of tax refunded under Article 72 (5) of the Act;

2. 22/100,000 per day beginning from the day following the notice date of the initial tax refund until the notice date of the amount of corporate tax collected under Article 72 (5) of the Act; provided, where there are justifiable grounds for a taxpayer to obtain the excess refund of corporate tax, the interest rate provided for in the main clause of Article 43-2 (2) of the Enforcement Decree of the Framework Act on National Taxes shall apply.

(5) In re-determining the initial tax refund under Article 72 (6) of the Act, where the amount of retroactively deducted losses is in excess of the amount of tax base, the amount of losses in excess shall not be construed as retroactively deducted losses. <Amended on Feb. 12, 2019>

Article 111(Withholding on interest income of domestic corporations) #

(1) "Income prescribed by Presidential Decree of a financial company, etc. prescribed by Presidential Decree" in paragraph (1), with the exception of the subparagraphs, of Article 73 of the Act means income paid to any of the following entities, excluding cases of paying interest, etc. (referring to interest, etc. under the former part of Article 73-2 (1) of the Act; hereafter the same shall apply in this Article and Articles 113, and 138-3) on bonds, etc. subject to withholding tax prescribed in the former part of Article 73-2 (1) of the Act (excluding short-term bonds, etc. falling under subparagraph 1 (b) of Article 2 of the Act on Electronic Registration of Stocks and Bonds with a maturity of up to one month, among those prescribed in the former part, with the exception of the subparagraphs, of Article 59 of that Act) to an investment company prescribed in the Financial Investment Services and Capital Markets Act and to a corporation that is not a special purpose company for recapitalization referred to in subparagraph 16: <Amended on Dec. 30, 2002; Dec. 30, 2003; Feb. 19, 2005; Dec. 30, 2005; Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Jun. 8, 2009; Dec. 31, 2009; Feb. 18, 2010; Oct. 23. 2015; Feb. 12, 2019; Jul. 1, 2019; Feb. 11, 2020; Feb. 17, 2021; Feb. 15, 2022>

1. Corporations referred to in Article 61 (2) 1 through 28;

2. The Bank of Korea established under the Bank of Korea Act;

3. Collective investment business entities under the Financial Investment Services and Capital Markets Act;

4. Investment companies, special purpose companies, investment limited companies, and investment limited partnerships companies referred to in the Financial Investment Services and Capital Markets Act [excluding institutional private equity fund referred to in Article 9 (19) 1 of that Act (including previous private equity funds participating in management that continue to exist for being deemed to be an institutional private equity fund, private equity fund for corporate financial stability, or private equity fund specializing in start-up or venture business pursuant to Article 8 (1) through (4) of the Addenda of the Financial Investment Services and Capital Markets Act, amended by Act No. 18128; hereafter in Article 161 (1) the same shall apply)]

5. Cooperatives established under the Agricultural Cooperatives Act;

6. Cooperatives established under the Fisheries Cooperatives Act;

7. Cooperatives established under the Forestry Cooperatives Act;

8. Unions and the National Credit Union Federation of Korea established under the Credit Unions Act;

9. Community credit cooperatives established under the Community Credit Cooperatives Act;

10. Securities financial companies established under the Financial Investment Services and Capital Markets Act;

11. Exchange (limited to the joint compensation fund for loss incurred from contravention of contracts);

12. The Korea Securities Depository established under the Financial Investment Services and Capital Markets Act;

13. The Korea Investment Corporation incorporated under the Korea Investment Corporation Act;

14. Funds (limited to a corporation or an organization deemed a corporation) to which the National Finance Act applies;

15. Corporations or funds, the principal purpose of which is to provide loans under applicable statutes (limited to those which keep accounts separately from other business);

16. Special purpose company for recapitalization referred to in Article 104-3 (1) of the Restriction of Special Taxation Act;

17. Korea Workers' Compensation and Welfare Service established under Article 10 of the Industrial Accident Compensation Insurance Act (limited to a SME retirement pension fund plan referred to in the Act on the Guarantee of Employees' Retirement Benefits);

18. Other corporations that operate a financial insurance business prescribed by Decree of the Ministry of Economy and Finance.

(2) The amount to be deducted from the withholding tax of a domestic corporation pursuant to Article 73 (2) 2 of the Act shall be the amount of indirect investment foreign corporate tax per domestic corporation pursuant to Article 94-2 (1), multiplied by the rate calculated according to the respective formula in the following: <Added on Feb. 28, 2023>

1. Where the withholding tax rate pursuant to Article 73 (1) of the Act is less than the foreign withholding tax rate (referring to the rate calculated in accordance with Article 94-2 (4); hereafter in this paragraph the same shall apply) applied to indirect investment foreign corporate tax: Withholding tax rate pursuant to Article 73 (1) of the Act / Foreign withholding tax rate applied to indirect investment foreign corporate tax - Withholding tax rate pursuant to Article 73 (1) of the Act

2. Where the withholding tax rate pursuant to Article 73 (1) of the Act is greater than or equal to the foreign withholding tax rate applied to indirect investment foreign corporate tax:

┌────────────────────────┐

│ │

1- Withholding tax rate pursuant to Article 73 (1) of the Act

└────────────────────────┘

(3) Deleted. <Feb. 28, 2025>

(4) "Those prescribed by Presidential Decree, such as income, etc., on which corporate tax is not imposed or exempt" in Article 73 (4) of the Act, with the exception of its subparagraphs, means any of the following incomes: <Amended on Dec. 31, 1999; Mar. 28, 2000; Dec. 29, 2000; Dec. 31, 2001; Nov. 29, 2003; Dec. 30, 2003; Feb. 19, 2005; Feb. 28, 2007; Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Sep. 21, 2009; Dec. 31, 2009; Jun. 30, 2015; Feb. 12, 2019; Jun. 25, 2019; Feb. 28, 2023; Feb. 29, 2024>

1. Income on which corporate tax is not imposed or income exempt from corporate tax;

2. Deleted; <by Feb. 4, 2009>

3. Income already included in the reported tax base, which has not been paid;

4. Interest revenue on loans to members of a non-profit corporation or members of its associations under the statutes or regulations, or the articles of incorporation, and interest revenue on deposits by the non-profit corporation in the cooperatives or the national federation of the relevant non-profit corporation;

5. Interest and discounts accruing by registering and continuing to hold the following State bonds, public bonds, etc., from the date of issuance to the date of payment of interest or date of repayment, which have been registered under the State Bond Act or electronically registered under the Act on Electronic Registration of Stocks and Bonds by a corporation prescribed by Decree of the Ministry of Economy and Finance, which manages and operates funds established under the applicable statutes, (hereafter referred to as "fund operating corporation" in this subparagraph) and a non-profit domestic corporation that operates the health insurance business, pension management business, or mutual-aid business (limited to the relevant fund business in cases of a fund operating corporation) among corporations prescribed by Decree of the Ministry of Economy and Finance:

(a) Bonds or securities issued by the State or local governments;

(b) Monetary stabilization bonds issued by the Bank of Korea under the Bank of Korea Monetary Stabilization Bond Act;

6. Interest revenue accruing from funds deposited jointly by a corporation, which is a member of any of the following associations (excluding any corporation that runs the financial and insurance activities under the Korea Standard Industrial Classification), according to the rules and regulations of such associations:

(a) An association established for stabilizing the securities market through investment in the listed securities, and prescribed by Decree of the Ministry of Economy and Finance;

(b) An association established for stabilizing the bond market and prescribed by Decree of the Ministry of Economy and Finance;

7. Interest revenue accruing from funds deposited in the Housing and Urban Fund under Article 6 (2) of the Housing and Urban Fund Act by the Korea Land and Housing Corporation incorporated under the Korea Land and Housing Corporation Act (limited to funds deposited by issuing debentures by the National Pension under the National Pension Act and postal deposits under the Postal Savings and Insurance Act in which the national pension and postal deposits continue to hold such debentures at the time of payment of interest income).

(5) In applying Articles 73 and 73-2 of the Act, interest, etc., on relevant bonds shall be deemed paid in either of the following cases: <Added on Dec. 29, 2000; Feb. 15, 2013; Feb. 12, 2019; Feb. 11, 2020>

1. Where convertible bonds are converted into equity stocks or exchangeable bonds are exchanged with equity bonds;

2. Where the preemptive right to new stocks on bonds with warrant is exercised (limited to where the price for new stocks is paid by the relevant bonds with warrant).

(6) In applying Articles 73 and 73-2 of the Act, the payment date of interest income shall be the date specified in the subparagraphs of Article 190 of Enforcement Decree of the Income Tax Act; provided, a corporation referred to in Article 61 (2) 1 through 7 and 10 issues and sells promissory notes with the terms and conditions provided for in subparagraph 1 of Article 190 of Enforcement Decree of the Income Tax Act, the tax shall be withheld by deeming the date such promissory notes are sold at discounted prices to be the payment date of interest, etc., and the tax on the income amount that reverts to the trust property operated by a trust business entity referred to in the Financial Investment Services and Capital Markets Act shall be withheld by deeming that it is paid on a specific date specified under Article 155-2 of the Income Tax Act. <Added on Dec. 29, 2000; Feb. 19, 2005; Feb. 4, 2009; Feb. 18, 2010; Feb. 12, 2019>

(7) In applying Articles 73 and 73-2 of the Act, where a trust business entity referred to in the Financial Investment Services and Capital Markets Act directly operates, keeps, or manages trust property, the trust business entity shall be deemed to be in an agency or commission relationship with a person who pays the income amount referred to in the subparagraphs of Article 73 (1) of the Act to the trust property. <Added on Feb. 4, 2009; Dec. 31, 2009; Feb. 12, 2019>

(8) For the purpose of Articles 73 and 73-2 of the Act, it shall be deemed that there exists a relationship of agency or delegation with respect to the duty to collect withholding tax between a person classified as follows and a person who has issued the relevant securities, etc. in connection with the interest income, etc. accruing from securities deposited with the Korea Securities Depository referred to in Article 294 of the Financial Investment Services and Capital Markets Act [referring to securities referred to in paragraph (1) of the same Article (excluding trust property to which paragraph (7) of this Article applies); hereafter in this paragraph referred to as "securities, etc."]: <Added on Feb. 12, 2019>

1. In the case of securities, etc. owned by a person who has opened an account with the Korea Securities Depository pursuant to Article 309 of the Financial Investment Services and Capital Markets Act (hereafter in this paragraph referred to as "depositor"): Korea Securities Depository;

2. In the case of securities, etc. deposited by an investor with a depositor pursuant to Article 309 of the Financial Investment Services and Capital Markets Act: Depositor.

[Title Amended on Feb. 12, 2019]

Article 113(Withholding on amount equivalent to Interest accruing for holding period of bonds, etc. of domestic corporation) #

(1) In applying Articles 73 and 73-2 of the Act, the income subject to withholding from the interest, etc. accruing from bonds, etc. (referring to the interest, etc. accruing from the sale of the bonds, etc., where the bonds, etc. are sold before the interest, etc. accruing therefrom are paid) shall be the amount of income accruing in the period during which a domestic corporation acquires and holds the bonds, etc. (including bonds, etc. that revert to trust property operated by a trust business entity referred to in the Financial Investment Services and Capital Markets Act) <Amended on Feb. 19, 2005; Feb. 4, 2009; Feb. 12, 2019>

(2) In applying paragraph (1), the income that accrues in the period during which a domestic corporation acquires and holds bonds, etc. shall be the amount computed by applying the periods under items of subparagraph 1 and the interest rates under items of subparagraph 2 to the par value of the bonds, etc. (hereafter referred to as "amount equivalent to the interest during the holding period" in this Article, Articles 114-2 and 138-3): <Amended on May 16, 2000; Dec. 29, 2000; Dec. 31, 2001; Feb. 19, 2005; Dec. 30, 2005; Feb. 9, 2006; Feb. 29, 2008; Feb. 18, 2010; Feb. 15, 2013>

1. The holding periods of bonds, etc.:

(a) Where the bonds, etc. are sold before the interest income is paid, the period from the acquisition date of the relevant bonds, etc. or the date after the end date of the calculation period of the immediately preceding interest income until the date the bonds, etc. are sold (the date of actual sale in the case of good offices, mediation, or commission for sale of such bonds, etc.); provided, where there is an agreement stipulating to calculate the period from the acquisition date of the relevant bonds, etc. or the end date of the calculation period of the immediately preceding interest income until the day preceding the date the bonds, etc. are sold, the relevant period;

(b) Where the interest income on the bonds, etc. has been paid, the period from the acquisition date of the relevant bonds, etc. or the date after the end date of the calculation period of the immediately preceding interest income until the end date of the calculation period of interest income; provided, where there is an agreement stipulating to calculate the period from the acquisition date of the relevant bonds, etc. or the end date of the calculation period of the immediately preceding interest income until the day preceding the date the bonds, etc. are sold, the relevant period;

2. Applicable interest rates:

(a) The interest rate computed by adding the interest rate under the calculation method in the agreement on the interest calculation period of the relevant bonds, etc. and the discount rate at the time of issuance, and subtracting the premium rate at the time of issuance; provided, with respect to bonds issued on the open market pursuant to each subparagraph of Article 22-2 (1) and (2) of the Enforcement Decree of the Income Tax Act, the discount rate and premium rate at the time of issuance shall neither be added to nor subtracted from the interest rate;

(b) For convertible bonds, exchangeable bonds, or bonds with warrant issued with a condition that the payment shall be made by adding the guaranteed rate for each interest calculation period on the redemption date at maturity, the additionally paid interest rate shall be added to the interest rate computed under item (a); provided, where convertible bonds, exchangeable bonds, or bonds with warrant are requested to be converted or exchanged for stocks and the interest payment is stipulated in the agreement, the stipulated interest rate shall be deemed the agreed interest rate from the date of the request for conversion or the date of the request for exchange, as prescribed by Decree of the Ministry of Economy and Finance.

(3) In applying paragraphs (1) and (2), the sale of bonds, etc. shall include the onerous transfer of bonds, etc. acquired and held by a corporation in its own asset account to the account of assets managed by the corporation on behalf of others, the onerous transfer between such managed accounts, or the onerous transfer from such managed accounts to its own asset account; provided, this shall not apply to cases prescribed by Decree of the Ministry of Economy and Finance. <Amended on Dec. 29, 2000; Feb. 29, 2008>

(4) "Income prescribed by Presidential Decree, such as the income on which corporate tax is not imposed or exempt" in Article 73-2 (2) of the Act means any of the following: <Added on Feb. 12, 2019; Jun. 25, 2019; Feb. 28, 2023>

1. Income falling under any subparagraph of Article 111 (4);

2. Amount of the interest for the holding period of bonds subject to withholding tax, etc. (referring to bonds subject to withholding tax, etc. prescribed in the former part of Article 73-2 (1) of the Act) of an investment company prescribed in the Financial Investment Services and Capital Markets Act and a special purpose company for recapitalization referred to in Article 111 (1) 16 of this Decree;

3. Amount of the interest for the holding period of short-term bonds, etc. falling under subparagraph 1 (b) of Article 2 of the Act on Electronic Registration of Stocks and Bonds with a maturity of up to one month, among short-term bonds, etc. prescribed in Article 59 of that Act of a financial company, etc. referred to in paragraph (1), with the exception of subparagraph 2, of Article 111.

(5) In applying paragraph (1), where a corporation that acquired securities provided in Article 26-2 (4) of the Enforcement Decree of the Income Tax Act among the collective investment securities provided in the Financial Investment Services and Capital Markets Act has sold such securities (including securities acquired and sold by a collective investment business entity under the Financial Investment Services and Capital Markets Act), in the middle of the period for computing proceeds from investment trust, the amount equivalent to interest for the holding period of such securities shall be computed in accordance with Article 26-2 (4) through (9) of the Enforcement Decree of the Income Tax Act, notwithstanding paragraph (2). <Amended on Dec. 29, 2000; Dec. 30, 2003; Feb. 19, 2005; Feb. 28, 2007; Feb. 22, 2008; Feb. 4, 2009; Feb. 18, 2010; Dec. 30, 2010; Dec. 31, 2024>

(6) Where the withholding tax deducted before the corresponding business year exceeds the amount of tax on the amount equivalent to the interest during the holding period calculated by applying mutatis mutandis paragraph (2) as a corporation sells bonds, etc. (hereinafter referred to as "original issue discount bonds, etc.") which are withheld on the date prescribed in subparagraph 1 of Article 190 of the Enforcement Decree of the Income Tax Act in the following business year before their maturity arrives although it duly reported its corporate tax with full deduction of such tax withheld at source on such bonds, etc. at the close of the corresponding business year in which it acquired them, such excess amount shall be paid in addition to the corporate tax payable for the business year during which such bonds, etc. are sold. <Amended on Dec. 29, 2000; Feb. 19, 2005; Feb. 4, 2009>

(7) A corporation that sells one kind of bonds, etc. acquired on different dates may select the method of computing the period under paragraph (2) 1 between the method applying mutatis mutandisArticle 74 (1) 1 (a) through (c) and the method prescribed by Decree of the Ministry of Economy and Finance; and the corporation shall continue applying the same method it selects after reporting it to the head of the tax office having jurisdiction over the place of tax payment within the period given in any of the following subparagraphs. In such cases, if the corporation fails to report the method of computing the holding period or applies a computing method different from what it reported, the holding period shall be computed by applying mutatis mutandis the method provided for in Article 74 (1) 1 (b): <Amended on Dec. 29, 2000; Feb. 29, 2008>

1. The payment date of withholding tax on the amount equivalent to interest for the holding period;

2. The filing date of corporate tax base for the amount equivalent to interest for the holding period.

(8) In applying paragraphs (1) through (7), Article 102 (8) of the Enforcement Decree of the Income Tax Act shall apply mutatis mutandis to the confirmation of the holding period of bonds, etc. <Amended on Feb. 18, 2010>

(9) Where a financial company, etc., that is commissioned to withhold tax or withholds tax as an agent under Article 73 (7) of the Act sells (including the sale under Article 113 (3)) bills or debt certificates after assuming charge of, or buying such bills or debt certificates from the corporation that has issued them, the interest, etc. on bonds, etc. subject to withholding tax referred to in Article 73-2 of the Act shall not include the interest, etc. that reverts to the financial company, etc.; provided, in the case of bills other than those sold by the methods prescribed in subparagraph 1 of Article 190 of the Enforcement Decree of the Income Tax Act, the interest, etc. that reverts to the financial company, etc. shall be included: <Added on Feb. 12, 2019; Feb. 28, 2023>

(10) A trust business entity as referred to in the Financial Investment Services and Capital Markets Act shall prepare a written confirmation of the amount of withholding tax on the amount equivalent to the interest during the holding period of the bonds, etc., which revert to the relevant trust property and submit such written confirmation to the head of the tax office having jurisdiction over the place of tax payment by the end of the month following the month under which the specific date provided for in Article 155-2 of the Income Tax Act falls. <Amended on Feb. 19, 2005; Dec. 30, 2005; Feb. 22, 2008; Feb. 4, 2009>

1.and 2. Deleted; <Feb. 4, 2009

2. Deleted; <by Feb. 4, 2009>

3. Deleted. <Feb. 22, 2008>

(11) Where a corporation sells original issue discount bonds, etc. (limited to bonds, etc. tax on which is withheld as at the time they are sold; hereafter the same shall apply in this paragraph) during an interest-calculation period, the corporation (referring to a financial company, etc., where the financial company, etc. brokers the sale of such bonds, etc.) shall be deemed to resell the relevant bonds, etc. on the date they are sold and tax on the calculated interest, etc. shall be withheld. <Added on Dec. 31, 2001; Feb. 4, 2009; Feb. 18, 2010>

(12) "Financial company, etc. prescribed by Presidential Decree" referred to in Article 73-2 (3) 1 of the Act means corporations prescribed in the subparagraphs of Article 61 (2). <Amended on Feb. 12, 2019>

(13) Where the bonds, etc. are deemed to be sold under paragraph (3), a withholding tax shall be imposed on the amount equivalent to the interest during the holding period of the managed property by deeming that the corporation that manages the relevant property sells the bonds, etc. <Added on Presidential Decree No. 18706, Feb. 19, 2005>

(14) Deleted. <Feb. 12, 2019>

[Title Amended on Feb. 12, 2019]

Article 114-2(Withholding and refund on bond transactions with repurchase agreement) #

(1) "Trading of repurchase bonds, etc., or other cases prescribed by Presidential Decree" in the former part of Article 73-2 (1) of the Act means any of the following transactions or a mixture of the following transactions: <Mar. 31, 2011; Feb. 12, 2016; Feb. 12, 2019; Feb. 17, 2021>

1. A transaction under which a financial company defined in any item of subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality, and a corporation referred to in any subparagraph of Article 111 (1) of this Decree sell or purchase bonds, etc. (including where such transactions are repeated subsequently) on the condition that they will repurchase or resell them at certain prices upon expiration of a pre-determined period and the facts relevant to such transaction are confirmed by means of accounts of the Korea Securities Depository under Article 294 of the Financial Investment Services and Capital Markets Act or the transaction ledger (including the transaction ledger in electronic form) of an exchange referred to in Article 373 of that Act;

2. A transaction under which a financial company, etc., defined in any item of subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality, and a corporation referred to in any subparagraph of Article 111 (1) of this Decree lend bonds, etc., (including where such transactions are repeated subsequently) on the condition that bonds, etc. of the same type and in the same quantity will be returned upon expiration of a pre-determined period and the facts relevant to such transaction are confirmed by the transaction ledger (including the ledger in electronic form) prepared by the relevant bond lending and borrowing broker (referring to the Korea Securities Depository, a financial securities company, an investment trader or investment broker, as defined in the Financial Investment Services and Capital Markets Act).

