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CORPORATE TAX ACT
CORPORATE TAX ACT
INTRODUCTION
Details of Enactment and Amendment
- Enactment: The Corporate Tax Act is a statute that provides the regulatory details of corporate taxes which are assessed on the
earnings and liquidation incomes of a corporation for each fiscal year. This Act was enacted on November 7, 1949 as Act No. 62.
- Amendment: This Act has been amended almost every year, almost as an annual event, including being wholly amended in the year 1961,
1967 and 1998.
Main Contents
- A person who is liable to pay a corporate tax shall be a domestic corporation, and a foreign corporation shall be liable to pay
it only where it has any withholding income in Korea. Taxable income subject to corporate tax shall be the income of a corporation
earned in each business year and the liquidation income (liquidation income = value of the remaining property that the investors
receives when the corporation ceases to exist by liquidation, merger or acquisition, or compensation for such merger or acquisition
- total equity capital) obtained at the time of its liquidation, but the liquidation income of any non-profit domestic corporation
and foreign corporation shall not be subject to taxation.
- The business year of a corporation shall be one accounting period prescribed by Acts and subordinate statutes or the corporation
articles of incorporation, which shall not exceed one year. A corporation which wishes to change its business year shall report
to the chief of the district tax office having jurisdiction over the place of tax payment within 3 months of the date of the end
of the immediately preceding business year.
- The place of tax payment for corporate tax of a foreign corporation shall be the location of the domestic place of business: Provided,
That for a foreign corporation with no domestic place of business which earns income from real estate rights, transfer income, or
forestry income, it shall be the location of each of the relevant assets. Where a foreign corporation has 2 or more domestic places
of business, the place of tax payment shall be the location of its main place of business.
- The tax base for corporate tax on the income for each business year of a foreign corporation with a domestic place of business,
a foreign corporation with income from domestic real estates or real estate rights, or a foreign corporation with forestry income
shall be the total amount of income generated from sources in Korea minus the amount of losses generated during the five business
years immediately preceding the current business year, non-taxable income, and income generated by the navigation of a ship or aircraft
to a foreign country, which are deducted in sequential order.
- The total amount of a foreign corporation s income generated from sources in Korea shall be calculated by applying mutatis mutandis
the method of calculating the income, earnings, and losses of a domestic corporation generated during each of its business years
and the method of non-taxation and income deduction for a domestic corporation.
- The income of a corporation for each business year shall be the total amount of losses incurred during the business year deducted
from the total amount of earnings during the business year. In this case, earnings shall mean the amount of proceeds generated by
transactions which increase the net assets of the concerned corporation, and losses shall mean the amount of losses generated by
transactions which cause a reduction in the net assets of the concerned corporation.
- This Act provides the objects of and standards for non-inclusion in the calculation of earnings and losses: to be concrete, proceeds
from capital transactions, marginal profits from the evaluation of assets, dividend amounts received by a holding company, dividend
amounts received from an equity investment in another corporation, etc. shall not be included in the calculation of earnings, and
marginal losses from the evaluation of assets, depreciation costs, donations, entertainment expenses, excessive expenses, non-business
expenses, interest on loans, etc. shall not be included in the calculation of losses, for both of which the detailed standards are
prescribed in this Act.
- Reserve funds for proper business purposes, liability reserve funds under Acts, a policyholder dividend reserve funds for an insurer
to pay dividend to insurance policyholders, the allowances for severance and retirement benefits, bad debt allowances to cover bad
debts, etc. shall be included in the calculation of losses, for which the detailed requirements are prescribed in this Act.
- A corporate tax of a foreign corporation on the income of each business year shall be an amount obtained by multiplying the amount
of a tax base by a tax rate. In this case, if the amount of the tax base is not more than one hundred million won, the tax rate shall
be applied at 15 percent (13 percent in and after 2005), and if the amount of the tax base is more than one hundred million won,
the tax rate shall be applied at 15 percent (13 percent in and after 2005) up to one hundred million won and at 27 percent (25 percent
in and after 2005) with respect to the amount in excess of the one hundred million won.
- Where a foreign corporation comes to have a domestic place of business, it shall make a report on its establishment to the chief
of the district tax office having jurisdiction over the place of tax payment, accompanied by a balance sheet and other relevant documents,
within two months from the date when such place of business is established.
CORPORATE TAX ACT
Wholly Amended by Act No. 5581, Dec. 28, 1998
Amended by Act No. 6047, Dec. 28, 1999
Act No. 6259, Feb. 3, 2000
Act No. 6293, Dec. 29, 2000
Act No. 6558, Dec. 31, 2001
Act No. 6852, Dec. 30, 2002
Act No. 7005, Dec. 30, 2003
Act No. 7117, Jan. 29, 2004
Act No. 7289, Dec. 31, 2004
Act No. 7317, Dec. 31, 2004
CHAPTER I GENERAL PROVISIONS
Article 1 (Definitions)
The terms used in this Act shall be defined as follows:
1.The term domestic corporation means a corporation with its headquarters or main office in the Republic of Korea;
2.The term non-profit domestic corporation means a domestic corporation which falls under any of the following items:
(a) A juristic person established under the provisions of Article 32 of the Civil Act;
(b) A juristic person established under the Private School Act or other special Acts for the purposes prescribed in Article 32 of
the Civil Act or similar purposes (excluding juristic persons as prescribed by the Presidential Decree which are not partnership
corporations and which can pay profit dividends to stockholders, employees, or investors); and
(c) Organizations treated as corporations under the provisions of Article 13 (4) of the Framework Act on National Taxes (hereinafter
referred to as organizations to be treated as corporations );
3.The term foreign corporation means a corporation with its headquarters or main office in a foreign country;
4.The term non-profit foreign corporations shall mean foreign governments or local governments, and other foreign corporations which
are not operated for the purpose of generating profit (including organizations treated as corporations); and
5.The term business year means one accounting period for the calculation of a corporation s income.
