The government’s tax reform plan calls for lowering the maximum corporate tax rate from 25 percent to 22 percent.
The South Korean government released a tax reform plan on July 21. According to it, the maximum corporate tax rate will be lowered from 25 percent to 22 percent and the number of corporate tax rates will be reduced from four to two and three.
The three different rates will be applied to companies with sales of less than 300 billion won and two will be applied to more than 300 billion won in sales. At present, 35 out of the 38 member states of the OECD are using one or two rates.
Specifically, non-large companies’ rates will become 10 percent for up to 500 million won in tax base, 20 percent for up to 20 billion won, and 22 percent for more than 20 billion won. At present, the rate of 10 percent is applied to up to 200 million won in tax base. This change is expected to lead to a decrease in tax burden. Large corporations’ tax rates will be simplified into 20 percent for up to 20 billion won and 22 percent for over 20 billion won.
In addition, according to the plan, a company does not have to pay a corporate tax in South Korea on condition that it already paid the tax abroad in bringing its overseas profit into South Korea. The opposition Democratic Party of Korea is against the plan and the actual tax law revision is unlikely to be easy. “The corporate tax reduction plan is for the benefit of a handful of conglomerates and will exacerbate national fiscal conditions,” it said.