(2) Article 73-2 of the Act shall apply to the transactions provided for in paragraph (1), deeming that the amount equivalent to the interest income accruing from the bonds, etc., during the period beginning on the date of selling or lending such bonds, etc., and ending on the date such bonds, etc., are repurchased or returned belongs to the seller or lender (referring to the initial seller or lender, where relevant transactions are repeated subsequently or where the transactions provided for in paragraph (1) are mixed). <Amended on Feb. 15, 2013; Feb. 12, 2016; Feb. 12, 2019>

(3) Where the bonds, etc. purchased or borrowed by a purchaser or borrower (hereafter in this Article referred to as "purchaser, etc.") through any of the transactions provided for in paragraph (1) are sold or lent to any third party, the amount of tax equivalent to the amount of the interest during the holding period shall be withheld under Articles 73-2 and 98-3 of the Act, and Articles 133-2 and 156-3 of the Income Tax Act from the purchaser, etc. (excluding any corporation that falls under subparagraphs of Article 111 (1)) and the purchaser, etc. may obtain a refund of the tax withheld under paragraph (4). <Amended on Feb. 12, 2019>

(4) Any purchaser, etc., who intends to obtain a refund of the tax withheld under paragraph (3) shall file an application for refund, accompanied by the document prescribed by Decree of the Ministry of Economy and Finance substantiating that the bonds, etc., that have been sold or lent to any third party are purchased or borrowed through the transaction provided for in paragraph (1), with the head of the tax office having jurisdiction over the place of tax payment of the purchaser, etc., by no later than the 10th day of the month following the month in which the amount of tax withheld is paid, and the head of the competent tax office in receipt of the application for refund shall immediately refund the amount of tax after verifying the fact of the transaction and details of the application for fund.

[This Article Wholly Amended on Jun. 8, 2010]

Article 115(Payment of withholding tax) #

(1) Each person liable for withholding under Articles 73 and 73-2 of the Act shall pay the corporate at the tax office, etc., having jurisdiction over the place of tax payment of the person liable for withholding under the National Tax Collection Act, and shall submit a report (including submission through the national tax information and communications network) on the withholding performance status in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment of the relevant person liable for withholding. <Amended on Mar. 17, 2004; Feb. 19, 2005; Feb. 29, 2008; Feb. 2, 2012; Feb. 12, 2019>

(2) "Person liable for withholding prescribed by Presidential Decree" in Article 73 (9) of the Act means a person (excluding corporations that engage in financial and insurance business) who is liable for withholding taxes with not more than 20 regular employees during the immediately preceding year (referring to the semi-annual term in which an application is filed, in cases of a business operator who starts up a new business; the same shall apply hereafter in this Article) and who has been approved or designated by the head of the tax office having jurisdiction over withholding tax to pay semi-annually the amount of withholding tax under each subparagraph of Article 73 (1) of the Act, as determined by the Commissioner of the National Tax Service. <Amended on Dec. 30, 2003; Feb. 18, 2010; Jun. 3, 2011; Feb. 3, 2015; Feb. 28, 2023>

(3) The number of regular employees in the immediately preceding year as referred to in paragraph (2) shall be the average number of regular employees as of the end of each month from January to December of the immediately preceding year.

(4) A corporation which intends to obtain approval under paragraph (2) shall file an application with the head of the tax office having jurisdiction over withholding tax between the first and the last day of the month immediately preceding the semi-annual period, in which the corporation intends to pay the withholding corporate tax semi-annually.

(5) Upon receipt of an application filed under paragraph (4), the head of the tax office having jurisdiction over withholding tax shall determine whether to grant approval in consideration of the reliability in filing reports and payment of the amount of withholding tax of the relevant person liable for withholding and notify the applicant of the determination by the end of the month after the semi-annual period which includes the date of application.

(6) Matters necessary for semi-annual payment of withheld corporate tax under Article 73 (9) of the Act and other necessary matters shall be prescribed by the Commissioner of the National Tax Service. <Amended on Feb. 28, 2023>

Article 120(Application of additional tax) #

(1) "Unclear with regards to the descriptions prescribed by Presidential Decree" in Article 75-2 (1) 3 of the Act means any of the following; provided, the same shall not apply where there exist any justifiable grounds, such as where a domestic corporation is unable to know the actual owners of stocks, etc.: <Added on Feb. 2, 2012; Feb. 12, 2019>

1. Where it is impossible to verify the details of stockholders, etc., since all or part of the matters stated under Article 152 (2) 1 and 2 (hereafter referred to as "necessary stated matters" in this paragraph) on the detailed statement on stockholders, etc., submitted under Article 109 (1) of the Act are not stated or falsely stated;

2. Where it is impossible to verify the details of stockholders, etc., since the necessary stated matters on the submitted detailed statement on stockholders, etc., are differently stated from the matters on the actual owners of stocks, etc.

(2) "Unclear circumstances prescribed by Presidential Decree" in Article 75-2 (2) 3 of the Act means any of the following cases; provided, the same shall not apply where there exist any justifiable grounds, such as where a domestic corporation is unable to know the actual owners of stocks, etc.: <Amended on Feb. 4, 2009; Feb. 18, 2010; Feb. 2, 2012; Feb. 12, 2019>

1. Where the changes of stocks are not verifiable, because all or part of the matters stated under Article 161 (6) 1 through 3 (hereafter referred to as "necessary stated matters" in this paragraph) are not stated or falsely stated on the submitted statement on change of stocks;

2. Where the changes of the stocks are not verifiable, because the necessary stated matters on the submitted statement on change of stocks is different from the matters on the actual owners of stocks, etc.

(3) "Corporation prescribed by Presidential Decree" referred to in Article 75-5 (1) and paragraph (1), with the exception of the subparagraphs, of Article 75-8 of the Act means a corporation falling under any of the following: <Amended on Dec. 29, 2000; Jun. 3, 2011; Feb. 2, 2012; Feb. 12, 2019>

1. The State and local governments;

2. Non-profit corporations (excluding portions related to profit-making businesses referred to in Article 3 (1)).

(4) "Business operator prescribed by Presidential Decree" referred to in Article 75-5 (1) of the Act means a business operator falling under any subparagraph of Article 158 (1). <Amended on Jun. 3, 2011; Feb. 12, 2019>

(5) "Type of business prescribed by Presidential Decree" referred to in Article 75-6 (2) 1 of the Act means the type of business serving consumers as specified in Appendix 3-2 of the Enforcement Decree of the Income Tax Act. <Added on Feb. 4, 2009; Feb. 12, 2019>

(6) "Revenue prescribed by presidential decree" referred to in Article 75-6 (2) 1 of the Act means the amount on which an invoice is issued pursuant to Article 121 of the Act or the amount on which a tax invoice is issued pursuant to Article 32 of the Value-Added Tax Act. <Added on Feb. 12, 2019>

(7) "Ratio, calculated as prescribed by Presidential Decree" in Article 75-6 (2) 1 of the Act means the ratio of the number of days (where the period spans at least two business years, each business year is separately applied) from the day following the day that is three months after the day it met the requirements provided for in Article 117-2 (1) of the Act to the day before the day it became an affiliate merchant to the number of days of the business year in which it has failed to become an affiliate merchant. <Added on Feb. 4, 2009; Feb. 12, 2019>

(8) "Cases prescribed by Presidential Decree, such as those subject to insurance benefits under the National Health Insurance Act" in Article 75-6 (2) 3 of the Act mean any of the following cases: <Added on Feb. 12, 2019>

1. Insurance benefits prescribed in the National Health Insurance Act;

2. Medical benefits prescribed in the Medical Benefit Act;

3. Medical care assistance prescribed in the Emergency Aid and Support Act;

4. Payment by subrogation prescribed in the Emergency Medical Service Act;

5. Insurance money and mutual aid money referred to in the Compulsory Motor Vehicle Liability Security Act (limited to mutual aid money of a person operating a mutual aid business under the Passenger Transport Service Act and the Trucking Transport Business Act, referred to in Article 26 of that Act).

(9) "Unclear with regards to the descriptions prescribed by Presidential Decree" in Article 75-7 (1) 2 of the Act means cases classified as follows: <Amended on Feb. 15, 2013; Feb. 3, 2015; Feb. 12, 2019; May 4, 2021>

1. In the case of detailed statements: When falling under any of the following:

(a) Where it is impossible to ascertain whether payment has been made, because no or wrong information is stated in the payment statement submitted, with regard to the address, name, identification number (resident registration number, if an identification number is substituted by the resident registration number) or business registration number of the payer or receiver, the type of income, the year of accrual of the income, or the amount of payment;

(b) Where it is impossible to identify the issuer of securities, because no or wrong standard code of securities is stated in the payment statement or the payment statement of interest and dividend income submitted;

(c) Where a financial company, which is a domestic corporation, states no or wrong tax category on the payment statement of interest and dividend income submitted by the financial company;

(d) Where no or wrong information is stated, with regard to the deferred retirement income tax referred to in Article 202-2 (1) of the Enforcement Decree of the Income Tax.

2. In the case of simple payment statements: Where it is impossible to ascertain whether payment has been made, because no or wrong information is stated in the simple payment statement submitted, with regard to the address, name, identification number (resident registration number, if an identification number is substituted by the resident registration number) or business registration number of the payer or receiver, the type of income, the year of accrual of the income, or the amount of payment;

3. Deleted. <Feb. 12, 2019>

4. Deleted. <Feb. 12, 2019>

(10) For the purpose of paragraph (9), either of the following cases shall not be deemed unclear: <Added on Feb. 15, 2013; Feb. 12, 2019>

1. Where payment is made to a person who has a business registration certificate or an identification number as of the date of payment;

2. Where the whereabouts of a person who has received payment, except those specified in subparagraph 1, are determined unknown after the payment was made.

(11) "Ratio prescribed by Presidential Decree" in Article 75-7 (4) of the Act means 5/100. <Added on May 4, 2021; Feb. 28, 2023>

(12) Where a corporation referred to in Article 120 of the Act files a report on the tax base or determines or corrects the tax base under Article 84, 85, or 87 of the Act due to its merger, division or dissolution, the amount of payment referred to in Article 75-7 of the Act shall be the amount to be submitted by the registration date of the merger, the registration date of the division, or the registration date of the dissolution. <Amended on Feb. 15, 2013; Feb. 12, 2019; May 5, 2021>

(13) "Where all or some matters to be stated, as prescribed by Presidential Decree, are not stated or falsely stated" in Article 75-8 (1) 1 of the Act means where the business registration numbers of, or the supply value for each customer are not stated or are falsely stated; provided, this shall not include where matters to be stated on the submitted aggregate tax invoice for individual suppliers are falsely stated by mistake, but the facts of the transaction are verifiable by the issued tax invoice. <Added on Feb. 28, 2007; Jun. 3, 2011; Feb. 12, 2019; May 5, 2021>

(14) "Matters to be stated, as prescribed by Presidential Decree" in Article 75-8 (1) 2 of the Act means matters to be stated under Article 211 (1) 1 through 4 of the Enforcement Decree of the Income Tax Act (hereafter in this paragraph referred to as "necessary stated matters"); provided, where some of the necessary matters stated on the issued invoice are falsely stated by mistake, but the facts of the transaction are verifiable based on other matters stated on the relevant invoice, such invoice shall not be deemed an invoice on which matters are falsely stated under Article 75-8 (1) 2 of the Act. <Amended on Feb. 19, 2005; Jun. 3, 2011; Feb. 12, 2019; May 4, 2021>

(15) "Matters to be stated, as prescribed by Presidential Decree" in Article 75-8 (1) 3 of the Act means the business registration number of, and the supply value for each customer; provided, where the matters stated on the submitted aggregate invoice for individual suppliers or purchasers are falsely stated by mistake, but the facts of the transaction are verifiable by the issued or received invoice, it shall not be deemed an aggregate invoice for individual suppliers or purchasers on which matters are falsely stated under Article 75-8 (1) 3 of the Act. <Amended on Jun. 3, 2011; Feb. 12, 2019; May 4, 2021>

(16) "Unclear with regard to the descriptions specified by Presidential Decree" in Article 75-9 (1) 2 of the Act means whole or partial omission or misstatement of an amount that shall be included in calculating distributable retained earnings, resulting in miscalculating the amount of distributable retained earnings. <Added on Feb. 21, 2014; Feb. 12, 2019; May 4, 2021>

Article 120-12(Corporations excluded from application of consolidated tax return system) #

(1) "Corporation prescribed by Presidential Decree, such as a non-profit corporation" in the former part of Article 76-8 (1) of the Act means any of the following: <Amended on Feb. 18, 2010; Feb. 2, 2012; Feb. 3, 2017; Feb. 17, 2021; Feb. 28, 2023; Feb. 29, 2024>

1. A non-profit domestic corporation;

2. A corporation in the process of liquidation due to dissolution;

3. A corporation referred to in any subparagraph of Article 51-2 (1) of the Act or a corporation pursuant to Article 104-31 (1) of the Act on Restriction on Special Cases concerning Taxation;

4. A corporation consolidated and controlled by another domestic corporation as prescribed in subparagraph 10-2 of Article 2 of the Act (excluding a non-profit domestic corporation);

5. Deleted; <Dec. 30, 2010>

6. A partnership firm to which the special taxation for partnership firms under Article 100-15 of the Restriction of Special Taxation Act applies;

7. A corporation to which the special case of computing tax base under Article 104-10 (2) of the Restriction of Special Taxation Act applies.

(2) "Corporation prescribed by Presidential Decree, such as a corporation in the process of liquidation" in the former part of Article 76-8 (1) of the Act means any corporation referred to in paragraph (1) 2, 3, 6, or 7. <Amended on Feb. 2, 2012>

(3) "Domestic corporation that meets the requirements prescribed by Presidential Decree" in Article 76-8 (3) of the Act means a domestic corporation that meets each of the following requirements, whose business year referred to in subparagraph 1 does not coincide with the consolidated business year among the domestic corporations prescribed by Decree of the Ministry of Economy and Finance: <Added on Feb. 18, 2010; Oct. 30, 2018>

1. That it is impossible to change the business year voluntarily because it is provided for in the applicable statues or regulations, etc.;

2. That the quarterly or semi-annual financial statements shall be prepared at the end of the consolidated business year pursuant to the applicable statues or regulations, etc., and the auditor's opinion must be obtained under subparagraph 7 of Article 2 of the Act on External Audit of Stock Companies.

(4) Deleted. <Feb. 28, 2023>

(5) Upon occurrence of the cause provided for in Article 76-8 (6) 1 of the Act, any consolidated subsidiary of a surviving corporation may apply the consolidated tax return system as follows: <Added on Dec. 30, 2010; Feb. 15, 2013; Oct. 30, 2018>

1. The period beginning on the first day of the consolidated business year of the surviving corporation under which the registration date of the merger falls and ending on the registration date of the merger: To apply the consolidated tax return system, deeming the relevant period to be one consolidated business year with the surviving corporation as the consolidated parent corporation. In such cases, the surviving corporation and its consolidated subsidiary shall submit the financial statements for the relevant period and the auditor's opinion under subparagraph 7 of Article 2 of the Act on External Audit of Stock Companies to the commissioner of the competent regional tax office through the head of the tax office having jurisdiction over the place of tax payment;

2. The period beginning on the following day of the registration date of the merger and ending on the last day of the consolidated business year of the surviving corporation, etc.: To apply the consolidated tax return system, deeming the relevant period to be one consolidated business year with the surviving corporation as the consolidated parent corporation. In such cases, where the surviving corporation is not a corporation newly established through the merger, the existing consolidated subsidiary shall apply the consolidated tax return system as before and the consolidated subsidiary of the merged corporation shall apply the consolidated tax return system by summing up the period deemed to be one consolidated business year;

3. Any surviving corporation, etc., which intends to apply the consolidated tax return system under subparagraph 2 shall submit a report on change (a request for application of the consolidated tax return system in cases of a newly established corporation) of the consolidated corporation in the form stipulated by Decree of the Ministry of Economy and Finance within one month from the registration date of the merger to the commissioner of the competent regional tax office through the head of the tax office having jurisdiction over the place of tax payment.

(6) Upon occurrence of the cause provided for in Article 76-8 (6) 2 of the Act, any consolidated subsidiary of a consolidated parent corporation (hereafter in this paragraph referred to as "existing consolidated parent corporation") which becomes a wholly controlled subsidiary of another corporation (hereafter in this paragraph referred to as "changed consolidated parent corporation") through the comprehensive exchange or transfer of stocks (hereafter in this paragraph, referred to as "exchange, etc.") may apply the consolidated tax return system as follows: <Added on Dec. 30, 2010; Feb. 15, 2013; Oct. 30, 2018; Feb. 28, 2023>

1. The period beginning on the first day of the consolidated business year of the existing consolidated parent corporation under which the date on exchange, etc., falls and ending on the date of exchange, etc.: To apply the consolidated tax return system, deeming the relevant period to be one consolidated business year with the existing consolidated parent corporation as the consolidated parent corporation. In such cases, the existing consolidated parent corporation and its consolidated subsidiary shall submit the financial statements for the relevant period and the auditor's opinion under subparagraph 7 of Article 2 of the Act on External Audit of Stock Companies to the commissioner of the competent regional tax office through the head of the tax office having jurisdiction over the place of tax payment;

2. The period beginning on the following day of the date of exchange, etc., and ending on the last day of the consolidated business year of the changed consolidated parent corporation: To apply the consolidated tax return system, deeming the relevant period to be one consolidated business year with the changed consolidated parent corporation as the consolidated parent corporation. In such cases, where the changed consolidated parent corporation has made the comprehensive exchange of stocks, the existing consolidated subsidiary shall apply the consolidated tax return system as before and the existing consolidated parent corporation and its consolidated subsidiary shall apply the consolidated tax return system by summing up the period deemed to be one consolidated business year;

3. The changed consolidated parent corporation which intends to apply the consolidated tax return system under subparagraph 2 shall submit a report on change (a request for application of the consolidated tax return system in the case of the changed consolidated parent corporation newly established through the comprehensive transfer) of the consolidated corporation in the form stipulated by Decree of the Ministry of Economy and Finance within one month from the date of exchange, etc., to the commissioner of the competent regional tax office through the head of the tax office having jurisdiction over the place of tax payment.