Article 2 (Tax Liability)
(1) Corporations falling under each of the following subparagraphs shall be liable to pay corporate tax on income under this Act:
1.Domestic corporations; and
2.Foreign corporations which generate income in the Republic of Korea.
(2)Where domestic corporations and foreign corporations earn land transfer marginal profits of land, etc. provided for in Articles
55-2 and 95-2, they shall be liable to pay the corporate tax under this Act. <Amended by Act No. 6558, Dec. 31, 2001>
(3)Corporate taxes shall not be imposed on such domestic corporations as the State and local governments (including local government
associations; hereinafter the same shall apply). <Amended by Act No. 6558, Dec. 31, 2001>
(4)Domestic corporations, foreign corporations, and residents and non-residents under the Income Tax Act shall be liable to pay corporate
taxes to be withheld under this Act.
Article 3 (Scope of Taxable Income)
(1) Corporate taxes shall be imposed on income under each of the following subparagraphs: Provided, That for non-profit domestic corporations
and foreign corporations, corporate taxes shall be imposed only on income under subparagraph 1:
1.Income of each business year; and
2.Liquidation income.
(2) Income for each business year of non-profit domestic corporations shall be income obtained through business or revenue under each
of the following subparagraphs (hereinafter referred to as the profit-making business ):
1.Earnings generated from businesses prescribed by the Presidential Decree such as manufacturing, construction, wholesale or retail
sales, consumer product repair, real estate, rental, and provision of business services;
2.Interest, discounts, and profits under the provisions of each subparagraph of Article 16 (1) of the Income Tax Act;
3.Dividends or funds distributed under the provisions of each subparagraph of Article 17 (1) of the Income Tax Act;
4.Revenue arising from the transfer of stocks, preemptive subscription rights, or contribution quotas;
5.Revenue arising from the disposal of fixed assets (excluding fixed assets used directly for proper purpose businesses as prescribed
by the Presidential Decree); and
6.Revenue arising from continuing action other than that under subparagraphs 1 through 5 as prescribed by the Presidential Decree.
(3) Income for each business year of foreign corporations shall be income earned in the Republic of Korea under the provisions of
Article 93 (hereinafter referred to as the income generated in Korea ): Provided, That for non-profit foreign corporations, this
shall be limited to income generated in Korea through profit-making businesses.
Article 4 (Real Taxation)
(1) Where the corporation to which all or part of revenue from assets or business legally accrues and the corporation to which it
actually accrues are different, this Act shall apply to the corporation to which the revenue actually accrues.
(2) The provisions concerning the calculation of the amount of taxable income subject to corporate tax shall apply to the real income
and earnings, notwithstanding their designation or form.
Article 5 (Trust Income)
(1) With regard to income accrued to a trust estate, the beneficiary to receive the profits of the trust (where no beneficiary is
specified or no beneficiary exists, the trustee of the trust or his successor) shall be deemed the owner of the trust estate in the
application of this Act.
(2) With regard to revenues and expenditures accrued to trust estate of corporations regulated by the Trust Business Act and the Act
on Business of Operating Indirect Investment and Assets (excluding special accounts of insurance company pursuant to Article 135
of the same Act; hereinafter the same shall apply), the revenues and expenditures shall be deemed not to be accrued to the corporation.
<Amended by Act No. 7005, Dec. 30, 2003>
Article 6 (Business Year)
(1)The business year shall be one accounting period prescribed by Acts and subordinate statutes or the corporation s articles of incorporation:
Provided, That this period shall not exceed one year.
(2) A domestic corporation with no provisions concerning the business year in the Acts and subordinate statutes or its articles of
incorporation shall separately determine its business year and report it together with the report on incorporation under the provisions
of Article 109 (1) or the registration of business under the provisions of Article 111 to the chief of the district tax office having
jurisdiction over the place of tax payment (the chief of the tax office under the provisions of Article 12; hereinafter the same
shall apply).
(3)A foreign corporation with a place of business in the Republic of Korea under the provisions of Article 94 (hereinafter referred
to as a domestic place of business ) which has no provisions concerning the business year in the Acts and subordinate statutes or
its articles of incorporation shall separately determine its business year and report it together with the report on the establishment
of a domestic place of business under the provisions of Article 109 (2) or the registration of business under the provisions of Article
111 to the chief of the district tax office having jurisdiction over the place of tax payment.
(4)A foreign corporation with no domestic place of business which earns income under the provisions of subparagraph 3, 7 or 8 of Article
93 shall separately determine its business year and report it to the chief of the district tax office having jurisdiction over the
place of tax payment within one month of the date on which such income was first generated.
