Tax law updates in 2026: key issues for international clients

The  Tax Law Amendments proposed by the Ministry of Economy and Finance became law on December 2^nd, 2025.  Set out below is the summary of the key changes in the tax amendment.

1.      Corporate income tax rate (art 55(1) of the Corporate Tax Act “CTA”)

The corporate income tax rates applicable to tax years starting in 2026 will revert to those in effect in 2022, prior to the 2023 tax amendment.

Tax Base (in million Korean Won)	Current Rates	Amended Rates
Up to 200	9%	10%
Over 200, but up to 20,000	19%	20%
Over 20,000, but up to 300,000	21%	22%
Over 300,000	24%	25%

2.      Additional documents required for the amendment of the corporate income tax return, adjusting the arm’s length price (art 6(2) of the Adjustment of International Taxes Act)

When a corporate taxpayer seeks a tax refund as a result of adjusting the arm’s length price in a decreasing amended tax return, the taxpayer must submit the supporting documents to verify double taxation in the tax item, which includes an increasing amended tax return in the tax jurisdiction of the counterparty.

3.      Penalty for non-submission of reporting a foreign corporation’s liaison office status (art 94-2 of CTA)

If a liaison office of a foreign corporation does not submit the prescribed “Foreign Corporation’s Liaison Office Status Report” or falsely reports it to the tax authority, a maximum penalty of KRW 10 million is imposed on the liaison office from January 1, 2026.   The exact amount for the penalty will be prescribed by the Enforcement Decree of the CTA.

4.      A withholding agent’s obligation to submit “Application for Reduced Withholding Tax Rate on Korean Sourced Income for a non-resident” (art 98-6 of CTA, art 138-7(8) of Enforcement Degree of CTA, art 156-6 of the Income Tax Act).

Prior to the tax amendment, a Korean entity that makes a payment to a non-resident that seeks the relevant tax treaty benefits (i.e. reduced withholding tax rate) in respect of the payment, constituting Korean-sourced income of the non-resident, must obtain an “Application for Entitlement to Reduced Tax Rate on Domestic Source Income” from the non-resident. The Korean entity must retain the relevant documents, including the application form, as a withholding agent for 5 years from the date the withholding tax return is filed. However, there was no obligation for the withholding agent in Korea to submit the documents to the relevant tax authority prior to the tax amendment.  

Under the tax amendment, such a withholding agent must submit the documents to the relevant tax authority by the end of February in the following year.