(7) Upon occurrence of the cause provided for in Article 76-8 (6) 3 of the Act, any consolidated subsidiary of a divided corporation which becomes a wholly controlled subsidiary of the corporation newly established through division may apply the consolidated tax return system as follows: <Added on Dec. 30, 2010; Feb. 15, 2013; Oct. 30, 2018; Feb. 28, 2023>

1. The period beginning on the first day of the consolidated business year of the divided corporation in which the registration date of the division falls and ending on the registration date of the division: To apply the consolidated tax return system, deeming the relevant period to be one consolidated business year with the divided corporation as the consolidated parent corporation. In such cases, where the divided corporation does not disappear in a division, the existing consolidated subsidiary shall apply the consolidated tax return system as before and the consolidated subsidiary of the divided corporation which becomes the consolidated subsidiary of the corporation established through division shall apply the consolidated tax return system by summing up the period deemed to be one consolidated business year;

2. The period beginning on the following day of the registration date of the division and ending on the last day of the consolidated business year of the corporation established through the division: To apply the consolidated tax return system, deeming the relevant period to be one consolidated business year with the corporation established through the division as the consolidated parent corporation. In such cases, the corporation established through division which intends to apply the consolidated tax return system shall submit a request for application of the consolidated tax return system in the form stipulated by Decree of the Ministry of Economy and Finance within one month from the registration date of the division to the commissioner of the competent regional tax office through the head of the tax office having jurisdiction over the place of tax payment;

3. In cases of subparagraph 1, where the divided corporation disappears upon division, the divided corporation and its consolidated subsidiary shall submit the financial statements for the relevant period and the auditor's opinion under subparagraph 7 of Article 2 of the Act on External Audit of Stock Companies to the commissioner of the competent regional tax office through the head of the tax office having jurisdiction over the place of tax payment.

[This Article Added on Feb. 4, 2009]

Article 120-17(Tax base) #

(1) "Consolidated corporations specified by Presidential Decree" in the proviso to Article 76-13 (1) of the Act means the corporations referred to in the subparagraphs of Article 10 (1). <Added on Feb. 12, 2016>

(2) In the application of Article 76-13 (1) 1 of the Act, losses first incurred for the business year shall be first deducted.

(3) An amount equivalent to losses referred to in Article 120-14 (3) of a corporation that does not apply the consolidated tax return system under Article 76-12 (3) of the Act shall be deducted from losses referred to in Article 76-13 (1) 1 of the Act. <Amended on Feb. 12, 2016; Feb. 29, 2024>

(4) "Amount of income prescribed by Presidential Decree" in Article 76-13 (3) 1 of the Act means the amount (hereafter in this Chapter referred to as "individually allotted amount of consolidated income") calculated by the following formula: <Amended on Feb. 29, 2024>Income amount for each consolidated business year under Article 76-14 (1) of the Actx Amount of the relevant corporation under Article 76-14 (1) 1 through 4 of the Act (limited to cases where it is greater than 0)/Sum of the amount of the consolidated group under Article 76-14 (1) 1 through 4 of the Act (limited to cases where it is greater than 0)

(5) Where the amount of income computed under Article 76-14 (1) of the Act for each consolidated business year is less than zero, the amount allocated to each consolidated corporation from the relevant amount shall be the amount computed by the following formula: Losses for each consolidated business year computed pursuant to Article 76-14 (1) of the Act × (Amount computed pursuant to Article 76-14 (1) 1 through 4 of the Act of the relevant corporation (limited to when the amount is less than zero) / Sum total of the amounts computed under Article 76-14 (1) 1 through 4 of the Act of each consolidated corporation (limited to when the amount is less than zero))

(6) In the application of paragraph (3) and Article 120-14 (3), where losses have incurred to at least two consolidated corporations in the same business year, the losses incurred to the relevant consolidated corporation shall be first deducted up to the individually allotted amount of consolidated income when the tax base for the consolidated business year is calculated, and losses of at least two other consolidated corporations that have not incurred from the relevant corporation shall be deemed deducted respectively in proportion to the scale of the relevant losses. <Amended on Feb. 12, 2016>

[This Article Added on Feb. 4, 2009]

Article 120-18(Deferment of profits or losses from transfer of assets between consolidated corporations) #

(1) "Assets prescribed by Presidential Decree, such as tangible and intangible assets" in Article 76-14 (1) 3 (d) of the Act means the following assets (hereafter in this Chapter referred to as "transfer profit or loss deferred assets"); provided, assets falling under subparagraph 1 (a) through (d), the book value of which per transaction does not exceed 100 million won, may be excluded from the transfer profit or loss deferred assets. <Amended on Feb. 12, 2019; Feb. 29, 2024>

1. Each of the following assets located within the Republic of Korea at the time of the transfer:

(a) Tangible assets (excluding buildings) provided for in Article 24 (1) 1;

(b) Intangible assets provided for in Article 24 (1) 2;

(d) Financial investment instruments as defined in Article 3 (1) of the Financial Investment Services and Capital Markets Act;

(e) Land and buildings.

2. Stocks, etc. of a foreign corporation that are transferred outright to another consolidated corporation.

(2) In applying Article 76-14 (1) 3 of the Act, capital gains or losses of a consolidated corporation (hereafter referred to as "transferor corporation" in this Article) that arise from the transfer of profit or loss deferred assets to another consolidated corporation (hereafter referred to as "transferee corporation" in this Article) shall not be included in the gross income or deductible expenses; however, the amount computed by the following formula shall be included in the gross income or deductible expenses of the transferor corporation for the business year in which the day any of the following causes occurred to the transferee corporation falls; provided, this shall not apply where Article 52 (1) of the Act is applied to the transfer of transfer profit or loss deferred assets: <Amended on Feb. 15, 2022>

1. Where capital gains or losses from transfer are depreciated: Capital gains or losses from transfer x (Amount of depreciation / Book value of the transferee corporation)

2. Where the transfer profit or loss deferred assets are transferred (excluding cases of transferring to another consolidated corporation):

┌───────────────────────────┐

Capital gains or losses from transfer× Rate of transfer of transfer profit or loss deferred assets

└───────────────────────────┘

3. Where bad debts are incurred to the transfer profit or loss deferred assets, or such transfer profit or loss deferred assets are destroyed: Capital gains or losses from transfer × (Amount of bad debts or destroyed amount / Book value of the transferee corporation)

4. Where the payment due date of the transferred bond arrives:

┌─────────────────────┐

Transfer price of the transferor corporation - Book value of the transferor corporation

└─────────────────────┘

5. When transfer profit or loss deferred assets are retired under Article 343 of the Commercial Act:

┌───────────────────────────┐

Capital gains or losses from transfer x Book value of the retired assets

│ ────────────│

Book value of the transferee corporation

└───────────────────────────┘

(3) The amount included in the gross income or deductible expenses under paragraph (2) 1 may be calculated by the following formula instead of the formula referred to in paragraph (2) 1. In such cases, the number of months shall be calculated based on the calendar months; however, the number of days that is less than one month shall be counted as one month: Capital gains or losses from transfer × (Number of months of the relevant business year / Number of months that have not passed among the service life of transfer profit or loss deferred assets)

(4) Where the consolidated tax return system ceases to be applied to the transferor corporation or transferee corporation, the amount remaining after inclusion in the gross income or deductible expenses under the subparagraphs of paragraph (2) among the amount not included in the gross income or deductible when the transferor corporation transfers the transfer profit or loss deferred assets under paragraph (2) shall be included in the gross income or deductible expenses of the transferor corporation for the business year in which the date such corporation ceases to apply the consolidated tax return system falls. <Amended on Feb. 2, 2012>

(5) Where a transferor corporation or transferee corporation merges with another consolidated corporation, the surviving corporation shall be deemed a transferor corporation or transferee corporation for purposes of paragraph (2).

(6) Where a transferor corporation is divided, the amount not included in the gross income or deductible expenses under paragraph (2) shall be respectively succeeded to by a divided corporation or corporation established through the division (including a counterpart corporation to a merger and division; hereafter the same shall apply in this Article) by proportionally distributing such gross income or deductible expenses based on the net asset as at the registration date of the division, and where a transferee corporation is divided and a corporation established through the division succeeds to the transfer profit or loss deferred assets, the corporation established through the division shall be deemed assumed charge of the relevant assets for purposes of paragraph (2).

(7) Matters necessary for deferring capital gains or losses from transfer shall be prescribed by Decree of the Ministry of Economy and Finance including the calculation, etc. of the amount of income in cases where a transferee corporation that holds securities acquired from a consolidated corporation and the securities of the same kind acquired from a corporation, other than the consolidated corporation, transfers such securities.

(8) Where there is any amount that a consolidated corporation does not include in deductible expenses under Article 34 (1) of the Act (hereafter referred to as "amount not included in deductible expenses" in this paragraph), the amount not included in deductible expenses shall be distributed in proportion to the amount of appropriation for bad debts per claim initially counted as deductible expenses and the amount computed by subtracting the amount not included in deductible expenses distributed from the amount equivalent to appropriation for bad debts earmarked for claims against another consolidated corporation shall not be included in deductible expenses under Article 76-14 (1) 3 of the Act. <Added on Feb. 2, 2012; Feb. 12, 2019>

[This Article Added on Feb. 4, 2009]

[Title Amended on Feb. 2, 2012]

Article 120-20(Non-inclusion of donations in deductible expenses of consolidated corporation) #

(1) The sum total of the following amounts shall be the amount allocated to each consolidated corporation among the amounts not included in the deductible expenses calculated by applying mutatis mutandisArticle 24 of the Act, deeming a consolidated group to be one domestic corporation under Article 76-14 (1) 4 of the Act: <Amended on Dec. 30, 2010; Feb. 2, 2012; Feb. 12, 2019; Feb. 17, 2021>

1. A donation expended by the relevant consolidated corporation, which is a donation other than the donations provided for in Article 24 (2) 1 and (3) 1 of the Act;

2. The amount computed by the following formula with respect to the donations provided for in Article 24 (2) 1 and (3) 1 of the Act: An amount not includible in deductible expenses of the relevant donations calculated by deeming a consolidated group to be one domestic corporation x (The relevant donation expended by the relevant consolidated corporation/ The sum total of relevant donations expended by each consolidated corporation)

(2) Where the amount in excess of the ceiling on inclusion in deductible expenses of donations prescribed in Article 24 (3) 1 of the Act and donations prescribed in paragraph (2) 1 of the same Article not included in deductible expenses under Article 76-14 (1) 4 of the Act is carried forward and included in deductible expenses under Article 24 (4) of the Act, the amount in excess of the ceilings on inclusion in deductible expenses for the business year that first incurs shall be included in deductible expenses and the amount allocated to each consolidated corporation among the amounts carried forward and included in deductible expenses shall be computed by the following formula: <Added on Feb. 2, 2012; Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021>An amount included in deductible expenses out of the amount carried over for exceeding the ceilings on inclusion in deductible expenses calculated by deeming a consolidated group to be one domestic corporation × (An amount in excess of the ceilings on inclusion in deductible expenses of the relevant donations of the relevant consolidated corporation / The sum total of amount in excess of the ceilings on inclusion in deductible expenses of the relevant donation of each consolidated corporation)

[This Article Added on Feb. 4, 2009]

Article 120-22(Calculated tax amount of each consolidated corporation) #

(1) "Amount specified by Presidential Decree" in Article 76-15 (2) of the Act means unappropriated earnings calculated pursuant to Article 100-32 of the Act on Restriction on Special Cases concerning Taxation without applying the consolidated tax return system to the relevant business year. <Added on Feb. 3, 2015; Feb. 12, 2019>

(2) The calculated amount of tax of each consolidated corporation under Article 76-15 (4) of the Act shall be an amount computed by multiplying the amount under subparagraph 1 by the rate under subparagraph 2. In such cases, where there is corporate tax on the capital gains from the transfer of land, etc. under Article 55-2 of the Act and corporate tax calculated by applying special taxation for facilitating investment and mutually beneficial cooperation under Article 100-32 of the Restriction of Special Taxation Act, such corporate tax shall be added thereto: <Amended on Feb. 3, 2015; Feb 28, 2025>

1. The amount (hereafter referred to as "individually reverted amount of tax base" in this Chapter) computed by subtracting losses (referring to the amount deducted from the individually reverted amount of consolidated income of the relevant consolidated corporation) deducted when calculating the tax base for each consolidated business year under Article 76-13 (1) of the Act, and the non-taxable income and income deduction of the relevant consolidated corporation from the individually reverted amount of consolidated income of the relevant consolidated corporation;

2. The ratio of the consolidated corporate tax amount under Article 76-15 (1) of the Act (excluding the corporate tax amount calculated by applying the corporate tax on capital gains from the transfer of land, etc. under Article 55-2 of the Act and the corporate tax amount calculated by applying the special taxation for the promotion of investment and shared growth under Article 100-32 of the Restriction of Special Taxation Act) to the consolidated tax base on income for the consolidated business year under Article 76-13 (1) of the Act (hereinafter referred to in this Chapter as the "consolidated tax rate").

(3) Where losses of another consolidated corporation is deducted from the individually reverted amount of consolidated income of at least two consolidated corporations when the individually reverted amount of tax base of each consolidated corporation is calculated pursuant to paragraph (2), such losses shall be deducted in proportion to the scale of each individually reverted amount of consolidated income (referring to the amount computed after subtracting losses incurred to the relevant corporation). <Amended on Feb. 3, 2015; Feb. 28, 2023>

(4) Notwithstanding paragraph (2), if there is a consolidated entity under any of the following subparagraphs, the amount of computed tax for each consolidated entity shall be the amount prescribed in that subparagraph. In this case, if the consolidated entity has corporate income tax on income from the transfer of land pursuant to Article 55-2 of the Act, it shall be added. <Added on Feb. 29, 2024>

1. A consolidated corporation falling under any item of Article 76-19 (5) 1 of the Act: The amount calculated according to the following formula; A x (B/C)A: The amount equivalent to the adjusted tax base for each consolidated corporation (refers to the amount of deficit deducted from the income of each consolidated corporation calculated pursuant to Article 76-14 (1) of the Act when calculating the tax base for each consolidated business year pursuant to Article 76-13 (1) of the Act (limited to the amount deducted from the income of the corporation as a loss incurred by the corporation), the amount after deducting non-taxable income and income deductions)B: Adjusted consolidated tax amount (refers to the amount calculated by applying the tax rate under Article 55 (1) of the Act to the total amount equivalent to the adjusted tax base for each consolidated corporation)C: Equivalent amount of adjusted tax base (refers to the sum of equivalent amount of adjusted tax base for each consolidated corporation)

2. A consolidated entity falling under any of the following subparagraphs of Article 76-19 (5) 2 of the Act: An amount calculated in accordance with the following formula; D x (E/F)D: Adjusted tax on loss (refers to the amount obtained by deducting the amount corresponding to calculation formula B in subparagraph 1 from the consolidated tax amount under Article 76-15 (1) of the Act)E: Amount of loss deduction for each consolidated corporation (refers to the total amount of loss combined with the income of other consolidated corporations pursuant to Article 76-14 (1) of the Act and the amount of loss deducted from individually allotted amount of consolidated income of other consolidated corporations" pursuant to Article 76-13 (1) 1 of the Act)F: Total loss deduction amount (refers to the sum of loss deduction for each consolidated corporation

3. A consolidated entity that falls under both one of the items of Article 76-19 (5) 1 of the Act and one of the items of subparagraph 2 of the same paragraph: The amount calculated by adding the amount specified in subparagraph 1 to the amount specified in subparagraph 2.

(5) Notwithstanding paragraph (4), in any of the following cases, the amount of consolidated tax calculated for each consolidated corporation may be calculated in accordance with paragraph (2): <Added on Feb. 29, 2024; Feb 28, 2025>

1. When the consolidated parent corporation wholly controls all consolidated subsidiaries (referring to the case where a domestic corporation holds all of the issued shares of another domestic corporation (in the case of a corporation that is not a joint stock company, referring to the total amount of investment, including shares without voting rights) (excluding shares acquired by employees through the employee stock ownership association pursuant to subparagraph 4 of Article 2 of the Framework Act on Labor Welfare and other shares, which are prescribed by Decree of the Ministry of Economy and Finance and within five hundredth of the total issued shares), and including the cases where the sum of shares, etc. held by a domestic corporation and another domestic corporation that is held by a corporation wholly controlled by the domestic corporation is equal to the total number of the issued shares of the another domestic corporation).

2. If, as of the end day of the consolidated business year, consent has been obtained from holders of at least 90 percent of the total number of issued shares or total amount of equity (limited to shares or equity interests not held by the consolidated corporation) of the consolidated subsidiary, within the filing deadline prescribed in Article 76-17 (1) of the Act.

[This Article Added on Feb. 4, 2009]

Article 120-23(Tax reductions or exemptions for consolidated corporation) #

(1) In the application of Article 76-16 (1) and (2) of the Act, the amount of tax reduction or exemption for each consolidated corporation shall be the amount computed by multiplying the tax-reduced or tax-exempt income by the consolidated tax rate (in cases of reduction, the amount computed by multiplying such amount by the relevant reduction rate). In such cases, the tax-reduced or tax-exempt income shall be limited to the individually allotted amount of tax base and Article 96 shall apply mutatis mutandis to the calculation thereof. <Amended on Feb. 2, 2012; Feb. 21, 2014>

(2) The amount to be allocated to each consolidated corporation out of the tax amount not eligible for tax credits or tax reduction because it falls short of the minimum amount of corporate tax provided for in Article 132 (1) of the Restriction of Special Taxation Act as a result of the application of Article 76-16 (1) or (2) of the Act shall be computed by the following formula. In such cases, the tax amount reduced by including deductible expenses or deducting income under Article 132 (1) 1 or 2 of the Restriction of Special Taxation Act shall be included in the computation, and the reduced tax amount shall be computed by multiplying the amount of deductible expenses included or income deducted by the consolidated tax rate: <Added on Feb. 12, 2016; Feb. 12, 2019>Tax amount that falls short of the minimum amount of corporate tax, as computed by deeming that a consolidated group is one domestic corporation x (Tax credits, tax reduction, etc. of the relevant consolidated corporation, as specified in any subparagraph of Article 132 (1) of the Act on Restriction on Special Cases concerning Taxation / Sum of tax credits, tax reductions, etc. of each consolidated corporation, as specified in any subparagraph of Article 132 (1) of the Act on Restriction on Special Cases concerning Taxation)

[This Article Added on Feb. 4, 2009]

Article 120-25(Consolidated interim prepayment) #

(1) The interim tax by consolidated corporation referred to in Article 76-18 (4) of the Act shall be an amount computed by multiplying the amount computed by dividing the amount computed by subtracting the following amounts from the calculated amount of tax of each consolidated corporation (including additional tax, however, excluding corporate tax on capital gains from the transfer of land, etc. under Article 55-2 of the Act) fixed in the immediately preceding consolidated business year by the number of months of the immediately preceding business year by six:

1. The reduced or exempted amount of corporate tax of the relevant consolidated corporation in the immediately preceding consolidated business year;

2. The amount of withholding tax paid as corporate tax by the relevant consolidated corporation in the immediately preceding consolidated business year.

(2) Where a consolidated parent corporation calculates the consolidated interim tax as prescribed in Article 76-18 (1) 2 of the Act, the interim tax by consolidated corporation shall be an amount computed by subtracting the following amounts from the calculated amount of tax of each consolidated corporation computed under Article 120-22 by deeming the relevant interim prepayment period to be one business year, notwithstanding paragraph (1): <Amended on Feb. 12, 2019>

1. The reduced or exempted amount of corporate tax of the relevant consolidated corporation in the relevant interim prepayment period;

2. The amount of withholding tax paid as corporate tax by the relevant consolidated corporation in the relevant interim prepayment period.