(5) Where a corporation which shall report under the provisions of paragraphs (2) through (4) fails to report, the corporation s business
year shall be from January 1st to December 31st each year.
(6) Matters necessary for the determination of the beginning date of a corporation s first business year in the application of the
provisions of paragraphs (1) through (5) shall be prescribed by the Presidential Decree.
Article 7 (Change of Business Year)
(1) A corporation which wishes to change its business year shall report to the chief of the district tax office having jurisdiction
over the place of tax payment within 3 months of the date of the last day of the immediately preceding business year under the conditions
as prescribed by the Presidential Decree.
(2) Where a corporation does not report within the time limit under the provisions of paragraph (1), the corporation s business year
shall be deemed not to have changed: Provided, That, for a corporation whose business year is determined by Acts and subordinate
statutes, its business year shall be deemed to have changed as amended in such Acts and subordinate statutes where an amendment to
such Acts and subordinate statutes has effected a change in the provisons pertaining to its business year even if no reporting is
made pursuant to the provisions of paragraph. (1). <Amended by Act No. 6293, Dec. 29, 2000>
(3) Where the business year is changed pursuant to the provisions of paragraphs (1) and (2) (proviso), the period from the first day
of the previous business year to the first day of the new business year shall be deemed to constitute one business year: Provided,
That, where that period is shorter than one month, it shall be included in the new business year. <Amended by Act No. 6293, Dec.
29, 2000>
Article 8 (Legal Fiction of Business Year)
(1) Where a domestic corporation is dissolved during a business year (excluding dissolution due to merger, division, or division and
merger), the period from the first day of the business year until the date of registration of dissolution (referring to the date
of bankruptcy registration for any corporation which is dissolved on the grounds of bankruptcy and the date of dissolution for any
organization treated as corporation; hereinafter the same shall apply), and the period from the day after the date of registration
of dissolution until the last day of the concerned business year shall each be deemed to be 1 business year; and where the value
of residual assets of a domestic corporation being liquidated is settled during the business year, the period from the first day
of the business year until the date on which the value of residual assets is settled shall be deemed to be 1 business year. <Amended
by Act No. 6558, Dec. 31, 2001>
(2) Where a domestic corporation is dissolved during the business year due to a merger or division (including division and merger;
hereinafter the same shall apply), the period from the first day of the business year until the date of registration of the merger
or division shall be deemed to be 1 business year of the dissolved corporation.
(3) Where a domestic corporation in the process of liquidation under the provisions of Article 229, 285, 519, or 610 of the Commercial
Act continues to conduct business, the period from the first day of the business year until the date of registration of continuation
(where registration of continuation is not made, referring to the date of actual continuation of business; hereinafter the same shall
apply) and the period from the day after the date of registration of continuation until the last day of the business year shall each
be deemed to be 1 business year.
(4) Where a foreign corporation with a domestic place of business comes to no longer have the concerned domestic place of business
during the business year, the period from the first day of the business year until the date on which it no longer has the concerned
place of business shall be deemed to be 1 business year of the corporation: Provided, That this shall not apply where it continues
to have another place of business in Korea.
(5) Where a foreign corporation with no domestic place of business reports to the chief of the district tax office having jurisdiction
over the place of tax payment that it is no longer generating income under the provisions of subparagraph 3, 7, or 8 of Article 93,
the period from the first day of the business year until the date such report is made shall be deemed to be one business year.
Article 9 (Place of Tax Payment)
(1) The place of tax payment for corporate tax of a domestic corporation shall be the location of the registered headquarters or main
office of the concerned corporation: Provided, That for organizations treated as corporations, it shall be the place as prescribed
by the Presidential Decree.
(2) The place of tax payment for corporate tax of a foreign corporation shall be the location of the domestic place of business: Provided,
That for a foreign corporation with no domestic place of business which earns income under the provisions of subparagraph 3, 7, or
8 of Article 93, it shall be the location of each of its assets.
(3) Where a foreign corporation under paragraph (2) has 2 or more domestic places of business, the location of the place of business
prescribed by the Presidential Decree shall be the place of tax payment, and where the corporation has 2 or more assets, the place
prescribed by the Presidential Decree shall be the place of tax payment.
(4) The place of tax payment for corporate tax withheld under the provisions of Articles 73, 98 and 98-3 shall be the location of
the concerned person responsible for collecting withholding tax as prescribed by the Presidential Decree: Provided, That where the
person responsible for collecting withholding tax under the provisions of Articles 98 and 98-3 does not have a domestic location,
it shall be the place prescribed by the Presidential Decree. <Amended by Act No. 6558, Dec. 31, 2001>
Article 10 (Designation of Place of Tax Payment)
(1) Where the Commissioner of the competent Regional Tax Office (referring to the Commissioner of the competent Regional Tax Office
under the provisions of Article 12; hereinafter the same shall apply) or the Commissioner of the National Tax Service deems that
the place of tax payment under the provisions of Article 9 is inappropriate for the corporation and the Presidential Decree determines,
he may, notwithstanding the provisions of Article 9, designate a place of tax payment.
