Korean Tax Brief 2023년 1월호

 

Ⅰ. Introduction

On July 21, 2022, the Ministry of Economy and Finance (MOEF) announced tax reform proposals (“Tax Reform Proposal”) for 2023, which was submitted to the National Assembly on September 1, 2022. On December 23, 2022, the National Assembly approved the tax reform for 2023 (“Tax Reform for 2022”) and most of the approved tax law amendments will become effective from January 1, 2023, unless otherwise specified.

In the following table, we summarized major changes between the Tax Reform Proposal submitted in September and the Final Tax Reform for 2023 approved by the National Assembly.

Item	Tax Reform Proposal Announced on Jul 21, 2022	Final Tax reform Approved on Dec 23, 2022
Change in Corporate Income Tax (“CIT”) Rates	Elimination of the highest tax rate bracket (25%)	Maintain the current tax bracket and reduce CIT rate by 1% for each taxable income bracket
Accumulated Earnings Reserve Tax	Expiration of accumulated earnings reserve tax	Extend sunset date of accumulated earnings reserve tax and limit the application of the tax to companies belonging to business groups subject to restrictions on cross-shareholdings.
Application of Flat Income Tax Rate to Foreign Employees	Expiration of application of flat income tax rate	Extended application period of flat income tax rate to 20 years and deletion of sunset date

 

Ⅱ. Highlights of Tax Law Amendment

•  Change in CIT Rates

•  Income Exclusion of Dividend Received from Foreign Subsidiary

•  Revised Domestic Dividend Received Deduction (DRD)

•  Increased Net Operating Loss Utilization Rate

•  Expiration of Accumulated Earnings Reserve Tax

•  Relaxation of Ownership Requirement for Tax Consolidation

•  Introduction of Integrated Employment Tax Credit

•  Introduction of Accelerated Depreciation for Energy-saving Facilities

•  Additional Supporting Document Requirement to Apply Tax Exemption Granted Under the      Tax Treaty

•  Expansion of Exemption Threshold to Submit International Transaction Related                        Information

•  Introduction of Tax on Income Attributed to Overseas Pass-Through Entity

•  Reduction of Securities Transaction Tax

•  Mitigation of Conditions to Issue Revised Import VAT Invoices

•  Introduction of Purchaser-issued VAT Invoices

•  Extension for Application period of Flat Income Tax Rate to Foreign Employees

•  Extension of Income Tax Exemption Period for Foreign Engineers

•  Two-year Postponement of Tax on Financial Investment Income

•  Extension of Retention Period for Offshore Transaction Documents

•  New Requirement to Maintain Transfer Pricing Related Documents Domestically

•  Introduction of Global Minimum Tax Rule (BEPS 2.0 Pillar Two)