(3) "Corporation prescribed by Presidential Decree in consideration of sales by type of business, etc." in the proviso, with the exception of the subparagraphs, of Article 76-18 (1) of the Act means an enterprise that meets the requirements under Article 2 (1) 1 of the Enforcement Decree of the Act on Restriction on Special Cases concerning Taxation. <Added on Feb. 28, 2025>

[This Article Added on Feb. 4, 2009]

Article 129(Calculation of amount of domestic source income) #

(1) In calculating the total amount of domestic source income of a foreign corporation for each business year under Article 92 of the Act, the gross income and deductible expenses shall be calculated pursuant to the following subparagraphs, except as otherwise provided for in the Act or this Decree: <Amended on Dec. 31, 2001; Feb. 4, 2009; Feb. 18, 2010; Feb. 2, 2012; Feb. 21, 2014; Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021>

1. Deductible expenses provided for in Article 14 of the Act shall be limited to the revenue amount and asset value related to domestic source income provided in Article 93 of the Act and the amount reasonably distributed to such domestic source income;

2. Where retirement benefit appropriation funds are earmarked under Article 33 of the Act, such funds shall be limited to those for executive officers or employees of the relevant foreign corporation who are employed in the Republic of Korea for the business operated by the relevant foreign corporation in the Republic of Korea and ordinarily work at the domestic place of business under Article 94 of the Act (hereinafter referred to as "domestic place of business") or at the location where the domestically sourced real estate income provided for in subparagraph 3 of Article 93 of the Act accrues;

3. Corporate tax, local corporate income tax, fines, minor fines, administrative fines, surcharges, forced collection charges, public charges, etc. referred to in subparagraphs 1, 3, 4 and 5 of Article 21 of the Act shall include those imposed under the law of any foreign country;

4. Tangible assets provided for in Article 24 (1) 1 and intangible assets provided for in subparagraph 2 (a) through (d) of Article 24 (1) shall be limited to the business assets that revert to the domestic place of business out of the tangible and intangible assets held by the relevant foreign corporation;

5. When the relevant foreign corporation ceases to have a domestic place of business during the period of a long term installment plan under Article 68 (4), the uncollected sales or transfer amount and the corresponding expenses shall be included respectively in the gross income and deductible expenses in the business year in which it ceases to have a domestic place of business;

6. Intangible assets provided in Article 24 (1) 2 (f) and (g) shall be limited to the intangible assets of the relevant foreign corporation, which revert to the business operated by such foreign corporation in the Republic of Korea or are related to the assets that revert to the domestic place of business;

7. Where a stock option, etc. prescribed by Decree of the Ministry of Economy and Finance that was granted to the executive officers and employees of a Korean branch of a foreign corporation prescribed by Decree of the Ministry of Economy and Finance is exercised or paid, the amount equivalent to the income accrued from the supply of labor in the Republic of Korea among the amounts compensated to the foreign corporation by its Korean branch as the expense for such exercise or payment, shall be included in deductible expenses.

(2) The sales costs, general management costs, and other expenses incurred at any domestic place of business which is unrelated to the accrual of domestic source income as prescribed by Decree of the Ministry of Economy and Finance shall not be included in deductible expenses provided in Article 14 of the Act. <Amended on Feb. 29, 2008>

(3) "Acquisition value and transfer expenses of the relevant securities verified, as prescribed by Presidential Decree" in Article 92 (2) 1 (a) of the Act means the following amount among the acquisition value and transfer expenses of the relevant securities verified by the receipt for payment of equity investments or shares, transfer deeds, receipt of payment of proceeds, or other data substantiating the amount expended for investments, acquisition or transfer, that are submitted by the transferor of such securities or his or her agent under Article 132 (8) to the relevant person liable for withholding by the date of withholding: <Amended on Dec. 29, 2000; Feb. 22, 2008; Dec. 30, 2010; Feb. 17, 2021; Feb. 15, 2022; Mar. 8, 2022>

1. The amount actually and directly expended to acquire or transfer the relevant securities (including tax, public charges, and brokerage commission directly paid for the acquisition or transfer); provided, where the relevant securities are the investment certificates or stocks which include the amounts accruing from the conversion of all or some of the surpluses of the corporation into the capital or financing, it shall be the amount computed by applying mutatis mutandisArticle 14 (2);

2. The acquisition value of securities transferred by the donee or any corresponding person shall be the amount computed as provided for in subparagraph 1 by deeming that the original donator or any corresponding person to be the transferor of the relevant securities; provided, if the relevant securities are taxed under subparagraph 10 (c) of Article 93 of the Act, the acquisition value of such securities shall be the market price at the time of donation;

3. The acquisition value of securities acquired due to a capital transaction falling under any item of Article 88 (1) 8 or Article 88 (1) 8-2 shall be the sum total of the amount computed under subparagraph 1 and the amount provided in Article 132 (14).

(4) "Amount prescribed by Presidential Decree" referred to in Article 92 (2) 1 (b) of the Act mean the amount of one virtual asset indicated by a virtual asset service provider or similar service provider prescribed in subparagraph 1 (n) of Article 2 of the Act on Reporting and Using Specified Financial Transaction Information (hereinafter referred to as "virtual asset service provider, etc.") that keeps and manages the relevant virtual assets at the time a foreign corporation withdraws the virtual assets, multiplied by the number of virtual assets withdrawn. <Added on Mar. 8, 2022>

(5) In Article 92 (2) 1 (b) of the Act, "acquisition cost, etc. as prescribed by Presidential Decree" means the amount calculated by applying mutatis mutandis the provisions for calculating deductible expenses for virtual assets under Article 37 (1) 3 and paragraph (5) of that Article of the Income Tax Act, and Article 88 (2) through (4) of the Enforcement Decree of that Act, yet, the valuation method shall use the moving average method applied to each virtual asset address of users under Article 7 (1) 3 of the Act on the Protection of Virtual Asset Users; provided, where a foreign corporation directly deposits virtual assets with a virtual asset service provider, etc., the acquisition cost of such deposited virtual assets shall be the amount calculated by multiplying the number of virtual assets deposited by the per-unit value of the virtual asset as indicated by the virtual asset service provider, etc. at the time of deposit. <Added on Mar. 8, 2022; Feb. 28, 2025>

(6) When calculating the amount of income and acquisition value pursuant to paragraphs (4) and (5), if the value of virtual assets is not indicated in an amount of money, the amount shall be calculated by applying mutatis mutandisArticle 88 (3) and (4) of the Enforcement Decree of the Income Tax Act. In such cases, "exchange transaction" shall be deemed "receipt or withdrawal of virtual assets". <Added on Mar. 8, 2022>

Article 129-2(Calculation of capital gains for foreign corporation without domestic place of business) #

(1) "Land, etc. prescribed by Presidential Decree" in the proviso to Article 92 (3) 1 of the Act means the land, etc. transferred within three years from the date on which such land, etc, is contributed; provided, the same shall not apply to any land, etc. directly used for any of the following business (excluding the profit-making business provided for in Article 3 (1) with the exception of the health service business) for at least one year: <Amended on Dec. 30, 2010; Feb. 13, 2018; Feb. 12, 2019>

1. Any business prescribed by statutes or regulations;

2. Any business permitted or authorized by the relevant administrative agency.

(2) paragraph (1) shall not apply where a reason for imposing tax arises with respect to any contributed property which is not included in the taxable value of the inheritance tax or gift tax under the Inheritance Tax and Gift Tax Act and an amount equivalent to the total amount of such inheritance tax or gift tax not included in such taxable value is imposed accordingly. <Amended on Feb. 19, 2005>

(3) For the purposes of Article 92 (3) 1 of the Act, the acquisition value of assets transferred by the donee or any corresponding person shall be an amount computed by deeming the original donee or any corresponding person to be the transferor of the transferred assets; provided, if the relevant assets are taxed under subparagraph 10 (c) of Article 93 of the Act, the acquisition value of such assets shall be an amount computed based on the market price at the time of transfer of such assets. <Amended on Dec. 30, 2010>

(4) For purposes of Article 92 (3) 2 of the Act, expenses directly expended to transfer the land, etc shall be an amount computed by applying mutatis mutandisArticle 163 (5) of the Enforcement Decree of the Income Tax Act. <Amended on Feb. 19, 2005>

(5) For purposes of Article 92 (4) of the Act, the actual transaction value of the acquisition value shall be an amount computed by applying mutatis mutandisArticle 163 (1) and (3) of the Enforcement Decree of the Income Tax Act. <Amended on Feb. 19, 2005>

(6) Where any foreign corporation provided for in Article 91 (2) of the Act transfers assets prescribed in subparagraph 7 of Article 93 of the Act on at least two occasions in a business year, its capital gains referred to in Article 92 (3) of the Act shall be an amount computed by adding up the amount of income computed under Article 92 (3) of the Act by assets transferred in the relevant business year. In such cases, if the total amount provided for in Article 92 (3) 1 and 2 of the Act is in excess of the transfer value of the relevant assets among the transferred assets, capital gains shall be calculated by deducting such excess amount.

[This Article Added on Dec. 31, 2001]

Article 129-3(Calculation of profits and losses of interest following capital transactions between headquarters and branch of foreign corporation) #

(1) Where money in the capital account of a domestic branch of a foreign corporation falls short of the amount (hereafter referred to as "estimated capital" in this Article) calculated by the following methods, interest paid (hereafter referred to as "interest paid on deemed capital" in this Article) to the amount equivalent to the shortage among the total amount provided from the headquarters or a foreign branch of the foreign corporation shall not be included in deductible expenses. In such cases, the domestic branch may choose any of the following amounts for application: <Amended on Jan. 5, 2021>

1. An amount computed by multiplying the total asset amount of the domestic branch by the rate of equity capital to the total asset amount on the statement of financial position as at the end of the relevant business year;

2. An amount computed by the method prescribed by Decree of the Ministry of Economy and Finance reflecting the function, assets in possession, share of risk, etc. of the domestic branch.

(2) If the accounting method of the headquarters is different from that of the branch when the estimated capital is calculated, the accounting method of the headquarters may be used. In such cases, the domestic branch shall keep and maintain the data adjusted by the accounting method of the headquarters.

(3) Where interest paid (hereafter referred to as "interest paid to insufficient capital" in this paragraph) that is not included in deductible expenses under Article 22 of the Adjustment of International Taxes Act and interest paid to deemed capital have accrued simultaneously, the following subparagraphs shall govern: <Amended on Feb. 17, 2021>

1. Where interest paid to deemed capital is less than interest paid to insufficient capital, the interest paid to deemed capital that is not included in deductible expenses shall be deemed nil;

2. Where interest paid to deemed capital is more than interest paid to insufficient capital, only the amount computed by subtracting the interest paid to insufficient capital from the interest paid to deemed capital shall not be included in deductible expenses.

(4) Domestic branches eligible for paragraph (1) and other necessary matters shall be prescribed by Decree of the Ministry of Economy and Finance.

[This Article Added on Feb. 4, 2009]

Article 130(Allocation of headquarters expenses) #

(1) In determining the income amount of a domestic place of business of a foreign corporation for each business year, domestic source income generated from transactions (hereinafter referred to as "internal transaction") between domestic places of business and the headquarters or branches in foreign countries (hereafter referred to as "headquarters, etc." in this Article) shall be the amount calculated based on arm's length price under Article 131 (1) (hereafter referred to as "arm's length price" in this Article) except as otherwise provided for in the Act or this Decree. <Added on Feb. 15, 2013>

(2) In applying paragraph (1), the expenses accruing from an internal transaction shall be included in deductible expenses only if such expenses are necessarily or reasonably related to income that reverts to the domestic place of business within the arm’s length price, and expenses prescribed by Decree of the Ministry of Economy and Finance such as interest accruing from capital transaction (excluding interest under Article 129-3) shall not be included in deductible expenses; provided, this shall not apply if interest from financial transactions is includible in deductible expenses under a tax treaty. <Amended on Feb. 11, 2020>

(3) In determining the income amount of a domestic place of business of a foreign corporation, common expenses reasonably related to the accrual of domestic source income of the domestic place of business, out of expenses of the headquarters, etc., shall be allocated to the domestic place of business and shall be included in its deductible expenses. <Amended on Feb. 15, 2013>

(4) When a foreign corporation calculates the amount of domestic source income from internal transactions pursuant to paragraphs (1) and (2), it shall submit documents prescribed by Decree of the Ministry of Economy and Finance, such as internal transaction statements and expense allocation statements, to the head of the tax office having jurisdiction over the place of tax payment within six months from the end of the month in which the end of the business year falls, and shall keep and furnish evidentiary documents regarding the calculation. <Added on Feb. 11, 2020; Feb. 15, 2022>

(5) In applying paragraphs (1) through (4), the procedures and methods for calculating the amount of domestic source income and capital from internal transactions, the scope of expenses allocated to the domestic place of business and method of allocating such expenses, the method of allocating expenses for each type of business, the method of converting a foreign currency into Korean won for allocating expenses, and other necessary matters shall be prescribed by Decree of the Ministry of Economy and Finance. <Added on Feb. 15, 2013; Feb. 11, 2020>

[Title Amended on Feb. 15, 2013]

Article 132(Scope of domestic source income) #

(1) "Tools prescribed by Presidential Decree" in subparagraph 4 of Article 93 of the Act means delivery equipment, tools, furniture, and fixtures. <Added on Dec. 30, 2003; Jun. 3, 2011>

(2) "Income prescribed by Presidential Decree" in the main sentence of subparagraph 5 of Article 93 of the Act means the following income generated from any business operated in the Republic of Korea among the businesses provided for in Article 19 of the Income Tax Act: <Amended on Dec. 29, 2000; Dec. 30, 2003; Feb. 19, 2005; Feb. 29, 2008; Jun. 3, 2011; Feb. 12, 2019>

1. Where a foreign corporation does not manufacture, process, develop, or do any other act overseas to increase the value of inventory assets it has acquired by transfer overseas (hereafter in this Article referred to as "manufacture, etc.") and transfers the inventory assets in the Republic of Korea (including transfer of such inventory assets after manufacture, etc., in the Republic of Korea), all income accruing from transfer in the Republic of Korea;

2. Where a foreign corporation transfers in the Republic of Korea inventory assets that have undergone manufacture, etc., overseas (including transfer of such inventory assets after manufacture, etc., in the Republic of Korea), the income accruing from the transfer when it is assumed that such inventory assets were acquired from another person who performed manufacture, etc., overseas under ordinary transaction conditions (including transfer after manufacture, etc., in the Republic of Korea);

3. Where a foreign corporation which has conducted manufacture, etc., of inventory assets in the Republic of Korea transfers them overseas (including transfer of such inventory assets after manufacture, etc. overseas), the income accruing from the transfer of the inventory assets that have undergone manufacture, etc., in the Republic of Korea when it is assumed that the relevant inventory assets manufactured in the Republic of Korea were transferred to any other person overseas under ordinary transaction conditions;

4. Where a foreign corporation conducts work in the Republic of Korea by procuring necessary labor or materials or entering into a contract concerning construction, installation, assembling, and other work in any foreign country, all income accruing from the relevant work;

5. Where a foreign corporation operates a non-life insurance business or life insurance business in the Republic of Korea and overseas, the income accruing from the office of business of the relevant business in the Republic of Korea or from insurance contracts concluded through agents for conclusion of insurance contracts;

6. Where a foreign corporation operating a publishing business or broadcasting business in the Republic of Korea and overseas conducts advertising-related business for other persons, the income accruing from the advertisement conducted in the Republic of Korea among the income accrued from such advertising-related business;

7. Where a foreign corporation operates an international transport business by ship in the Republic of Korea and overseas, the income of the foreign corporation accruing from business in the Republic of Korea, that is determined based on the revenue amount generated in connection with the passengers boarding or cargo loaded in the Republic of Korea;

8. Where a foreign corporation operates an international transport business by aircraft in the Republic of Korea and overseas, the income of the foreign corporation accruing from business in the Republic of Korea calculated by the method prescribed by Decree of the Ministry of Economy and Finance in consideration of the revenue amount and expenses generated in connection with the passengers boarding or cargo loaded in the Republic of Korea, the value of tangible or intangible assets for domestic business and how much the business in the Republic of Korea contributes to generating the income of such transport business;

9. Where a foreign corporation operates, in the Republic of Korea and overseas, a business other than those provided for in subparagraphs 1 through 8, the income generated in connection with the domestic business, that is determined in consideration of the income or the revenue amount and expenses generated in related to such domestic business and other reasonable factors assuming that the related business were separated into the domestic business and overseas business and such businesses are operated by independent business operators, and transactions took place between such independent business operators under ordinary transaction conditions;

10. Income accruing from investment in stocks or investment certificates listed or registered in the securities market, etc., among those issued by foreign corporations or from other similar acts;

11. Income accruing from the transfer of industrial, commercial or scientific machinery, equipment, installation, delivery equipment, tool, apparatus, fixture by a foreign corporation.

(3) Notwithstanding paragraph (2), the income generated in any foreign country, which accrues to the domestic place of business shall be included in the domestic source business income provided for in subparagraph 5 of Article 93 of the Act: <Amended on Dec. 30, 2003; Feb. 29, 2008; Feb. 12, 2019; Feb. 11, 2020>

1. Deleted. <Feb. 11, 2020>

2. Deleted. <Feb. 11, 2020>

3. Deleted. <Feb. 11, 2020>

4. Deleted. <Feb. 11, 2020>

(4) Where a foreign corporation engages in advertising, publicity, gathering and provision of information, market research, and other activities of preparatory or supporting nature overseas for any business operated in the Republic of Korea, or engages in such activities in the Republic of Korea for any business operated overseas, no income shall be deemed generated from such activities. <Feb. 11, 2020>

(5) Where the inventory assets referred to in paragraph (2) 1 through 3 fall under any of the following cases, such inventory assets shall be deemed transferred in the Republic of Korea for purposes of the same paragraph: <Amended on Dec. 30, 2003>

1. Where the relevant inventory assets are in the Republic of Korea immediately prior to being delivered to the transferee, or managed through business conducted at the domestic place of business of the relevant transferor foreign corporation;

2. Where a contract for the transfer of the relevant inventory assets has entered into in the Republic of Korea;

3. Where some of important activities, such as taking orders or deliberation to enter into a contract for the transfer of the relevant inventory assets are done in the Republic of Korea.

(6) "Personal services prescribed by Presidential Decree" in the former part of subparagraph 6 of Article 93 of the Act means the following services, and "personal services prescribed by Presidential Decree, among personal services rendered abroad" means the services specified in subparagraph 4: <Amended on Feb. 9, 2006; Jun. 3, 2011; Feb. 3, 2017; Feb. 12, 2019>

1. Services provided by movie or stage actors, musicians, and public entertainers;

2. Services provided by professional athletes;

3. Services provided by attorneys-at-law, certified public accountants, architects, surveyors, patent attorneys, or free-lancers;

4. Services provided by persons who have professional knowledge and special skills in the fields of science, technology, and business administration using such knowledge or skills.

(7) "Expenses prescribed by Presidential Decree" in the latter part of subparagraph 6 of Article 93 of the Act means air fares, accommodation charges, or meal expenses actually paid by any person provided with personal services to air carriers, accommodation business operators, or restaurant business operators (Including where payment is made through a person providing personal services) in relation to the provision of such personal services. <Added on Feb. 9, 2006; Jun. 3, 2011; Feb. 11, 2020>

(8) "Income prescribed by Presidential Decree" in subparagraph 9 of Article 93 of the Act, with the exception of its items, means the following income: <Amended on Dec. 31, 1999; Dec. 29, 2000; Aug. 14, 2001; Feb. 19, 2005; Feb. 4, 2009; Feb. 18, 2010; Dec. 30, 2010; Feb. 2, 2012>

1. Income accruing from the transfer of stocks or investment certificates by a foreign corporation with a domestic place of business;

2. Income accruing from the transfer of stocks or investment certificates by a foreign corporation with no domestic place of business; provided, excluded herefrom shall be any income accruing from the transfer of stocks or investment certificates through the securities market (including transfer of stocks through brokerage under Article 78 of the Financial Investment Services and Capital Markets Act) of which the relevant transferor corporation and a related party continue to own less than 25/100 of the total number of issued stocks or total investment amount (the total number of stocks or total investment amount listed on the securities market in the case of stocks or investment certificates issued by a foreign corporation) of the corporation that issued such stocks or investment certificates during the year in which the date of the transfer of the relevant stocks or investment certificates falls and the immediately preceding five year period;

3. Income accruing from the transfer of securities, other than stocks or investment certificates by a foreign corporation with a domestic place of business; provided, excluded herefrom shall be the taxable income referred to in subparagraph 1 of Article 93 of the Act at the time of the transfer of such securities;

4. Income accruing from the transfer of securities, other than stocks or investment certificates by a foreign corporation with no domestic place of business to a domestic corporation, resident, non-resident, or the domestic place of business of a foreign corporation; provided, excluded herefrom shall be the taxable income referred to in subparagraph 1 of Article 93 of the Act at the time of the transfer of such securities.