(2) Where the Commissioner of the competent Regional Tax Office or the Commissioner of the National Tax Service designates a place
of tax payment under the provisions of paragraph (1), he shall notify the concerned corporation under the conditions as prescribed
by the Presidential Decree.
Article 11 (Change of Place of Tax Payment)
(1)Where a corporation s place of tax payment is changed, the corporation shall report it to the chief of the district tax office
having jurisdiction over the new place of tax payment within 15 days of the date of the change under the conditions as prescribed
by the Presidential Decree. In this case, where the corporation whose place of tax payment has been changed reports the change under
the provisions of Article 5 of the Value-Added Tax Act, it shall be deemed to have reported the change of the place of tax payment.
(2) Where there is no report under the provisions of paragraph (1), the previous place of tax payment shall be the corporation s place
of tax payment.
(3) Where a foreign corporation comes to have no domestic place of tax payment falling under the provisions of Article 9 (2), it shall
report it to the chief of the district tax office having jurisdiction over the place of tax payment.
Article 12 (Jurisdiction of Taxation)
Corporate tax shall be levied by the chief of the district tax office or the Commissioner of the competent Regional Tax Office having
jurisdiction over the place of tax payment under the provisions of Articles 9 through 11.
CHAPTER II CORPORATE TAX ON INCOME OFDOMESTIC CORPORATIONS FOR EACH BUSINESS YEAR
SECTION 1 Tax Base and its Calculation
Sub-Section 1 Common Provisions
Article 13 (Tax Base)
The tax base for corporate tax on income of domestic corporations for each business year shall be, within the scope of the income
for each business year, the amount or income of the following subparagraphs deducted sequentially from the income amount:
1.The amount of deficits incurred during each business year within the five years prior to the first day of the current business year
which were not thereafter deducted in the calculation of the tax base;
2.Non-taxable income under this Act and other Acts; and
3.Amount of income deduction under this Act and other Acts.
Article 14 (Income for Each Business Year)
(1) The income of a domestic corporation for each business year shall be the total amount of deductible expenses incurred during the
business year deducted from the total amount of gross income during the business year.
(2) The amount of deficits of a domestic corporation for each business year shall be the total amount of gross income during the business
year deducted from the total amount of deductible expenses incurred during the business year.
Sub-Section 2 Calculation of Gross Income
Article 15 (Scope of Gross Income)
(1)Gross income shall mean the amount of proceeds generated by transactions which increase the net assets of the concerned corporation,
not including capital input or financing and other transactions as provided in this Act.
(2)The amount under each of the following subparagraphs shall be deemed to be gross income:
1.Where securities are purchased from an individual who is a person with a special relationship under the provisions of Article 52
(1) at a price which is below the market price under the provisions of Article 52 (2), the amount of the difference between the appropriate
market price and the concerned purchase price; and
2.The appropriate amount of tax liability of foreign corporations under the provisions of Article 57 (4) (limited to cases in which
the tax liability amount has been deducted).
(3)Matters necessary for the scope and classification of proceeds under the provisions of paragraph (1) shall be prescribed by the
Presidential Decree.
Article 16 (Legal Fiction of Dividends or Distributions)
(1)The amount under any of the following subparagraphs shall be deemed to be the amounts of profits received from the corporation
as dividends or surplus funds received from the corporation by distribution, and this Act shall apply accordingly: <Amended by
Act No. 6558, Dec. 31, 2001; Act No. 7317, Dec. 31, 2004>
1.The amount of the sum of funds and the value of other assets acquired by a stockholder, employee, or investor (hereinafter referred
to as a stockholder, etc. ) through the retirement of stocks, reduction of capital, employee retirement or separation, or investment
reduction in excess of the amount necessary for the stockholder, etc. to acquire the concerned stocks or contribution quotas (hereinafter
referred to as stocks, etc. );
2.The value of stocks, etc. acquired through the transfer of all or part of corporation s surplus funds into capital or financing:
Provided, That this shall not apply where amounts under any of the following items are transferred to capital:
(a) Capital reserve fund under the provisions of Article 459 (1) 1 through 3 and 3-2 of the Commercial Act (excluding marginal profits
from the evaluation of a merger and marginal profits from the evaluation of a division as prescribed by the Presidential Decree;
in case of the profit from retirement of equity stocks or contribution quotas, limited to the transfer of capital after the passage
of 2 years on the date of such retirement in case that the market price under Article 52 (2) does not exceed the acquisition value
at the time equity stocks or contribution quotas are retired; and limited to the amount gained by subtracting face value from market
value in case the market price of the stocks, etc. is above face value but below issue price when stocks are issued to convert liability
into investment); and
(b) Revaluation reserve fund under the Assets Revaluation Act (excluding an appropriate amount for any difference in the revaluation
of land under the provisions of Article 13 (1) 1 of the same Act);
3.In case that the equity ratio of stockholders, etc. of a corporation other than the relevant corporation is increased by the latter
s transfer of capital under the provisions of each item of subparagraph 2 while holding its own stocks and equity shares, the value
of stocks, etc. corresponding to such increased equity ratio;
4.The amount of funds and the value of other assets acquired by stockholders, etc. of a dissolved corporation (including members of
an organization treated as a corporation) through the distribution of the residual assets of the corporation in excess of the amount
necessary for the acquisition of the concerned stocks, etc.;
5.The amount of the sum of the value of stocks, etc., funds, and other assets which stockholders, etc. of a corporation which is extinguished
through a merger (hereinafter referred to as an extinguished corporation ) receive from a corporation which is established or maintained
through the merger (hereinafter referred to as a merged corporation ) in return for the merger (hereinafter referred to as the
cost of merger ) in excess of the amount necessary for the acquisition of the stocks, etc. of the extinguished corporation; and
6.Where a corporation is divided, the amount of the sum of the value of stocks, funds, and other assets which stockholders of the
divided corporation (hereinafter referred to as a divided corporation ) or counterpart corporation to a corporation extinguished
through division and merger receive from the corporation established through the division (hereinafter referred to as a corporation
established by division ) or the counterpart corporation to the division and merger in return for the division (hereinafter referred
to as the cost of division ) in excess of the amount necessary for the acquisition of the stocks of the divided corporation or counterpart
corporation to the corporation extinguished through division and merger (where the divided corporation continues to exist, limited
to stocks reduced by retirement).