(9) Any income earned by a foreign corporation with no domestic place of business by trading any of the following derivatives shall not be deemed domestic source income. <Amended on Dec. 31, 1999; Feb. 19, 2005; Feb. 4, 2009; Feb. 12, 2019>

1. Exchange-traded derivatives referred to in Article 5 (2) of the Financial Investment Services and Capital Markets;

2. Over-the-counter derivatives referred to in Article 5 (3) of the Financial Investment Services and Capital Markets, which are traded for the purpose of hedging under Article 186-2 of the Enforcement Decree of that Act.

(10) "Income prescribed by Presidential Decree" in subparagraph 10 (b) of Article 93 of the Act means the value of money or other goods paid or provided in excess of compensation for payment under the original contract, irrespective of its title, which is damages paid in penalty compensation for breach or termination of contracts on property rights. <Amended on Dec. 29, 2000; Dec. 30, 2010>

(11) A determination as to whether another corporation excessively owns real estate, as referred to in the latter part of subparagraph 7 (b) (ii) of Article 93 of the Act, shall be based on whether the ratio of real estate owned by another corporation, as calculated by the following formula, is not less than 50/100: <Added on Feb. 12, 2016>

┌────────────────────────────────────────┐

Value of assets owned by another corporation, as referred to in Article 94 (1) 1 or 2 of the Income Tax Act

│────────────────────────────────────────│

Total value of assets of another corporation

└────────────────────────────────────────┘

(12) The total amount of assets and asset value referred to in subparagraph 7 (b) of Article 93 of the Act shall be calculated by applying mutatis mutandisArticle 158 (4) and (5) of the Enforcement Decree of the Income Tax Act. In such cases, "the date of transfer" shall be construed as "the start date of the business year in which the date of transfer falls." <Amended on Dec. 30, 2003; Feb. 19, 2005; Feb. 28, 2007; Feb. 4, 2009; Feb. 11, 2020>

(13) "Related party prescribed by Presidential Decree" in subparagraph 10 (i) of Article 93 of the Act means a foreign corporation in any of the following special relationships: <Amended on Feb. 9, 2006; Dec. 30, 2010; Feb. 2, 2012; Feb. 17, 2021>

1. The special relationship provided for in Article 2 (2) of the Enforcement Decree of the Adjustment of International Taxes Act with a resident or domestic corporation;

2. The special relationship provided for in Article 131 (2) 1 or 2 with a non-resident or foreign corporation.

(14) "Income accruing from an increase in the value of stocks, etc., that arises from capital transactions prescribed by Presidential Decree" in subparagraph 10 (i) of Article 93 of the Act means the income accruing from profits distributed to a foreign corporation that is a stockholder, etc., by other stockholders, etc., who are in any of the special relationships provided for in the subparagraphs of paragraph (13) due to the transaction referred to in any item of Article 88 (1) 8 or subparagraph 8-2 of the same paragraph. <Amended on Feb. 9, 2006; Feb. 4, 2009; Dec. 30, 2010>

(16) In the application of the proviso to paragraph (8) 2, where a foreign corporation acquires the stocks (hereafter in this paragraph referred to as "stocks, etc.") of a domestic corporation or a foreign corporation (limited to a foreign corporation listed on the securities market) or makes an investment (hereinafter referred to as "investment") therein through an investment scheme (referring to where a stockholder or an investor of a corporation is directly obligated to pay tax on any income accruing from the transfer of stocks or investment shares, for purposes of tax collection, in the country of residence of the corporation; hereinafter the same shall apply), the holding ratio of such stocks or the ratio of investment (hereinafter referred to as "ratio of investment") shall be calculated as follows: <Amended on Dec. 30, 2010>

1. Where the foreign corporation only makes an investment through the investment scheme (hereinafter referred to as "indirect investment"): The ratio of investment by such investment scheme. In such cases, if the investment is made through at least two investment schemes, the ratio of investment shall be calculated by aggregating the ratios of investment made respectively by such investment schemes;

2. Where the foreign corporation simultaneously makes an indirect investment as well as a direct investment not through the investment scheme(hereafter referred to as "direct investment" in this subparagraph), the larger of the ratios calculated by the following methods:

(a) The ratio calculated by aggregating the ratio of direct investment and the ratio of indirect investment made by the foreign corporation. In such cases, the ratio of indirect investment made by a foreign corporation shall be calculated by multiplying the ratio of investment made by the foreign corporation in the investment scheme by the ratio of investment by the investment scheme;

(b) The ratio of investment made by the investment scheme. In such cases, if the investment is made through at least two investment schemes, the ratio of investment shall be calculated by aggregating the ratios of investment made respectively by such investment schemes.

(17) "Amount calculated as prescribed by Presidential Decree" in subparagraph 10 (k) of Article 93 of the Act means the amount of virtual asset income calculated in accordance with Article 92 (2) 1 (b) of the Act, assuming that the virtual asset is transferred at the time of withdrawing it. <Added on Mar. 8, 2022>

Article 132-2(Approval requirements, etc. for qualified foreign financial company) #

(1) A foreign financial company, etc. that intends to obtain approval from the Commissioner of the National Tax Service as a qualified foreign financial company, etc. referred to in the former part of Article 93-3 (2) of the Act (hereinafter referred to as "qualified foreign financial company, etc.") shall be a foreign corporation that has its head office or main office in a country that has entered into a tax treaty with the Republic of Korea, and which is recognized by the Governor of the Financial Supervisory Service as performing similar duties to those of the Korea Securities Depository under Article 294 of the Financial Investment Services and Capital Markets Act. <Amended on Dec. 31, 2024>

(2) A foreign financial company, etc. that intends to obtain approval as a qualified foreign financial company, etc. shall submit an application for approval as a qualified foreign financial company, etc. prescribed by Decree of the Ministry of Economy and Finance to the Commissioner of the National Tax Service through the Korea Securities Depository referred to in Article 294 of the Financial Investment Services and Capital Markets Act.

(3) Upon receipt of an application referred to in paragraph (2), the Commissioner of the National Tax Service shall approve the applicant as a qualified foreign financial company, etc. if it falls under paragraph (1). In such cases, the Commissioner of the National Tax Service may seek advice from the Korea Securities Depository referred to in Article 294 of the Financial Investment Services and Capital Markets Act as to whether the applicant falls under paragraph (1). <Amended on Dec. 31, 2024>

(4) Where a qualified foreign financial company, etc. falls under any of the following, the Commissioner of the National Tax Service may revoke the approval of a qualified foreign financial company, etc.: <Amened on Dec. 31, 2024>

1. Where it has obtained approval by fraud or other improper means, such as falsely stating the application documents;

2. Where there is a tax delinquent and its collection is deemed substantially difficult;

3. Where it is deemed inappropriate to have it perform the business affairs of a qualified foreign financial company, etc. as it has failed to fulfill its obligations stipulated in each subparagraph of Article 132-3 (1) or for other reasons;

4. Where a qualified foreign financial company, etc. requests the Commissioner of the National Tax Service to revoke approval of the qualified foreign financial company, etc.

[This Article Added on Dec. 31, 2022]

Article 132-3(Matters to be observed by qualified foreign financial companies) #

(1) Qualified foreign financial companies, etc. shall fulfill the obligations specified in the following subparagraphs: <Amended on Dec. 31, 2024; Feb. 28, 2025>

1. Materials regarding the name, country of residence (referring to the country where the head office or principal office of the foreign corporation is located; hereafter the same shall apply in this Article and Article 132-4), and location, etc. (hereafter referred to in this Article as "name, etc.") of a foreign corporation (including an overseas investment vehicle deemed to be the real beneficiary under Article 93-3 (3) of the Act; hereinafter the same shall apply in this Article and Article 132-4) that acquires, holds, or transfers government bonds, etc. (as defined in Article 93-3 (1) (i); hereinafter the same shall apply in this Article and Article 132-4) through an eligible foreign financial institution, etc. shall be retained and maintained; provided, where the foreign corporation acquires, holds, or transfers government bonds, etc. through qualified foreign financial companies, etc., via a foreign financial institution that is a corporation performing custodial services for securities issued in a country other than the relevant country (hereafter referred to in this Article and Article 132-4 as an "intermediary foreign custodial institution, etc."), it may request the intermediary foreign custodial institution, etc. to submit the materials regarding the name, etc. of the relevant foreign corporation;

2. Deleted; <Feb. 28, 2025>

3. Deleted; <Feb. 28, 2025>

4. Where the Commissioner of the National Tax Service or an income payer (referring to a person who pays income under each subparagraph of Article 93-3 (1) of the Act; hereafter referred to as "income payer" in Article 132-4) requests submission of materials under subparagraph 1, the relevant person shall submit such materials within 30 days (60 days in cases under the proviso of that subparagraph) from the date of receipt of such request;

5. Where the Commissioner of the National Tax Service sets conditions when approving a qualified foreign financial company, etc., it shall comply with such conditions.

(2) Deleted. <Feb. 28, 2025>

[This Article Added on Dec. 31, 2022]

[Title Amended on Dec. 31, 2024]

Article 132-4(Application for non-taxation on interest and capital gains of state bonds, of foreign corporations) #

(1) An application for non-taxation by a foreign corporation under Article 93-3 (4) of the Act (including a foreign investment vehicle deemed a real beneficiary under paragraph (3) of that Article; the same shall apply in this Article) shall be made in accordance with the procedures classified as follows. In such cases, after non-taxation is granted based on the application, if the foreign corporation intends to apply for non-taxation on other interest and capital gains accruing from State bonds, etc. and if there is no change in the original application, the procedures classified as follows may be omitted: <Amended on Feb. 28, 2023; Feb. 28, 2025>

1. In cases where income specified in each subparagraph of Article 93-3 (1) of the Act on government bonds, etc. acquired, held, or transferred without going through qualified foreign financial companies, etc. is paid to a foreign corporation: Procedures in the following order:

(a) The foreign corporation shall submit an application for tax exemption for foreign corporations (hereafter referred to in this Article as "application for non-taxation for foreign corporations") prescribed by Decree of the Ministry of Economy and Finance to the income payer;

(b) The income payer shall submit an application for non-taxation for foreign corporations submitted under item (a) to the head of the competent tax office having jurisdiction over the place of tax payment by no later than the 9th day of the month following the month in which the relevant income is paid;

2. In cases where income specified in the subparagraphs of Article 93-3 (1) of the Act is paid to a foreign corporation with respect to the government bonds, etc. that are acquired, held, or transferred through a qualified foreign financial company, etc. (including cases where it passes through an intermediary foreign custodial institution, etc.): Procedures in the following order:

(a) Qualified foreign financial companies, etc. shall prepare an application for non-taxation for foreign corporations, etc. in the form prescribed by Decree of the Ministry of Economy and Finance (hereafter in this Article, referred to as "application for non-taxation for qualified foreign financial companies, etc.") and submit it to the income payer;

(b) The income payer shall submit an application for non-taxation for qualified foreign corporations, etc. submitted under item (a) to the head of the competent tax office having jurisdiction over the place of tax payment by no later than the 9th day of the month following the month in which the relevant income is paid.

(2) Deleted. <Feb. 28, 2025>

(3) Deleted. <Feb. 28, 2025>

(4) A foreign corporation and a qualified foreign financial company, etc. may file an application under paragraph (1) through its agent (including tax managers referred to in Article 82 of the Framework Act on National Taxes). <Amended on Feb. 28, 2025>

(5) Where a financial company, etc. referred to in Article 24 of the Enforcement Decree of the Income Tax Act acquires, trades or brokers State bonds, etc. of a foreign corporation or acts as an agent therefor, paragraphs (1) and (4) shall apply as if there is an agency or delegation relationship between the relevant financial company, etc. and the relevant foreign corporation. <Amended on Feb. 28, 2025>

(6) Where an investment trader or investment broker under the Financial Investment Services and Capital Markets Act withholds taxes regarding the transfer of State bonds, etc. under the main clause of Article 98 (7) of the Act, paragraphs (1) and (4) shall apply deeming that the investment trader or investment broker has a relationship of agency or delegation with the foreign corporation. <Amended on Feb. 28, 2025>

(7) In cases where paragraph (5) or (6) does not apply and the address, domicile, main office, principal office, actual management place for the business or domestic place of business (including a domestic place of business under Article 120 of the Income Tax Act) of an income payer is not located in the Republic of Korea, notwithstanding paragraph (1), a foreign corporation or a qualified foreign financial company, etc. may directly submit a written application classified under the following subparagraphs to the head of the competent tax office having jurisdiction over the place for tax payment: <Amended on Feb. 28, 2025>

1. Deleted; <Feb. 28, 2025>

2. In cases of a foreign corporation: A written application for non-taxation for a foreign corporation to be submitted to the income payer under paragraph (1) 1 (a);

3. In cases of qualified foreign financial companies, etc.: A written application for non-taxation of qualified foreign financial companies, etc. to be submitted to the income payer under paragraph (1) 2 (a).

[This Article Added on Dec. 31, 2022]

Article 134(Calculation of taxable income of domestic place of business) #

(1) "Amount prescribed by Presidential Decree, such as an amount deemed to be reinvested in the business by the relevant domestic place of business" in Article 96 (2) 3 of the Act means all of the following amounts, and where the amount equivalent to capital as of the start date of the relevant business year is in excess of the amount equivalent to capital as at the end date of the relevant business year, such excess amount (hereinafter referred to as "capital reduction amount") shall be added to the amount of income for the relevant business year. In such cases, the sum amount shall not exceed the untaxed accumulated reserve income (limited to where such income is not a negative number) as of the end date of the immediately preceding business year: <Amended on Dec. 30, 2010; Mar. 31, 2011>

1. The amount equivalent to capital as of the end date of the relevant business year that is in excess of the amount equivalent to capital as of the start date of the relevant business year (hereinafter referred to as "capital increase amount");

2. The amount computed by removing the negative sign from the untaxed accumulated reserve income (limited to where such income is a negative number); provided, the ceilings on such amount shall be the amount computed by subtracting the amount provided in Article 96 (2) 1, 2 and 4 of the Act and the capital increase amount from the income amount of each business year of a domestic place of business.

(2) "Amount equivalent to capital" in paragraph (1) means the amount computed by subtracting the total amount of debts (including any appropriation funds, however, excluding any unpaid corporate tax) from the total amount of assets on the statement of financial position as at the end date of the relevant business year. <Amended on Feb. 19, 2005; Jan. 5, 2021>

(3) "Untaxed accumulated reserve income" in paragraph (1) means a portion of income for a business year, which is untaxed under Article 96 of the Act and corresponds to the amount calculated by subtracting the amount under subparagraph 2 from the amount under subparagraph 1: <Amended on Mar. 31, 2011; Feb. 21, 2014>

1. The sum of income for each taxable year until the business year immediately preceding the relevant business year minus both the sum of the losses for each business year until the business year immediately preceding the relevant taxable year and the sum of the corporate tax and local corporate income tax on the income for each business year until the business year immediately preceding the relevant business year;

2. The sum of taxable income provided in Article 96 of the Act for each business year until the business year immediately preceding the relevant business year.

(4) Paragraph (1) shall apply mutatis mutandis to the calculation of the taxable income referred to in Article 96 (1) of the Act where losses are incurred in the relevant business year; provided, where the capital reduction amount is in excess of losses in the relevant business year, such excess amount shall be the taxable income, up to the limit of the untaxed accumulated reserve income computed under paragraph (3).

(5) "Amount of remittance prescribed by Presidential Decree" in the main sentence of Article 96 (1) of the Act means profits actually remitted among the income of each business year (if profits actually remitted in each business year are in excess of the taxable income of the immediately preceding business year referred to in Article 96 (2) of the Act, the limit thereof shall be the untaxed accumulated reserve income provided for in paragraph (3) until the immediately preceding business year among such excess). <Added on Dec. 31, 2001; Jun. 3, 2011>

(6) Where a foreign corporation ceases to have a domestic place of business, the amount equivalent to capital as of the end date of the business year referred to in Article 8 (5) of the Act (hereafter referred to as "fictitious business year" in this Article) shall be deemed "zero", in calculating the taxable income of the fictitious business year pursuant to paragraphs (1) through (4). <Added on Feb. 28, 2007; Amended on Feb. 2, 2012>

(7) Where a foreign corporation ceases to have a domestic place of business, the amount equivalent to profits unremitted on the end date of the fictitious business year shall be deemed fully remitted on the end date of the fictitious business year, in calculating the taxable income of the fictitious business year pursuant to paragraph (5). <Added on Feb. 28, 2007>

Article 137(Withholding for foreign corporations) #

(1) Article 131 (2) of the Income Tax Act and Article 191 (excluding subparagraph 4) of the Enforcement Decree of that Act shall apply mutatis mutandis to the timing for paying dividend income in withholding tax under Article 98 of the Act; and Article 145-2 of the Income Tax Act and Article 202 (3) of the Enforcement Decree of that Act shall apply mutatis mutandis to the timing for paying other income. <Amended on Feb. 2, 2012>

(2) Notwithstanding paragraph (1), when a domestic corporation provided for in the subparagraphs of Article 51-2 (1) of the Act or a domestic corporation provided for in Article 104-31 (1) of the Act on Restriction on Special Cases concerning Taxation fail to pay dividend income accruing from disposal of the profits or surpluses by no later than three months after determination of the disposal, the dividend income shall be deemed paid on the day on which three months have passed. <Added on Feb. 28, 2007; Feb. 11, 2020; Feb. 17, 2021>

(3) Articles 115 through 117 of this Decree and Article 185 of the Enforcement Decree of the Income Tax Act shall apply mutatis mutandis to paying withholding tax imposed pursuant to Article 98 of the Act and issuing a withholding receipt. <Amended on Feb. 12, 2019; Feb. 17, 2021; Feb. 15, 2022; Mar. 8, 2022>

(4) In withholding tax under Article 98 of the Act, the timing for paying domestically sourced interest income referred to in subparagraph 1 (b) of Article 93 of the Act shall be the last day of the filing deadline of the tax base on income for the relevant tax period or the relevant taxable year of a foreign corporation or non-resident that pays such income (referring to the last day of the extended filing deadline if the filing deadline is extended under Article 97 (2) of the Act). <Amended on Feb. 12, 2019>

(5) In withholding tax under Article 98 of the Act, if the person liable for withholding has no domicile, residence, headquarters, main office, place for substantially managing its business, or domestic place of business (including a domestic place of business provided for in Article 120 of the Income Tax Act) in the Republic of Korea, the relevant foreign corporation shall appoint the tax manager under Article 82 of the Framework Act on National Taxes and reported thereon to the head of competent tax office. <Added on Dec. 30, 2002; Feb. 19, 2005; Feb. 9, 2006>

(6) "Time prescribed by Presidential Decree" in Article 98 (14) of the Act means any of the following dates: <Added on Dec. 30, 2003; Dec. 30, 2010>

1. In cases falling under Article 88 (1) 8 (a): Where a corporation disappears due to a merger, the registration date of the merger; where a corporation disappears or survives a division or divided merger, the registration date of the division or divided merger;

2. In cases falling under Article 88 (1) 8 (b) and (c): The date of determination for capital increase or decrease.

(7) Any domestic corporation that has issued stocks, etc. shall withhold tax on other domestic source income provided for in subparagraph 10 (i) of Article 93 of the Act at the time specified in paragraph (6). <Added on Dec. 30, 2003; Feb. 28, 2007; Dec. 30, 2010; Feb. 12, 2019>

(8) "Personal services prescribed by Presidential Decree" in the proviso to Article 98 (1) 4 of the Act mean services falling under Article 132 (6) 4. <Added on Feb. 3, 2017; Feb. 12, 2019>

(9) Where a transferee withholds tax as prescribed in Article 98 (1) of the Corporate Tax Act after a transferor files a report on and pays corporate tax as prescribed in Article 97 (1) of the Act when calculating the amount to be withheld under Article 98 (1) 5 of the Act, it shall be an amount computed after subtracting the amount that the relevant transferor has filed a report and paid. <Added on Feb. 4, 2009; Dec. 30, 2010; Feb. 12, 2019>