(2)In the application of the provisions of paragraph (1), matters necessary for the period of the distribution of profit dividends
or surplus funds and the evaluation of the value of stocks, etc. shall be prescribed by the Presidential Decree.
Article 17 (Non-Inclusion of Proceeds from Capital Transactions in Calculation of Gross Income)
The proceeds of the following subparagraphs shall not be included in gross income in calculating the income amount for each business
year of a domestic corporation:
1.Surplus amount of par value of stocks issued;
2.Gains from retirement of stocks;
3.Marginal profits from a merger: Provided, That this shall not include marginal profits from the evaluation of mergers (hereinafter
referred to as merger evaluation marginal profits ) as prescribed by the Presidential Decree; and
4.Marginal profits from a division: Provided, That this shall not include marginal profits from the evaluation of divisions (hereinafter
referred to as division evaluation marginal profits ) as prescribed by the Presidential Decree.
Article 18 (Non-Inclusion of Evaluation Marginal Profits in Calculation of Gross Income)
The proceeds of the following subparagraphs shall not be included in gross income in calculating the income amount for each business
year of a domestic corporation: <Amended by Act No. 6558, Dec. 31, 2001>
1.Marginal profits from the evaluation of assets: Provided, That this shall not include evaluation marginal profits arising from evaluation
under the provisions of each subparagraph of Article 42 (1);
2.Gross income carried forward;
3.The amount appropriated for taxes other than corporate tax not included in the calculation of deductible expenses under the provisions
of subparagraph 1 of Article 21 or income-proportional resident tax refunded or to be refunded;
4.Interest on refunded national or local taxes paid in error;
5.Output tax amount of value-added tax;
6.The amount of 90% of the dividend income amount an institutional investor as prescribed by the Presidential Decree receives from
stock-listed corporations (hereinafter referred to as stock-listed corporations ) and Association-registered corporations (hereinafter
referred to as Association-registered corporations ) under the Securities and Exchange Act other than those prescribed by the Presidential
Decree;
7.Deleted; and <by Act No. 6558, Dec. 31, 2001>
8.The amount appropriated for making up for losses carried forward as prescribed by the Presidential Decree from among the value of
assets received without compensation, and the amount of the reduction of debt due to the exemption from or extinction of financial
obligations.
Article 18-2 (Non-Inclusion of Holding Company s Received Dividend Amount in Calculation of Gross Income)
(1)Where the sum computed pursuant to subparagraphs 1 and 2 exceeds the sum computed pursuant to subparagraphs 3 and 4, of profit
dividends or surplus distribution, or of legally fictitious dividends or distributions under Article 16 (hereafter referred to as
the received dividend amount in this Article and Article 18-3) received by a holding company prescribed by the Presidential Decree
among such domestic corporations that are classified as holding companies under the Monopoly Regulation and Fair Trade Act (including
financial holding companies under the Financial Holding Companies Act; hereafter referred to as a holding company in this Article)
from its subsidiary (referring to such domestic corporations that have been invested by the corresponding holding company and that
also meet the criteria prescribed by the Presidential Decree in consideration of the holding company s equity investment ratio in
the subsidiary; hereafter the same shall apply in this Article), such excess amount shall not be included in gross income in calculating
the income amount for each business year: <Amended by Act No. 6293, Dec. 29, 2000; Act No. 6558, Dec. 31, 2001; Act No. 7005,
Dec. 30, 2003; Act No. 7317, Dec. 31, 2004>
1.The amount computed by multiplying the dividend amount received from the subsidiary by 90/100 where a holding company has invested
in excess of 80/100 (40/100 in case of stock-listed or Association-registered corporations) of the corresponding subsidiary s total
issued equity stocks or equity investment shares: Provided, That the amount equivalent to the total dividend amount received from
the corresponding subsidiary where a holding company has invested in all of the subsidiary s issued stocks or equity investment shares;
2.The amount computed by multiplying the dividend amount received from the subsidiary by 60/100 where a holding company has invested
in the corresponding subsidiary at a ratio lower than that provided in subparagraph 1;
3.The amount calculated according to the Presidential Decree considering the ratio of non-inclusion of interest on borrowed money
into gross income pursuant to the provisions of subparagraphs 1 and 2, and the ratio of the amount invested in the subsidiary to
the total asset of the holding company, etc., in case where interest on borrowed money has been paid by the holding company in each
business year; and
4.The amount computed by multiplying the dividend amount received from the subsidiary by the ratio prescribed by the Presidential
Decree considering the corresponding subsidiary s equity investment in other corporations in case it made equity investment in any
company affiliated therewith under the Monopoly Regulation and Fair Trade Act (hereafter referred to as an affiliated company in
this subparagraph), or in other domestic corporations than affiliated company in excess of 1/100 of its total issued equity stocks
or investment amount: Provided, That the cases falling under any of the following items shall be excluded:
(a) In case where a subsidiary pursuant to the provisions of subparagraph 1-3 of Article 2 of Monopoly Regulation and Fair Trade Act
has invested in a business-related granddaughter company decided by the Fair Trade Commission;
(b) In case where a subsidiary pursuant to the provisions of Article 2 (1) 2 of the Financial Holding Companies Act invests in a granddaughter
company pursuant to the provisions of subparagraph 3 of the same paragraph; and
(c) In case where a subsidiary pursuant to the provisions of Article 2 (1) 2 of the Financial Holding Companies Act conforms to the
institutional investor pursuant to the provisions of subparagraph 6 of Article 18.
(2)The provisions of paragraph (1) shall not apply to received dividend amounts accrued from a holding company s holding of equity
stocks, etc. of its subsidiary within three months prior to the subsidiary s base date for dividend distribution. <Amended by
Act No. 6293, Dec. 29, 2000>
(3)In applying the provisions of paragraphs (1) and (2), necessary matters for the method for computing the ratio of equity investment
by a holding company in its subsidiary, amounts excluded from gross income, submission of a detail written statement of received
dividend amounts, etc. shall be prescribed by the Presidential Decree. <Amended by Act No. 6293, Dec. 29, 2000>
[This Article Newly Inserted by Act No. 6047, Dec. 28, 1999]
Article 18-3 (Non-Inclusion of Received Dividend Amount in Calculation of Gross Income)
(1)Where the sum computed pursuant to the provisions of subparagraphs 1 and 2 exceeds the sum computed pursuant to the provisions
of subparagraph 3, of dividend amounts received by a domestic corporation from another domestic corporation in which the former has
made an equity investment, such an excess amount shall not be included in gross income in calculating the income amount for each
business year: <Amended by Act No. 7317, Dec. 31, 2004>
1.The amount computed by multiplying dividend amount received from an invested domestic corporation by 50/100 where a domestic corporation
has invested in excess of 50/100 (30/100 in case of stock-listed or Association-registered corporations) of the total issued equity
stocks or investment shares of such an invested domestic corporation: Provided, That the total number of issued stocks or total amount
of investment has been invested, it refers to the amount corresponding to the total received dividend from other domestic corporations;
2.The amount arrived by multiplying the dividend amount received from an invested domestic corporation by 30/100 where the corresponding
investing domestic corporation has invested at a ratio lower than that provided in subparagraph 1; and
3.The amount calculated according to the Presidential Decree considering the ratio of non-inclusion of interest on borrowed money
into gross income pursuant to the provisions of subparagraphs 1 and 2, and the ratio of the amount invested in other domestic corporations
to the total asset of the domestic corporation concerned, etc., in case where interest on borrowed money has been paid by the holding
company in each business year.
(2)The provisions of paragraph (1) shall not apply to the following received dividend amounts:
1.Deleted; <by Act No. 6558, Dec. 31, 2001>
2.Received dividend amounts accrued from holding stocks, etc. acquired within three months prior to its base date for dividend distribution;
3.Received dividend amounts that are subject to the provisions of subparagraph 6 of Article 18 and Article 18-2; and
4.Dividend amounts received from a corporation falling under each subparagraph of Article 51-2 (1).
(3) In applying the provisions of paragraphs (1) and (2), necessary matters for the method for computing the ratio of equity investment,
the amount excluded from gross income, the submission of a detail written statement of received dividend amounts, etc. shall be prescribed
by the Presidential Decree.
[This Article Newly Inserted by Act No. 6293, Dec. 29, 2000]
Sub-Section 3 Calculation of Deductible Expenses
Article 19 (Scope of Deductible Expenses)
(1) Deductible expenses shall mean the amount of losses generated by transactions which cause a reduction in the net assets of the
concerned corporation, excluding return of capital or financing, disposition of surplus funds, and other transactions as provided
for in this Act.
(2) The losses under the provisions of paragraph (1) shall be losses or expenses generated or spent in connection with the business
of the corporation which are generally accepted as normal or directly related to profit, except as otherwise prescribed by this Act
and other Acts and subordinate statutes.
(3) Matters necessary for the scope and types of losses under the provisions of paragraphs (1) and (2) shall be prescribed by the
Presidential Decree.
Article 20 (Non-Inclusion of Losses from Capital Transactions, etc. in Calculation of Deductible Expenses)
Losses under each of the following subparagraphs shall not be included in deductible expenses in calculating the income amount for
each business year of a domestic corporation:
1.The amount appropriated as deductible expenses in the disposition of surplus funds: Provided, That this shall not apply to piece
rates as prescribed by the Presidential Decree;
2.Dividends on interest during construction; and
3.Margins from the discount issue of stocks.