(10) "Amount prescribed by Presidential Decree" in the proviso to Article 98 (1) 8 (b) of the Act means the amount of virtual assets equivalent to the withholding amount according to the following Virtual assets equivalent to the withholding amount = Amount calculated pursuant to Article 98 (1) 8 (b) (i) or (ii) of the Act / Amount of one virtual asset indicated by a virtual asset service provider that keeps and manages the relevant virtual assets at the time of exchanging or withdrawing the virtual assetsNote: When applying the denominator of this formula, the value when exchanging or withdrawing a virtual asset whose value is not expressed in a money amount shall be calculated by applying mutatis mutandis Article 88

(11) "Amount prescribed by Presidential Decree" in Article 98 (1) 8 (c) of the Act means the market price at the time of acquisition. <Added on Feb. 15, 2013; Feb. 12, 2019; Feb. 11, 2020; Feb. 17, 2021; Feb. 15, 2022; Mar. 8, 2022>

(12) Pursuant to Article 98 (16) of the Act, a virtual asset service provider, etc. shall, at the time of each withdrawal of virtual assets under its custody and management, sum up the amount payable per person according to the following formula on a monthly basis and pay it to the tax office having jurisdiction over the place of taxation, the Bank of Korea, or a post office. <Added on Mar. 8, 2022>Amount due per person = (A - D) x B/CA: The cumulative amount of money withheld per person by a virtual asset service provider, etc. pursuant to Article 98 (1) 8 (b) of the Act (In the case of withholding following the exchange or withdrawal of virtual assets, referring to the amount pursuant to paragraph (10), expressed in units of virtual assets, sold for cash immediately upon exchange or withdrawal);B: Withdrawal amount of virtual assets or cash per person. In such cases, the withdrawal amount of virtual assets means an amount pursuant to Article 129 (4).C: The total amount of assets per person under the custody and management of a virtual asset service provider, etc.;D: The cumulative amount of the amount payable per person calculated as of the time of the last withdrawal

(13) When applying the formula prescribed in paragraph (12), if a foreign corporation incurs a loss from a virtual asset transaction, a virtual asset service provider, etc. shall reflect the loss by adjusting the cumulative amount of money withheld for each person pursuant to Article 98 (1) 8 (b) of the Act (referring to value "A" in the formula prescribed in paragraph (12); hereafter in this paragraph referred to as "cumulative withholding amount") according to the following formula: <Added on Mar. 8, 2022>Cumulative withholding amount at the time of the incurrence of loss = Cumulative withholding amount at the time of transaction immediately before the incurrence of loss - (the lesser of 20/100 of the loss amount and Z)Z: Cumulative withholding amount at the time of transaction immediately before the incurrence of loss - The cumulative amount of money payable per person, calculated as of the withdrawal immediately prior to the loss

(14) A virtual asset service provider, etc. shall pay an amount equivalent to the amount deducted under paragraph (13) to a foreign corporation that incurs losses. <Added on Mar. 8, 2022>

(15) Pursuant to Article 98 (17) of the Act, virtual asset service providers, etc. shall receive evidential materials necessary to verify whether a taxpayer is subject to withholding tax from the person who transfers, lends, or withdraws virtual assets before withholding tax under paragraph (16) of that Article is first performed for each taxpayer, and verify whether the relevant taxpayer is subject to withholding tax. <Amended on Feb. 28, 2025>

(16) A virtual asset service provider, etc. shall verify whether the tax payer is still subject to withholding every three years from the verification conducted under paragraph (15). <Added on Mar. 8, 2022>

Article 138-2(Special cases concerning reports on or payment of capital gains on transfer of securities by foreign corporations) #

(1) A foreign corporation shall report and pay to the head of the tax office having jurisdiction over the location of a domestic corporation that issued the relevant securities, the amount equivalent to the withholding tax on its transfer gains from the transfer of stocks or investment certificates on which no withholding tax was imposed under Article 98-2 of the Act as the foreign corporation did not satisfy the taxation standards stipulated in the relevant tax treaty at the time of transfer of such stocks or investment certificates.

(2) A foreign corporation that intends, pursuant to paragraph (1), to report and pay the tax equivalent to the withholding tax on its capital gains from the transfer of stocks or investment certificates on which no withholding tax was imposed at the time of transfer, shall submit an adjustment report on capital gains from the transfer of securities, separating the total amount of stocks it transferred and the total amount of stocks on which the withholding tax was not imposed during the same business year in the form stipulated by Decree of the Ministry of Economy and Finance. <Amended on Feb. 29, 2008>

(3) "Circumstances prescribed by Presidential Decree" in the main sentence of Article 98-2 (3) of the Act means the transfer of any of the following securities: <Added on Feb. 22, 2008; Jun. 3, 2011>

1. Securities, such as stocks that are taxed under Article 18 (4) 1 and 2 of the Enforcement Decree of the Restriction of Special Taxation Act;

2. Korean won-denominated securities (referring to securities that are traded outside the foreign securities market) that are traded in any foreign country.

(4) A foreign corporation that intends to report and pay tax under Article 98-2 (3) of the Act shall report and pay it upon preparing a report on capital gains from transfer of securities by a foreign corporations in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having the jurisdiction over the location of the domestic corporation that has issued the relevant securities, such as stocks. <Added on Feb. 22, 2008; Feb. 29, 2008>

(5) A foreign corporation that intends to report and pay tax under Article 98-2 (4) of the Act shall report and pay it upon preparing a report on donation income of a foreign corporation in the form stipulated by Decree of the Ministry of Economy and Finance to the head of the tax office having the jurisdiction over the location of the relevant assets (referring to the location of a domestic corporation that has issued the relevant securities, if such assets are the securities). <Added on Feb. 2, 2012>

[This Article Added on Dec. 29, 2000]

[Title Amended on Feb. 2, 2012]

Article 138-3(Special cases concerning withholding from interest on bonds of foreign corporations) #

(1) Anyone who pays interest, etc., on bonds, etc., subject to withholding tax to a foreign corporation to which Article 98 (1) of the Act applies (hereafter in this Article referred to as "foreign corporation") or who purchases bonds, etc., subject to withholding tax from a foreign corporation before being paid interest, etc., on bonds, etc., subject to withholding tax shall withhold the amount computed by applying the following tax rate to the paid amount, where the tax rate provided for in the Act, the Restriction of Special Taxation Act, or the relevant tax treaty (hereafter in this Article referred to as "applicable tax rate") is applied to such paid amount. In such cases, if the tax rate referred to in subparagraph 1 is higher than the one provided for in the former part of Article 73-2 (1) of the Act and a foreign corporation fails to prove the holding period of bonds, etc., subject to withholding tax, the total of the paid amount shall be deemed the amount equivalent to the interest that accrues during the holding period by the foreign corporation; and if the applicable tax rate referred to in subparagraph 1 is lower than the one provided for in the former part of Article 73-2 (1) of the Act and the foreign corporation fails to prove the holding period of bonds, etc., subject to withholding tax, the amount of the interest, etc., during the holding period by the relevant foreign corporation shall be deemed nil: <Amended on Feb. 19, 2005; Feb. 9, 2006; Dec. 30, 2010; Feb. 2, 2012; Feb. 12, 2019>

1. The applicable tax rate to the relevant foreign corporation with respect to the amount equivalent to the interest that accrues during the holding period by the relevant foreign corporation among the paid amount;

2. The tax rate provided for in the former part of Article 73-2 (1) 1 of the Act with respect to the amount paid less the amount equivalent to the interest that accrues during the holding period by the relevant foreign corporation under subparagraph1.

(2) "Trading of repurchase bonds, etc., or other cases prescribed by Presidential Decree" in Article 98-3 (1) of the Act means any of the following transactions or a mixture of the following transactions: <Amended on Jun. 8, 2010; Jun. 3, 2011; Feb. 12, 2016>

1. A transaction under which a foreign corporation sells or purchases bonds, etc. (including where such transactions are repeated subsequently) on the condition that it will repurchase or resell the bonds, etc., at certain prices upon expiration of a pre-determined period and the facts relevant to such transaction is confirmed by means of accounts of the Korea Securities Depository established under Article 294 of the Financial Investment Services and Capital Markets Act;

2. A transaction under which a foreign corporation lends bonds on the condition that it will have bonds of the same types and quantity returned upon expiration of a pre-determined period and the facts relevant to such transaction is confirmed by any transaction ledger (including an electronic transaction ledger) prepared by the bond lending and borrowing broker (referring to the Korea Securities Depository, a financial securities company, an investment trader or investment broker, as defined in the Financial Investment Services and Capital Markets Act).

(3) Article 98-3 of the Act shall apply to the transactions provided for in paragraph (2), deeming that the amount equivalent to the interest income or dividend income accruing from the bonds, etc., during the period beginning on the date of selling or lending such bonds, etc., and ending on the date such bonds, etc., are repurchased or returned belongs to the seller or lender (referring to the initial seller or lender, where relevant transactions are repeated subsequently or where the transactions under paragraph (2) are mixed). <Amended on Jun. 8, 2010; Feb. 12, 2016>

(4) Where the bonds, etc., sold to a purchaser or lent to a borrower (hereafter in this Article referred to as "purchaser, etc.") through the trading referred to in paragraph (2) are re-sold or re-lent to any third party, the tax equivalent to the amount of the interest during the holding period shall be withheld from the purchaser, etc. (excluding any corporation falling under any subparagraph of Article 111 (1)) under Articles 73-2 and 98-3 of the Act and Articles 133-2 and 156-3 of the Income Tax Act and the purchaser, etc., may be refunded the withheld tax pursuant to paragraph (5). <Amended on Jun. 8, 2010; Feb. 12, 2019>

(5) Any purchaser who intends to obtain a refund of the tax withheld under paragraph (4) shall file an application for refund, which shall be accompanied by the documents prescribed by Decree of the Ministry of Economy and Finance substantiating that the bonds, etc., sold or lent to any third party have been purchased or borrowed through the trading referred to in paragraph (2), with the head of the tax office having jurisdiction over the place of tax payment of the purchaser by no later than the tenth day of the month following the month in which the payment date of the withheld falls, and the head of the competent tax office in receipt of such application shall immediately refund the tax after verifying the fact of trading and the contents of the refund application. <Amended on Jun. 8, 2010>

(6) Article 111 (6) shall apply mutatis mutandis to the timing for paying interest, etc., on bonds, etc., to a foreign corporation. Article 113 shall apply mutatis mutandis to the computation of the holding period of bonds, etc., the computation method of the amount equivalent to the interest for the holding period, and the method of proving the holding period. Article 137 (2) shall apply mutatis mutandis to the payment of withholding tax. <Amended on Dec. 31, 2009>

(7) Deleted. <Feb. 19, 2005>

[This Article Added on Dec. 29, 2000]

Article 138-4(Applying for non-taxation or tax exemption for foreign corporations under tax treaties) #

(1) A real beneficiary of domestic source income who intends to file an application for non-taxation or tax exemption under Article 98-4 (1) of the Act shall present an application for non-taxation or tax exemption in the form stipulated by Decree of the Ministry of Economy and Finance and a document certifying the real beneficiary of domestic source income (hereafter in this Article referred to as "application, etc.") to the relevant income payer, who shall, in turn, file the application with the head of a tax office having the jurisdiction over the place of tax payment of the income payer, by the ninth day of the month immediately following the month in which the income payer pays the income. In such cases, in the case of a foreign investment scheme falling under the latter part of Article 98-4 (1) of the Act, a report on a foreign investment scheme subject to special cases of a real beneficiary in the form prescribed by Decree of the Ministry of Economy and Finance (hereafter in this Article and Articles 138-7 and 138-8 referred to as "report on a foreign investment scheme subject to special cases of a real beneficiary") shall be also submitted. <Amended on Jun. 8, 2009; Feb. 18, 2010; Dec. 30, 2010; Feb. 21, 2014; Feb. 3, 2017; Feb. 12, 2019; Feb. 11, 2020; Feb. 28, 2023>

(2) The documents certifying that the relevant person is the real beneficiary of the domestic source income under paragraph (1) shall be as follows: provided, where the domestic source income is paid through an overseas investment vehicle (including an overseas investment vehicles falling under the latter part of Article 98-4 (1) of the Act), and where the real beneficiary of the domestic source income is a governmental institution of the Contracting State under a tax treaty that is prescribed by Decree of the Ministry of Economy and Finance (hereinafter referred to as "Contracting State"), the documents specified in subparagraph 2 shall apply, regardless of the amount of tax for which the relevant person intends to claim tax exemption or tax relief: <Amended on Feb. 28, 2023; Feb 28, 2025>

1. Where the amount of tax for which exemption or relief is claimed under Article 98-4 (1) of the Act is 1 billion Korean won or more (including cases where the aggregate amount of tax for which exemption or relief has been claimed under that Article within 1 year from the end of the month in which the payment date of the relevant domestic source income falls exceeds 1 billion Korean won): The documents specified in each of the following items; in such cases, the documents under items (b) through (d) shall be submitted together with their Korean translations, and if the Commissioner of the National Tax Service acknowledges it as appropriate, such documents may be submitted in English only:

(a) A resident certificate issued by the competent authority of the country of residence of the relevant foreign entity;

(b) The names and addresses of the members of the board of directors of the relevant foreign corporation, and the personal information and shareholding status of the shareholders, etc.; provided, where the number of shareholders, etc. exceeds 100, it shall be replaced with a statement of the number of shareholders, etc. by country and the total amount of investment;

(c) Financial statements (including attachments), tax returns, or audit reports submitted to the tax authorities of the Contracting State for the recent 3 years (or, in the case of a foreign corporation established less than 3 years ago, referring to the period from the date of its establishment to the day before the submission of the application);

(d) Documents verifying the place of registration and the owner or licensee of the rights, assets, or information falling under any item of subparagraph 8 of Article 93 of the Act (hereafter in this item referred to as "rights, etc."), such as a license agreement, etc. of the rights, etc. (only applicable when the domestic source income applied for non-taxation or tax exemption is domestically sourced royalty income referred to in subparagraph 8 of Article 93 of the Act);

2. In cases other than subparagraph 1: A resident certificate issued by the competent authority of the country of residence of the foreign corporation.

(3) A foreign corporation may authorize its agent (including any tax manager designated under Article 82 of the Framework Act on National Taxes) to file an application for non-taxation or tax exemption referred to in paragraph (1). <Amended on Feb. 19, 2005>

(4) Where a financial company, etc., assumes charge of, trades, brokers bonds, etc., of a foreign corporation or makes such transactions as an agent in accordance with Article 98-3 of the Act, the agency or delegation relationship shall be deemed to exist between the financial company, etc., and the foreign corporation for purposes of paragraph (1). <Amended on Feb. 2, 2012>

(5) Where an investment trader or broker, or a corporation that has issued stocks withholds tax in connection with the transfer of securities under Article 98 (7) of the Act, the agency or delegation relationship shall be deemed to exist among the investment trader or broker, or the corporation that has issued stocks and the relevant foreign corporation for purposes of paragraph (1). <Amended on Feb. 2, 2012>

(6) Where paragraphs (4) and (5) are not applicable and an income payer does not have his or her domicile, residence, headquarters, principal place of business, place for substantially managing its business, or a place of business in the Republic of Korea (including any domestic place of business defined under Article 120 of the Income Tax Act), the real beneficiary of domestic source income may directly file an application, etc. with the head of a tax office having jurisdiction over its place of tax payment, without presenting the application to the income payer, notwithstanding paragraph (1). <Amended on Dec. 30, 2002; Feb. 19, 2005; Feb. 9, 2006; Feb. 21, 2014; Feb. 28, 2023>

(7) An application, etc. need not be filed with respect to any of the following income, which is the domestic source income provided for in Article 93 of the Act, notwithstanding paragraph (1): <Amended on Feb. 19, 2005; Feb. 29, 2008; Feb. 4, 2009; Jun. 8, 2009; Dec. 30, 2010; Feb. 28, 2023>

1. The domestic source income which the corporate tax is not imposed on or which is exempted from the corporate tax under the Act or the Restriction of Special Taxation Act;

2. Deleted; <by Feb. 4, 2009>

3. Other domestic source income prescribed by Decree of the Ministry of Economy and Finance.

(8) Deleted. <Feb. 12, 2019>

(9) In the application of paragraph (1), where domestic source income is paid through a foreign investment scheme, the foreign investment scheme shall receive an application, etc. from the real beneficiary and present the application so presented for non-taxation or tax exemption to the income payer, along with a report on the foreign investment scheme in the form stipulated by Decree of the Ministry of Economy and Finance (hereafter in this Article and Articles 138-7 and 138-8 referred to as "report on the foreign investment scheme"), accompanied by a detailed statement of the real beneficiary, and the income payer shall, in turn, file the application, etc. with the head of the tax office having jurisdiction over the place of tax payment by no later than the ninth day of the month immediately following the month in which the income is paid; provided, the foregoing shall not apply where the foreign investment scheme is a foreign public-offering collective investment scheme, defined under the proviso to Article 138-7 (3), who presents the following documents: <Added on Feb. 21, 2014; Feb. 12, 2019; Feb. 11, 2020; Feb. 28, 2023>

1. A document providing the matters specified in Article 138-7 (3);

2. A report on the foreign investment scheme, including statements of the number of real beneficiaries of the foreign investment scheme in each country and the total investment amount;

3. An application for non-taxation or tax exemption, prepared in the name of the foreign public-offering collective investment scheme.

(10) For the purpose of paragraph (9), where a foreign investment scheme (hereafter in this Article referred to as "primary foreign investment scheme") invests in another foreign investment scheme (hereafter in this Article referred to as "secondary foreign investment scheme"), the primary foreign investment scheme shall receive an application, etc. for each real beneficiary from the secondary foreign investment scheme and present a report on the foreign investment scheme, including statements (referring to the document proving that the secondary foreign investment scheme is a foreign public-offering collective investment scheme, as is the case, and statements of the number of real beneficiaries of the foreign investment scheme in each country and the total investment amount), and the application, etc. so received. In such cases, if several foreign investment schemes are related with one another successively in investments, the immediately preceding invested foreign investment scheme shall be deemed the primary foreign investment scheme, while the investing foreign investment scheme shall be deemed the secondary foreign investment scheme. <Added on Feb. 21, 2014; Feb. 28, 2023>

(11) A person who falls under any subparagraph of Article 138-7 (5) in applying paragraphs (1) and (9) shall be deemed a real beneficiary. <Added on Feb. 21, 2014>

(12) For the purpose of paragraph (1) or (9), an application, etc.; report on a foreign investment scheme subject to special cases of a real beneficiary; or report on a foreign investment scheme need not be presented for three years from the date the initial application is presented in accordance with paragraph (1) or (9); provided, if there is any change in the details thereof, a report on the change shall be presented in accordance with paragraph (1) or (9) by no later than the ninth day of the month immediately following the month in which income is initially paid after the change occurs. <Added on Feb. 21, 2014; Feb. 11, 2020; Feb. 28, 2023>

(13) "If an income payer has not received an application, etc., if an income payer is unable to identify a real beneficiary with the documents received, or if an income payer has any other ground specified by Presidential Decree" in Article 98-4 (3) of the Act means any of the following cases. In such cases, subparagraph 2 or 3 shall apply only to the portion relating to which such an event occurs, and subparagraph 3 shall not apply to any foreign public-offering collective investment scheme: <Added on Feb. 21, 2014; Feb. 11, 2020; Feb. 28, 2023>

1. Where an income payer has not received an application, etc., report on a foreign investment scheme subject to special cases of a real beneficiary, or report on a foreign investment scheme;

2. Where a person fails to comply with a request to supplement the details of the application, etc., report on a foreign investment scheme subject to special cases of a real beneficiary, or report on a foreign investment scheme, already presented;

3. Where it is impossible to identify the real beneficiary with the application, etc., report on a foreign investment scheme subject to special cases of a real beneficiary, or report on a foreign investment scheme, already presented;

(14) Each income payer and each foreign investment scheme shall preserve relevant documents, including applications, etc., reports on a foreign investment scheme subject to special cases of a real beneficiary, and reports on the foreign investment scheme for five years from the day immediately after the deadline under paragraph (1). In such cases, upon receipt of a request from the head of the tax office having jurisdiction over the income payer's place of tax payment, the income payer or foreign investment scheme shall submit such documents. <Added on Feb. 21, 2014; Feb. 11, 2020; Feb. 28, 2023>

(15) A person who intends to request a correction in accordance with Article 98-4 (5) of the Act shall file a request for correction for the application of non-taxation or tax exemption in the form stipulated by Decree of the Ministry of Economy and Finance with the head of the tax office having jurisdiction over the income payer's place of tax payment, along with the following documents. In such cases, such documents shall be accompanied by translations in Korean. However, English documents only may be submitted in cases acknowledged by the Commissioner of the National Tax Service: <Added on Feb. 21, 2014; Feb. 12, 2019; Feb. 11, 2020; Feb. 28, 2023>

1. An application, etc.;

2. Deleted. <Feb. 28, 2023>

3. A report of a foreign investment scheme subject to special cases of a real beneficiary (limited to where a report of a foreign investment scheme subject to special cases of a real beneficiary is to be submitted under the latter part of paragraph (1)) or a report on the foreign investment scheme (limited to where a report on the foreign investment scheme is to be submitted under paragraph (9));

(16) Article 138-6 (2) through (4) shall apply mutatis mutandis to the procedure for requesting corrections under paragraph (15). <Added on Feb. 21, 2014>

[This Article Added on Dec. 31, 2001]

[Title Amended on Feb. 21, 2014]

Article 138-5(Procedures for prior approval to apply non-taxation, tax exemption, or restricted tax rates under tax treaties) #

(1) Any person who intends to obtain prior approval under the proviso of Article 98-5 (1) of the Act shall file an application for prior approval of special cases in tax withholding prescribed by Decree of the Ministry of Economy and Finance with the Commissioner of the National Tax Service with the following documents attached thereto: Provided, That where the details have become different from the first reported details due to change in the details of a contract after having obtained prior approval pursuant to paragraph (2), an application for prior approval shall be filed again: <Amended on Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Feb. 2, 2012; Feb. 28, 2025>

1. Resident certificate issued by the Contracting State;

2. Copies of the report on incorporation or establishment of the relevant corporation or organization and the articles of incorporation or association;

3. The names and addresses of the members of the board of directors;

4. Personal details of stockholders, etc., and their current equity holdings;

5. The number of employees of the relevant corporation or organization and the division of work by employee;

6. A statement detailing the economic and business motives related to investment to earn the relevant domestic source income;

7. Means to raise the investment fund to earn the relevant domestic source income;

8. A statement or plan detailing how to dispose of the relevant domestic source income after receipt thereof;

9. Financial statements (including supplementary documents), tax returns, or audit reports submitted to the tax authorities of the Contracting State for the most recent 3 years (or, in the case of a corporation for which 3 years have not passed since its establishment, the period from its establishment to the date of application);

10. In cases falling under paragraph (2) 3, matters registered for listing on the securities market of the Contracting State to the relevant tax treaty and documents verifying that transactions are regularly conducted on that securities market;

11. In cases falling under paragraph (2) 5, documents verifying eligible beneficiaries of pensions and funds;

12. In cases falling under paragraph (2) 7, documents verifying that the financial authorities of the Contracting State to the relevant tax treaty properly regulate and documents verifying the stocks and equity shares currently held by the investors in the relevant investment company, etc. referred to in the same subparagraph.

(2) Upon receipt of an application for prior approval filed under paragraph (1), the Commissioner of the National Tax Service may grant prior approval to a corporation, if the corporation that is directly and indirectly entitled to receive the income referred to in subparagraph 1, 2, 8, or 9 of Article 93 of the Act (hereafter in this Article referred to as "corporation entitled to receive the income") falls under any of the following cases in connection with the relevant domestic source income: <Amended on Feb. 29, 2008; Dec. 30, 2010; Feb. 2, 2012; Feb. 3, 2017>

1. Where the corporation entitled to receive the income is a real beneficiary and is a corporation of the Contracting State to the relevant tax treaty;

2. Where the corporation entitled to receive the income is a government agency, etc. (hereinafter referred to as "government agency, etc.") of the Contracting State to the relevant tax treaty, which is prescribed by Decree of the Ministry of Economy and Finance;

3. Where the stocks issued by the corporation entitled to receive the income are the stocks of any corporation listed on the securities market (hereafter in this Article referred to as "listed corporation") recognized under statutes or regulations of the Contracting State to the relevant tax treaty and transactions prescribed by Decree of the Ministry of Economy and Finance are regularly conducted;

4. Where at least 50/100 of the total number of issued stocks (including equity shares) of the corporation entitled to receive the income are owned, either directly or indirectly, by any individual, government agency, etc., or listed corporation of the Contracting State to the relevant tax treaty;

5. Where the corporation entitled to receive the income is any pension, fund or similar organization of the Contracting State to the relevant tax treaty, at least 50/100 of persons who benefit from such pension, fund or organization are the residents of the Contracting State to the relevant tax treaty;

6. Where the ratio of the revenue amount (in cases of any corporation that has been incorporated within three years, the revenue amount that has been earned from its incorporation to the present time) that accrues for the most recent three years from the holding or transfer of stocks and bonds or the use or transfer of intangible assets does not exceed 10/100 of the revenue amount for the most recent three years (in cases of any corporation that has been incorporated within three years, the revenue amount that has been earned from its incorporation to the present time) of the corporation entitled to receive the income;

7. Where the corporation entitled to receive the income meets the requirements provided for in Article 138-7 (3) 1 and 2;

8. Where the tax to be borne by the corporation entitled to receive the income on the relevant income is at least 50/100 of marginal profits between the tax calculated by applying the tax rate referred to in Article 98 of the Act and the amount to be taxed under the tax treaty of the relevant country.

(3) When it is deemed necessary to supplement and correct the details of an application for prior approval filed under paragraph (1), the Commissioner of the National Tax Service may request the relevant applicant to supplement and correct it within a given period not exceeding 30 days. In such cases, the period for supplement and collection shall be included in the period referred to in paragraph (5).

(4) A request for correction referred to in paragraph (3) shall be filed in writing stating the following matters:

1. Matters to be corrected;

2. Grounds for requesting a correction;

3. The period for correction;

4. Other necessary matters.

(5) The Commissioner of the National Tax Service shall notify each applicant of whether he or she grants approval within three months of the receipt of the application filed under paragraph (1).

(6) The Commissioner of the National Tax Service shall revoke the prior approval granted if the submitted documents is found to contain any false representation.

(7) Article 2 (3) of the Enforcement Decree of the Adjustment of International Taxes Act shall apply mutatis mutandis to the calculation of the indirect holding ratio of stocks referred to in paragraph (2) 4. <Amended on Feb. 17, 2021>

(8) In applying paragraph (1), an application for prior approval of special cases concerning withholding and accompanying documents shall be submitted along with translations in Korean; provided, English documents only may be submitted in cases acknowledged by the Commissioner of the National Tax Service. <Added on Feb. 4, 2009>

[This Article Added on Feb. 9, 2006]

Article 138-7(Special cases concerning withholding procedures to apply restricted tax rates under tax treaties to foreign corporations) #

(1) Where a real beneficiary of any domestic source income that intends to apply the restrictive tax rates under Article 98-6 (1) of the Act, he or she shall submit a request for application of restrictive tax rates (hereafter referred to as "request for application of restrictive tax rates" in this Article) to the domestic source income in the form stipulated by Decree of the Ministry of Economy and Finance to the relevant person liable for withholding before receiving the relevant domestic source income. In such cases, in the case of a foreign investment scheme falling under the latter part of Article 98-6 (1) of the Act, a report on a foreign investment scheme subject to special cases of a real beneficiary shall also be submitted; a request for application of restrictive tax rates may not be submitted with respect to the domestic source income paid to a foreign securities depository referred to in subparagraph 5 of Article 296 of the Financial Investment Services and Capital Markets Act through an account opened at the Korea Securities Depository under Article 294 of that Act. <Amended on Feb. 12, 2019; Feb. 11, 2020>

(2) Deleted. <Feb. 12, 2019>

(3) In applying paragraph (1), where the domestic source income is paid through a foreign investment scheme, the foreign investment scheme shall receive a request for application of restrictive tax rates from the relevant real beneficiary and submit a report on foreign investment schemes along with the detailed statement on real beneficiaries, to the person liable for withholding before receiving the domestic source income; provided, the same shall not apply where a foreign investment scheme that meets all of the following requirements (hereafter referred to as "overseas public-offering collective investment scheme" in this Article) submits a report on the foreign investment scheme, along with documents verifying the following matters and the detailed statements on the number of the real beneficiaries of the relevant foreign investment scheme per country and the total investments: <Amended on Feb. 12, 2019>

1. A foreign investment scheme which is similar to a collective investment scheme provided for in the Financial Investment Services and Capital Markets Act and is registered or approved under the laws of the Contracting State of the tax treaty;

2. That it shall not issue securities through private offering and the number of investors as at the end date of the immediately preceding business year (referring to the submission date of a report on the foreign investment scheme in the case of a newly established foreign investment scheme) is 100 or more (where the investor is another foreign investment scheme, such foreign investment scheme shall be deemed one person);

3. That it shall not be any foreign investment scheme to which the benefits under the tax treaty do not apply.

(4) Where a foreign investment scheme (hereafter referred to as "primary foreign investment scheme" in this Article) receives an investment from another foreign investment scheme (hereafter referred to as "secondary foreign investment scheme" in this Article), the primary foreign investment scheme shall receive a report on the foreign investment scheme, along with the detailed statement on real beneficiaries (where the relevant secondary foreign investment scheme is an overseas public-offering collective investment scheme, referring to the documents to verify such fact, and the detailed statements on the real beneficiaries of the relevant foreign investment scheme per country and the total investments) from the second foreign investment scheme and submit them. In such cases, where several foreign investment schemes are in a serial investment relationship, the immediately preceding invested foreign investment scheme that receive investments shall be deemed the primary foreign investment scheme and the investing foreign investment scheme shall be deemed the secondary foreign investment scheme.

(5) In applying paragraph (1) or (3), any of the followings shall be deemed a real beneficiary:

1. A pension established overseas under the laws of the Contracting State of the tax treaty, which are equivalent to the National Pension Act, the Public Officials Pension Act, the Military Pension Act, the Pension for Private School Teachers and Staff Act and the Act on the Guarantee of Workers' Retirement Benefits;

2. A fund established overseas as a non-profit organization established under the laws of the Contracting State of the tax treaty which does not distribute the yields to its members;

3. Deleted. <Feb. 12, 2019>

(6) A request for the application of restrictive tax rates, report on a foreign investment scheme subject to special cases of a real beneficiary, or report on a foreign investment scheme submitted under paragraph (1) or (3) need not be resubmitted within three years from the date of its submission; provided, if there is any change in the contents thereof, a report on the change shall be presented in accordance with paragraph (1) or (3) before income is initially paid after the change occurs. <Amended on Feb. 21, 2014>

(7) "The grounds prescribed by Presidential Decree" in Article 98-6 (3) of the Act mean the following cases. In such cases, subparagraph 2 or 3 shall apply only to the portion relating to which such an event occurs, and subparagraph 3 shall not apply to a foreign public-offering collective investment scheme: <Amended on Feb. 21, 2014; Feb. 11, 2020>

1. Where a request for application of restrictive tax rates, report on a foreign investment scheme subject to special cases of a real beneficiary, or report on the foreign investment scheme is not submitted;

2. Failure to comply with the request to supplement the details stated on the submitted request for application of restrictive tax rates, report on a foreign investment scheme subject to special cases of a real beneficiary, or report on the foreign investment scheme;

3. Where it is impossible to identify who the real beneficiary is with the request for application of restrictive tax rates, report on a foreign investment scheme subject to special cases of a real beneficiary, or the report on the foreign investment scheme, already submitted.

(8) Every person liable for withholding and foreign investment scheme shall keep the relevant data, such as requests for application of restrictive tax rates, reports on a foreign investment scheme subject to special cases of a real beneficiary, or reports on the foreign investment scheme for five years from the day following the payment deadline of withholding tax under Article 98 (1) of the Act and where the head of the tax office having jurisdiction over the place of tax payment of the relevant person liable for withholding requests the submission thereof, they shall submit them. <Amended on Feb. 11, 2020>

[This Article Added on Feb. 2, 2012]

Article 152(Reports on incorporation or establishment of corporation) #

(1) Pursuant to Article 109 (1) of the Act, the representative of a corporation shall file a report on incorporation in the form stipulated by Decree of the Ministry of Economy and Finance with the head of the tax office having jurisdiction over the place of tax payment, accompanied by the following documents: <Amended on Feb. 29, 2008; Feb. 2, 2012; Feb. 15, 2013; Jun. 28, 2013>

1. Detailed statements on stockholders, etc. pursuant to paragraph (2);

2. Documents specified in Appendix of Article 11 (3) and Article 11 (4) of the Enforcement Decree of the Value-Added Tax Act.

(2) "Detailed statement on stockholders, etc. prescribed by Presidential Decree" in the former of Article 109 (1) of the Act, with the exception of its subparagraphs, means the detailed statement on stockholders, etc. in the form stipulated by Decree of the Ministry of Economy and Finance, stating the following matters based on the actual holders of stocks, etc.: <Amended on Feb. 2, 2012>

1. The names of stockholders, etc. or the corporation, and the resident registration numbers, the business registration numbers, or identification numbers;

2. The holding status of the stocks, etc., by stockholders, etc.;

(3) A person responsible for management of a foreign corporation referred to in Article 109 (2) of the Act shall file a report on establishment, accompanied by the documents referred to in the subparagraphs of paragraph (4), with the head of the tax office having jurisdiction over the place of tax payment.

(4) "Documents prescribed by Presidential Decree" in the former part of Article 109 (2) of the Act, with the exception of its subparagraph, means the following documents: <Amended on Jun. 3, 2011>

1. Documents concerning the registration of the headquarters, etc.;

2. The articles of incorporation;

3. Deleted. <Nov. 2, 2010>

(5) Upon receipt of a report filed under paragraph (3), the head of the tax office having jurisdiction over the place of tax payment shall verify the corporation registration certificate of the branch by sharing administrative information under Article 36 (1) of the Electronic Government Act; provided, the same shall not apply where the reporter submits other documents proving the details of the business operations of the domestic place of business. <Added on Nov. 2, 2010>

Article 158(Receipt and keeping of evidentiary documents of expenditures) #

(1) "Business operator prescribed by Presidential Decree" in the main sentence of Article 116 (2) of the Act, with the exception of its subparagraphs, means any of the following business operators: <Amended on Dec. 29, 2000; Dec. 31, 2001; Feb. 19, 2005; Feb. 9, 2006; Feb. 28, 2007; Jun. 3, 2011; Feb. 15, 2013; Jun. 28, 2013; Feb. 12, 2019>

1. A corporation; provided, the following corporations shall be excluded herefrom:

(a) A non-profit corporation (excluding the portion related to the profit-making business provided for in Article 3 (1));

(b) The State or a local government;

(c) A corporation engaging in finance or insurance business (limited to such corporation that provides finance or insurance services provided for in Article 208-2 (1) 3 of the Enforcement Decree of the Income Tax Act);

(d) A foreign corporation with no domestic place of business;

2. An entrepreneur provided for in Article 3 of the Value-Added Tax Act; provided, excluded herefrom shall be simplified tax rate taxpayers provided for in Article 61 of the Value-Added Tax Act located in Eups or Myeons, other than a credit card merchant under the Specialized Credit Finance Business Act (hereinafter referred to as "credit card merchant") or Cash Receipt merchant under Article 126-3 of the Restriction of Special Taxation Act (hereinafter referred to as "Cash Receipt merchant");

3. A business operator defined under Article 1-2 (1) 5 of the Income Tax Act or a non-resident who earns the income specified in subparagraph 3 or 5 of Article 119 of that Act; provided, excluded herefrom shall be non-residents with no domestic place of business under Article 120 of that Act.

(2) "Cases prescribed by Presidential Decree" in the proviso to Article 116 (2) of the Act, with the exception of its subpragraphs, means the following cases: <Amended on Dec. 30, 2003; Feb. 19, 2005; Feb. 9, 2006; Feb. 28, 2007; Feb. 29, 2008; Feb. 4, 2009; Jun. 3, 2011; Feb. 3, 2017>

1. Where the transaction amount (including value-added tax) of commodities or services provided for in each transaction does not exceed 30,000 won:

(a) Deleted; <Feb. 4, 2009>

(b) Deleted; <Feb. 4, 2009>

2. Where commodities or services are provided directly by farmers or fishermen (referring to persons engaging in the crop growing industry, the livestock industry, the combined farming industry, the forestry industry, or the fisheries industry, as listed under the farming industry in the Korean Standard Industrial Classification, and excluding corporations);

3. Where services are provided by a business income earner subject to withholding under Article 127 (1) 3 of the Income Tax Act (limited to those withheld);

4. Where services referred to in Article 164 (8) 1 are provided;

5. Other cases prescribed by Decree of the Ministry of Economy and Finance.

(3) "Things prescribed by Presidential Decree" in Article 116 (2) 1 of the Act means any of the following (hereafter in this Article referred to as "debit card, etc."): <Amended on Feb. 12, 2019>

1. Debit cards referred to in the Specialized Credit Finance Business Act;

2. Credit cards issued overseas;

(4) Where the following documented evidence is kept, the credit card sales slips referred to in Article 116 (2) 1 of the Act shall be deemed received and kept: <Added on Dec. 30, 2002; Dec. 30, 2003; Feb. 19, 2005>

1. A statement on monthly use of credit cards, debit cards, etc., issued by the credit card business operators under the Specialized Credit Finance Business Act;

2. Transaction information on credit cards, debit cards, etc., which are kept in the enterprise resource planning systems after having been transmitted by the credit card business operators under the Specialized Credit Finance Business Act (limited to the case of satisfying the requirements provided in Article 65-7 of the Enforcement Decree of the Framework Act on National Taxes).

(5) If a corporation receives any of the following documents certifying expenditure, the corporation shall be deemed to keep a document certifying expenditure in accordance with Article 116 (1) of the Act and thus shall not be obliged to keep such document additionally: <Added on Feb. 15, 2013; Jun. 28, 2013; Feb. 11, 2020>

1. A cash receipt specified in Article 126-3 (4) of the Restriction of Special Taxation Act;

2. A credit card sales slip specified in Article 116 (2) 1 of the Act;

3. An electronic tax invoice transmitted to the Commissioner of the National Tax Service in accordance with Article 32 (3) and (5) of the Value-Added Tax Act;

4. An electronic tax invoice transmitted to the Commissioner of the National Tax Service in accordance with Article 163 (8) of the the Income Tax Act.

(6) Where a corporation whose revenue for the immediately preceding business year is not less than three billion won (or the amount computed by multiplying three billion by the number of months in the relevant business year and then dividing it by 12 in the case of a corporation whose business year is less than one year) receives and keeps documents certifying expenditure in accordance with Article 116 of the Act, the corporation shall prepare and keep a list of documents certifying expenditure in the form prescribed by Decree of the Ministry of Economy and Finance. <Added on Feb. 12, 2016; Feb. 17, 2021>

[Title Amended on Feb. 12, 2019]

Article 159(Becoming credit card merchants) #

(1) "Corporation that meets the requirements prescribed by Presidential Decree" in Article 117 (1) of the Act means a corporation that operates a type of business serving consumers stipulated in Appendix 3-2 of the Enforcement Decree of the Income Tax Act. <Amended on Feb. 22, 2008>

(2) "Business entities prescribed by Presidential Decree" in the proviso of Article 117 (2) of the Act means the following business entities: <Amended on Feb. 28, 2025>

1. A business entity who engages in travel business under Article 3 (1) 1 of the Tourism Promotion Act;

2. A business entity who operates a large-scale store under the Distribution Industry Development Act;

3. A business entity who operates a sports facility under Article 3 of the Installation and Utilization of Sports Facilities Act.