Article 21 (Non-Inclusion of Various Taxes and Public Imposts in Calculation of Deductible Expenses)
Taxes and public imposts under each of the following subparagraphs shall not be included in the calculation of deductible expenses
for each business year of a domestic corporation: <Amended by Act No. 6293, Dec. 29, 2000; Act No. 6558, Dec. 31, 2001>
1.Corporate taxes or income-proportional resident taxes paid or to be paid for each business year (including the amount of foreign
corporate tax under Article 57), the tax amount paid or to be paid (including additional taxes) due to non-performance of duties
as provided in tax-related Acts, and the sales tax amount of value-added tax (excluding cases exempted from value-added tax or as
prescribed by the Presidential Decree);
2.The unpaid amount of special consumption tax, liquor tax, or transport tax on unsold manufactured goods: Provided, That this shall
not apply where the price of the manufactured goods includes a reasonable tax amount;
3.Deleted; <by Act No. 6558, Dec. 31, 2001>
4.Fines and penalties (including appropriate amounts for fines or penalties under noticed dispositions), fines for negligence (including
penalties and fines), additional charges for default, and fees for delinquency in payment;
5.Public imposts that are not mandatory under Acts and subordinate statutes; and
6.Public imposts that are imposed for non-performance of duties, or violation of prohibited or restricted acts under Acts and subordinate
statutes.
Article 22 (Non-Inclusion of Marginal Losses from Evaluation of Assets in Calculation of Deductible Expenses)
In the calculation of the income amount for each business year of a domestic corporation, the marginal losses from the evaluation
of assets in its possession shall not be included in deductible expenses: Provided, That this shall not apply to evaluation marginal
losses generated by the evaluation of assets under the provisions of Article 42 (2) and (3).
Article 23 (Non-Inclusion of Depreciation Costs in Calculation of Deductible Expenses)
(1) In the calculation of the income amount for the concerned business year of a domestic corporation, depreciation costs of fixed
assets shall be included in deductible expenses only when they are appropriated as deductible expenses (referring to the amount appropriated
as losses in the confirmation of the settlement of accounts; hereinafter the same shall apply) within the scope of the amount calculated
under the conditions as prescribed by the Presidential Decree (hereafter referred to as the scope of depreciation amount in this
Article), and the portion of the appropriated amount in excess of the scope of depreciation amount shall not be included in the calculation
of deductible expenses.
(2) Fixed assets under the provisions of paragraph (1) shall mean buildings other than land, machinery and equipment, patent rights,
and other assets as prescribed by the Presidential Decree.
(3) Domestic corporations which appropriate depreciation costs under the provisions of paragraph (1) as deductible expenses shall
submit a detailed statement on depreciation costs to the chief of the district tax office having jurisdiction over the place of tax
payment under the conditions as prescribed by the Presidential Decree.
(4) In the application of the provisions of paragraph (1), matters necessary for the method of appropriation of depreciation costs
as deductible expenses and the settlement of the amount in excess of the scope of the depreciation amount shall be prescribed by
the Presidential Decree.
Article 24 (Non-Inclusion of Donations in Calculation of Deductible Expenses)
(1) Of donations made during each business year by a domestic corporation in consideration of social welfare, culture, arts, education,
religion, charity, or learning as prescribed by the Presidential Decree (hereinafter referred to as designated donations ), the
amount in excess of 5% of the amount obtained by subtracting the amount under subparagraph 2 from the amount under subparagraph 1
(hereafter referred to as the limit amount of inclusion in deductible expenses in this Article) and donations other than designated
donations shall not be included in deductible expenses in the calculation of the income amount for the concerned business year:
1.The income amount for the concerned business year (the amount prior to the inclusion of donations and designated donations under
the provisions of paragraph (2) in the calculation of deductible expenses; hereafter in this Article the same shall apply); and
2.Donations included in the calculation of deductible expenses under the provisions of paragraph (2) and the total amount of deficits
under the provisions of subparagraph 1 of Article 13.
(2)The provisions of paragraph (1) and Article 29 shall not apply to donations under each of the following subparagraphs: Provided,
That where the total amount of the donations under each of the following subparagraphs is in excess of the amount obtained by subtracting
the deficits under subparagraph 1 of Article 13 from the income amount of the concerned business year, the amount in excess shall
not be included in deductible expenses in the calculation of the income amount for the concerned business year:
1.The value of money and other valuables contributed to the State or a local government without compensation: Provided, That for contributed
items under application of the Act on the Regulation of Donations Collection, this shall be limited to items requisitioned under
the provisions of Article 5 (2) of the same Act;
2.The value of contributions for national defense and money and other valuables contributed for the consolation and comfort of soldiers
of the national armed forces; and
3.The value of money and other valuables contributed for victims of natural disasters.
(3) The amount of designated donations in excess of the limit for inclusion in deductible expenses which is not included in the calculation
of deductible expenses under the provisions of paragraph (1) shall be carried forward and included in the calculation of deductible
expenses for each business year which is completed within three years of the first day of the business year following the concerned
business year as prescribed by the Presidential Decree.