(3) "The method prescribed by Presidential Decree" in the proviso to Article 117 (2) of the Act means the method of installing and operating the enterprise resource planning facilities defined under subparagraph 1 of Article 5-2 of the Restriction of Special Taxation Act or the point-of-sale information management system defined under subparagraph 12 of Article 2 of the Distribution Industry Development Act. <Added on Feb. 4, 2009; Dec. 30, 2010; Feb. 21, 2014>

(4) Where a credit card merchant refuses a transaction by credit card or issues a false credit card sales slip, the relevant consumer shall, when intending to file a report under Article 117 (3) of the Act, submit a report stating the following matters, along with the documents or materials verifying the relevant facts, to the Commissioner of the National Tax Service, the commissioner of a regional tax office or the head of the competent tax office, within one month from the date on which the transaction was refused or the false sales slip was issued; provided, the evidentiary documents or materials shall be submitted only to the extent that it is possible: <Added on Feb. 28, 2007; Feb. 4, 2009; Feb. 18, 2010; Feb. 12, 2019>

1. The name of the person who file a report;

2. The name of the relevant credit card merchant;

3. The date on which the transaction by credit card was refused or the false sales slip was issued, details and amount of the transaction.

(5) The head of the tax office having jurisdiction over the place of tax payment notifies the relevant credit card merchant of the amount reported for the relevant business year under the latter part of Article 117 (4) of the Act within two months from the end date of such business year. <Added on Feb. 28, 2007>

(6) The Commissioner of the National Tax Service may prescribe detailed matters necessary for procedures for designating corporations eligible for becoming credit card merchants, procedures for reporting and giving notice on the refusal of transactions by credit card to the extent necessary for tax management. <Amended on Feb. 19, 2005; Feb. 28, 2007; Feb. 22, 2008; Feb. 4, 2009>

Article 159-2(Becoming cash receipt merchants) #

(1) "Corporation that meets the requirements prescribed by Presidential Decree" in Article 117-2 (1) of the Act means a corporation under Article 159 (1); provided, the State, a local government or a corporation prescribed by Decree of the Ministry of Economy and Finance which have difficulty becoming a Cash Receipt merchant shall be excluded herefrom. <Amended on Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009>

(2) "Circumstances prescribed by Presidential Decree" in the proviso to Article 117-2 (3) of the Act means the circumstances in which a corporation which operates air transportation business sells goods in the aircraft. <Added on Feb. 4, 2009; Feb. 2, 2012>

(3) "Business operator prescribed by Presidential Decree" in the proviso to Article 117-2 (3) of the Act means a business operator under Article 159 (2). <Added on Feb. 2, 2012>

(4) "Method prescribed by Presidential Decree" in the proviso to Article 117-2 (3) of the Act means the method under Article 159 (3). <Added on Feb. 2, 2012>

(5) "Domestic corporation that engages in the type of business prescribed by Presidential Decree" in the main sentence of Article 117-2 (4) of the Act means a domestic corporation that engages in the type of business as stipulated in Appendix 3-3 of the Enforcement Decree of the Income Tax Act. <Added on Feb. 18, 2010; Jun. 3, 2011>

(6) An amount subject to issuance of a Cash Receipt shall be at least one won in each transaction. <Amended on Feb. 22, 2008>

(7) If a cash receipt merchant or a domestic corporation that is obligated to issue a cash receipt pursuant to Article 117-2 (4) of the Act refuses to issue a cash receipt or issues a false cash receipt, the relevant consumer shall, when intending to file a report on such transaction pursuant to Article 117-2 (5) of the Act, submit a report stating the following matters, along with the documents or materials verifying the relevant facts, to the Commissioner of the National Tax Service, the commissioner of a regional tax office or the head of a tax office, within five years from the date on which the issuance of a Cash Receipt was refused or false Cash Receipt was issued: <Amended on Feb. 2, 2012; Feb. 29, 2024>

1. The name of the person who file a report;

2.The trade name of a cash receipt merchant or a domestic corporation which is required to issue a cash receipt pursuant to Article 117-2 (4) of the Act;

3. The date on which the issuance of a Cash Receipt was refused or the false Cash Receipt was issued, and the details and amount of the relevant transaction.

(8) Where a Cash Receipt is issued pursuant to the main sentence of Article 117-2 (4) of the Act or Article 117-2 (7), the Cash Receipt may be issued anonymously within five days from the date on which the price is paid in cash after the goods or services are supplied. <Amended on Feb. 2, 2012>

(9) The head of the tax office having jurisdiction over the place of tax payment shall notify the relevant Cash Receipt merchant of the amount reported for the relevant business year pursuant to the latter part of Article 117-2 (6) of the Act by the following applicable deadlines: <Added on Feb. 2, 2012>

1. Where he or she receives a report during the relevant business year: Within two months from the end date of the business year;

2. Where he or she receives a report after the lapse of the relevant business year: Within two months from the filling date of the report.

(10) The Commissioner of the National Tax Service may prescribe detailed matters necessary for corporations eligible for Cash Receipt merchants to become or withdraw from such merchants, procedures for reporting and giving notice on a refusal to issue a Cash Receipt, and the method of anonymously issuing Cash Receipts where a consumer does not want the issuance of a Cash Receipt, and other matters to the extent necessary for tax management. <Amended on Feb. 18, 2010>

[This Article Added on Feb. 28, 2007]

Article 161(Submission of detailed statement of changes in stocks) #

(1) "Partnership corporation, etc., prescribed by Presidential Decree" in Article 119 (1) of the Act means any of the following corporations: <Amended on Feb. 19, 2005; Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Jun. 3, 2011; Feb. 2, 2012; Oct. 23, 2015; Feb. 12, 2019; Feb. 17, 2021; Feb. 15, 2022>

1. A corporation (excluding the national association and federation thereof) provided for in the subparagraphs Article 2 (1);

2. An investment company, investment limited liability company, or investment limited partnership provided for in the Financial Investment Services and Capital Markets Act (excluding institutional private equity fund referred to in Article 9 (19) 1 of that Act);

3. A corporation falling under any subparagraph of Article 6 (5) of the Financial Investment Services and Capital Markets Act, such as a corporate restructuring investment company;

4. A corporation whose stockholders, etc., are comprised of public institutions or institutional investors prescribed by Decree of the Ministry of Economy and Finance, and minority stockholders of any listed corporations;

5. An improvement project association referred to in Article 38 of the Act on the Improvement of Urban Areas and Residential Environments;

6. Other corporations prescribed by Decree of the Ministry of Economy and Finance.

(2) "Corporation prescribed by Presidential Decree" in Article 119 (2) 1 of the Act means a corporation that prepares the stockholder register on at least one occasion in the relevant business year through a person who deals with transfer of or changes in the ownership of stocks. <Amended on Feb. 22, 2008>

(3) "Controlling stockholder (including any related party thereof)" in Article 119 (2) 1 of the Act means controlling stockholders, etc. <Amended on Feb. 22, 2008; Feb. 2, 2012>

(4) "Minority stockholder" in paragraph (1) 4 and Article 119 (2) 2 of the Act means any of the following minority stockholders, etc.: <Amended on Feb. 22, 2008; Feb. 4, 2009>

1. In cases of a corporation listed on the securities market, the stockholder who holds stocks, the total par value of which is less than 300 million won and the total market value of which (refers to the market value prescribed by Decree of the Ministry of Economy and Finance) is less than 10 billion won;

2. In cases of a corporation listed on the KOSDAQ market, the stockholder who holds stocks, the total par value of which is less than 300 million won and the total market value of which (refers to the market value prescribed by Decree of the Ministry of Economy and Finance) is less than 10 billion; provided, such stocks were acquired before they have been listed on the KOSDAQ market, the stockholder who holds stocks, the total par value of which does not exceed five million and the stockholder who has transferred stocks of a small and medium enterprise through the KOSDAQ market;

3. In cases of a corporation other than those referred to in subparagraphs 1 and 2, the stockholder, etc. who holds stocks, the total par value of which or whose total investments is less than five million won.

(5) The controlling stockholder, etc., minority stockholder, etc., par value, market value, or total investments referred to in paragraphs (3) and (4) shall be based on the current status as at the start date and the end date of a business year of the relevant corporation. In such cases, if a person becomes a controlling stockholder, etc., even for one day, he or she shall be deemed a controlling stockholder, etc., referred to in paragraph (3); if a person ceases to be a minority stockholder, etc., even for one day, he or she shall not be deemed a minority stockholder, etc., referred to in paragraph (4). <Added on Feb. 22, 2008>

(6) The form of the detailed statement of changes in stocks, etc., referred to in Article 119 of the Act shall be stipulated by Decree of the Ministry of Economy and Finance, and the following matters shall be entered on the detailed statement based on the real holders of stocks, etc.: <Amended on Dec. 31, 2001; Dec. 30, 2003; Feb. 22, 2008; Feb. 29, 2008; Feb. 2, 2012>

1. The names of stockholders, etc. or the corporation, and the resident registration numbers, the business registration numbers, or identification numbers;

2. The holding status of the stocks, etc., by stockholders, etc.;

3. Changes in stocks, etc., during the relevant business year;

4. Deleted. <Feb. 19, 2005>

(7) Changes in stocks, etc., referred to in paragraph (6) 3 mean any change in the stockholders, etc., the ratio of share, the total par value of stocks held, and the total investments due to sale, capital increases, capital reductions, succession, donations, and investment. <Amended on Feb. 22, 2008>

Article 162-2(Special cases concerning Obligation to File payment statements on domestic source income of foreign corporations) #

(1) A person who pays domestic source income under Article 93 of the Act to a foreign corporation shall submit a statement of payment prescribed by Decree of the Ministry of Economy and Finance (hereafter referred to as "statement of payment" in this Article) to the head of the competent tax office having jurisdiction over the place for tax payment under Article 120-2 (1) of the Act; provided, this shall not apply to any of the following income: <Amended on Dec. 31, 2001; Feb. 19, 2005; Feb. 9, 2006; Feb. 22, 2008; Feb. 29, 2008; Feb. 4, 2009; Feb. 18, 2010; Dec. 30, 2010; Feb. 15, 2013; Feb. 21, 2014; Feb. 12, 2019; Feb. 28, 2025>

1. Domestic source income on which corporate tax is not imposed or exempted under the Act or the Restriction of Special Taxation Act; provided, domestic source income in any of the following cases shall be excluded herefrom:

(a) Domestic source income under Article 21 (1) of the Restriction of Special Taxation Act;

(b) Domestic source income under Article 21-2 (1) of the Restriction of Special Taxation Act;

(c) Domestic source income under Article 121-2 (3) of the Restriction of Special Taxation Act (referring to the domestic source income that accrued before the Restriction of Special Taxation Act is partially amended by Act No. 12173);

2. Domestic source income provided in subparagraph 1, 2, 4, 8, 9 or 10 (excluding the income provided in item (g) of the same subparagraph) of Article 93 of the Act that is substantially related to the domestic place of business or reverts to the domestic place of business (excluding any income withheld at source under Article 73, 73-2 or 98-3 of the Act);

3. Domestically sourced real estate income provided for in subparagraph 3 of Article 93 of the Act;

4. Domestic source business income under subparagraph 5 of Article 93 of the Act (excluding income subject to withholding under Article 98 of the Act);

5. Other domestic source income provided for in subparagraph 10 (g) of Article 93 of the Act;

6. Domestic source income for which an application for non-taxation or tax exemption is filed under Article 98-4 of the Act;

7. Income (excluding domestic source capital gains on real estate prescribed in subparagraph 7 of Article 93 of the Act and domestic source income accruing from transferring securities prescribed in subparagraph 9 of the same Article), the withholding tax on which is less than one thousand won;

8. Other income that is deemed to lack the effectiveness to file the payment statement and prescribed by Decree of the Ministry of Economy and Finance.

(2) Deleted. <Dec. 30, 2002>

(3) Where the corporate tax is withheld at source under Article 138-3 of this Decree or Article 98 (7) and (16) of the Act, the relevant person liable for withholding shall file a payment statement on the amount paid. <Added on Dec. 31, 2001; Feb. 22, 2008; Dec. 30, 2010; Feb. 17, 2021; Feb. 15, 2022; Mar. 8, 2022>

(4) The form of the payment statement to be submitted with respect to the income provided in subparagraph 1, 2 or 9 of Article 93 of the Act may be stipulated by Decree of the Ministry of Economy and Finance. <Added on Dec. 31, 2001; Feb. 22, 2008; Feb. 29, 2008; Dec. 30, 2010>

(5) Articles 215 and 216 of the Enforcement Decree of the Income Tax Act shall apply mutatis mutandis to filing of the payment statement on the domestic source income, etc. by any foreign corporation. <Added on Dec. 31, 2001; Feb. 19, 2005; Feb. 22, 2008>

[This Article Added on Dec. 29, 2000]

[Title Amended on Feb. 22, 2008]

Article 164(Preparation and issuance of invoices) #

(1) Articles 211 through 212-2 of the Enforcement Decree of the Income Tax Act shall apply mutatis mutandis to the preparation and issuance of invoices under Article 121 of the Act. <Amended on Dec. 31, 2001; Dec. 30, 2002; Feb. 19, 2005>

(2) "Electronic format prescribed by Presidential Decree" in the latter part of Article 121 (1) of the Act means the issuance of an invoice by the method prescribed in Article 68 (5) of the Enforcement Decree of the Value-Added Tax Act, and "where such invoice, etc. is issued, as prescribed by Presidential Decree" in the proviso to Article 121 (2) of the Act means where an invoice is issued in the name of the consignor or principal under Article 212 (2) of the Enforcement Decree of the Income Tax Act. <Amended on Feb. 19, 2005; Jun. 3, 2011; Feb. 3, 2015; Feb. 13, 2018>

(3) "Circumstances prescribed by Presidential Decree" in Article 121 (4) of the Act means circumstances in which land and a building, and their respective purchase rights are supplied. <Added on Dec. 31, 2001; Jun. 3, 2011; Feb. 28, 2023>

(4) "Deadline prescribed by Presidential Decree" in the main sentence of Article 121 (5) of the Act means by February 10 of each year. <Amended on Dec. 31, 2001; Jun. 3, 2011; Feb. 2, 2012>

(5) "Deadline specified by Presidential Decree" in Article 121 (7) of the Act means the day immediately after the issue date of an electronic invoice, and "detailed statement of such electronic invoices in the form prescribed by Presidential Decree" in the same paragraph means a statement of the matters specified in Article 211 (1) of the Enforcement Decree of the Income Tax Act. <Added on Feb. 3, 2015>

(6) Every corporation shall submit the aggregate invoices for individual suppliers or purchasers in the form prescribed by Decree of the Ministry of Economy and Finance to the head of the tax office having jurisdiction over the place of tax payment by the deadline (February 19 of each year in cases of a foreign corporation) specified under paragraph (4). <Amended on Dec. 31, 2001; Feb. 9, 2006; Feb. 29, 2008>

(7) Article 212 of the Enforcement Decree of the Income Tax Act shall apply mutatis mutandis to the submission of the aggregate invoices for individual suppliers or purchasers referred to in paragraph (5), except as otherwise expressly provided for in this Decree. <Amended on Dec. 31, 2001; Feb. 19, 2005>

(8) Article 211 (2) of the Enforcement Decree of the Income Tax Act shall apply mutatis mutandis to the provision of any of the following goods or services among the goods or services provided for in Article 106 (1) 6 of the Restriction of Special Taxation Act: <Added on Presidential Decree No. 18706, Feb. 19, 2005; Feb. 29, 2008; Jan. 5, 2021>

1. Services rendered by the Port Authority prescribed in the Port Authority Act to collect freight rates provided for in Article 13 (1) 1 (b) of the Enforcement Decree of that Act;

2. Other goods or services prescribed by Decree of the Ministry of Economy and Finance in consideration of the amount and number of transactions.

(9) Where a person who lends assets as a facility pursuant to Article 3 (2) of the Specialized Credit Finance Business Act (hereafter in this paragraph referred to as the "lessor") concludes a lease agreement with the lessee, and the lessor receives a guarantee of the residual value from a third party not related to the lessee, the supply value of the invoice shall be prepared according to the lease agreement between the lessor and the lessee. <Added on Feb. 17, 2021>

ENFORCEMENT DECREE OF THE CORPORATE TAX ACT

Article 1(Purpose) #

Article 2(Definition) #

Article 3(Scope of profit-making business) #

Article 3-2(Trust income) #

Article 4(Start date of business year) #

Article 5(Reports on change of business year) #

Article 6(Scope of registration dates of mergers) #

Article 7(Scope of place of tax payment) #

Article 8(Designation of and notices on place of tax payment) #

Article 9(Report on change of place of tax payment) #

Article 10(Deduction of losses) #

Article 11(Scope of earnings) #

Article 12(Scope of surpluses untaxed upon capitalization) #

Article 13(Timing for constructive dividend payment or distribution of surpluses) #

Article 14(Evaluation of values of assets) #

Article 15(Amount in excess of par value of issued stocks) #

Article 16(Losses carried forward) #

Article 17(Limitation on reduced distribution of revaluation reserve out of merger gain) #

Article 17-2(Non-inclusion of domestic corporations' dividend income in gross income) #

Article 17-3 #

Article 18(Non-inclusion of dividend income of foreign subsidiaries in gross income) #

Article 19(Scope of deductible expenses) #

Article 19-2(Non-inclusion of bad debts in deductible expenses) #

Article 20 #

Article 21(Scope of non-performance of duties) #

Article 22(Inclusion of input tax of value-added tax in deductible expenses) #

Article 23(Scope of punitive damages) #

Article 24(Scope of depreciable assets) #

Article 25(Method of appropriating depreciation costs as deductible expenses) #

Article 26(Calculation of allowable depreciation) #

Article 26-2(Calculation of previous depreciation costs) #

Article 26-3(Calculation of standard depreciation costs) #

Article 27(Change of depreciation method) #

Article 28(Service life and depreciation rates) #

Article 29(Special cases and changes of service life) #

Article 29-2(Allowable depreciation of used assets) #

Article 30(Constructive depreciation) #

Article 31(Constructive instant depreciation) #

Article 32(Disposition of disallowed amount of depreciation) #

Article 33(Detailed statements on depreciation costs) #

Article 34(Detailed regulations concerning depreciation costs) #

Article 35(Scope of donations) #

Article 36(Value of donations) #

Article 37(Scope of inclusion of donations in deductible expenses) #

Article 38(Requirements for Korean schools) #

Article 39(Scope of donations determined in consideration of public interest) #

Article 40(Scope of business promotion expenses) #

Article 41(Use of credit cards for business promotion expenses) #

Article 42(Standard for calculating business promotion expenses as amount of income) #

Article 42-2 #

Article 43(Non-inclusion of bonuses in deductible expenses) #

Article 44(Non-inclusion of retirement benefits in deductible expenses) #

Article 44-2(Non-inclusion of retirement insurance premiums in deductible expenses) #

Article 45(Non-inclusion of expenses for fringe benefits in deductible expenses) #

Article 46(Non-inclusion of travel expenses in deductible expenses) #

Article 47 #

Article 48(Non-inclusion of joint expenses in deductible expenses) #

Article 49(Scope of non-business assets) #

Article 50(Non-business expenditures) #

Article 50-2(Special cases concerning exclusion of expenses incurred in relation to passenger vehicles for business use from deductible expenses) #

Article 51(Scope of interest on debentures for which creditor is unknown) #

Article 52(Scope of interest on loans appropriated for construction capital) #

Article 53(Non-inclusion of interest paid on non-business assets in deductible expenses) #

Article 54 #

Article 55(Order of application of non-inclusion of paid interest in deductible expenses) #

Article 56(Inclusion of reserve funds for principal purpose business in deductible expenses) #

Article 57(Inclusion of liability reserve funds in deductible expenses) #

Article 58(Inclusion of contingency reserve funds in deductible expenses) #

Article 59(Inclusion of surrender value reserve fund in deductible expenses) #

Article 60(Inclusion of retirement benefit appropriation funds in deductible expenses) #

Article 61(Inclusion of allowances for bad debts in deductible expenses) #

Article 62 #

Article 63(Inclusion of allowances to redeem claims for indemnity in deductible expenses) #

Article 64(Inclusion of national subsidies in deductible expenses) #

Article 65(Inclusion of construction charges in deductible expenses) #

Article 66(Inclusion of insurance marginal profits in deductible expenses) #

Article 67 #

Article 68(Business year in which gains and losses from sale of assets accrue) #

Article 69(Business year on which gains and losses from provision of services devolve) #