Article 25 (Non-Inclusion of Entertainment Expenses in Calculation of Deductible Expenses)
(1) Of the amount a domestic corporation spends as entertainment expenses (excluding the amounts falling under paragraph (2)) during
each business year, the amount in excess of the sum of the amounts under each of the following subparagraphs shall not be included
in deductible expenses in the calculation of the income amount for the concerned business year:
1.The amount obtained by multiplying 12,000,000 won (18,000,000 won for small and medium enterprises as prescribed by the Presidential
Decree) by the number of months for the concerned business year, and then dividing it by 12; and
2.The amount obtained by multiplying the revenue amount for the concerned business year (limited to the revenue amount as prescribed
by the Presidential Decree) by the rates under the following table: Provided, That for revenue amounts generated by transactions
with a person with a special relationship under the provisions of Article 52 (1), the appropriate amount shall be 20% of the amount
obtained by multiplying the revenue amount by the rates provided in the following table:
Revenue Amount
Rate
10,000,000,000 won or less
20/10,000
More than 10,000,000,000 won
and up to 50,000,000,000 won
20,000,000 wonï¼?
(10/10,000 of the amount in excess of 10,000,000,000 won)
More than 50,000,000,000 won
60,000,000 wonï¼?
(3/10,000 of the amount in excess of 50,000,000,000 won)
(2) Of entertainment expenses paid by a domestic corporation, entertainment expenses that are paid in excess of the amount prescribed
by the Presidential Decree on one occasion and that do not fall under any of the following subparagraphs shall not be included in
deductible expenses in the calculation of the income amount for each business year: <Amended by Act No. 6293, Dec. 29, 2000>
1.Entertainment expenses paid by credit cards under the Specialized Credit Financial Business Act (including items similar to credit
cards, as prescribed by the Presidential Decree; hereafter referred to as credit cards, etc. in this Article); and
2.Entertainment expenses paid by receiving delivery of an invoice under the provisions of Article 121 of this Act and Article 163
of the Income Tax Act or a tax invoice under the provisions of Article 16 of the Value-Added Tax Act.
(3) If sales slips, that are issued in the name of a member shop of credit cards, etc. other than the one that does actually supply
the corresponding goods or services, are delivered, the corresponding payment amounts shall not be included in the entertainment
expenses provided in paragraph (2) 1 in applying the same subparagraph of the same paragraph. <Newly Inserted by Act No. 6293,
Dec. 29, 2000>
(4) Deleted. <by Act No. 6558, Dec. 31, 2001>
(5) Entertainment expenses in paragraphs (1) through (3) shall mean entertainment expenses and expenses of a similar nature spent
by a corporation in connection with its business, regardless whether such expenses are called social expenses, honoraria, or other
pretexts. <Amended by Act No. 6293, Dec. 29, 2000; Act No. 6558, Dec. 31, 2001>
Article 26 (Non-Inclusion of Excessive Expenses in Calculation of Deductible Expenses)
Of the losses under each of the following subparagraphs, the amount recognized as excessive or inappropriate as prescribed by the
Presidential Decree shall not be included in deductible expenses in the calculation of the income amount of a domestic corporation
for each business year: <Amended by Act No. 6558, Dec. 31, 2001>
1.Personnel/labor expenses;
2.Welfare expenses;
3.Travel expenses and education and training expenses;
4.Business expenses of a corporation operating an insurance business (including mutual aid projects under the Agricultural Cooperatives
Act and the Fisheries Cooperatives Act; hereinafter the same shall apply);
5.Losses generated or paid by a corporation as a result of the joint operation or management of an identical organization or business
with a person other than the concerned corporation; and
6.Expenses other than those under subparagraphs 1 through 5 recognized as having little direct connection to the business of the corporation
as prescribed by the Presidential Decree.
Article 27 (Non-Inclusion of Non-Business Expenses in Calculation of Deductible Expenses)
Of the expenditures of a domestic corporation during each business year, the amounts under each of the following subparagraphs shall
not be included in deductible expenses in the calculation of the income amount of the concerned business year:
1.The amount of expenses as prescribed by the Presidential Decree incurred by the acquisition and management of the assets which are
prescribed by the Presidential Decree and which are deemed to have no direct connection to the business of the concerned corporation;
and
2.Expenditures as prescribed by the Presidential Decree other than the amount of subparagraph 1, which are deemed to have no direct
connection to the business of the corporation.
Article 28 (Non-Inclusion of Paid Interest in Calculation of Deductible Expenses)
(1)Interest on loans under each of the following subparagraphs shall not be included in deductible expenses in the calculation of
the income amount for each business year of a domestic corporation:
1.Interest on debentures for which the creditor is unknown;
2.Of the interest, discount amount, or marginal profits on bonds and securities under the provisions of Article 16 (1) 1, 2, 6, and
9 of the Income Tax Act, the interest, discount amount, or marginal profits on bonds and securities as prescribed by the Presidential
Decree for which the person who received payment is unknown;
3.Interest on loans appropriated for construction capital as prescribed by the Presidential Decree; and
4.Of interest on loans paid during each business year by a domestic corporation which acquires or possesses assets falling under one
of the following items, the amount calculated under the conditions as prescribed by the Presidential Decree (limited to interest
on loans of an appropriate amount for the value of the concerned assets):
(a) Assets falling under the provisions of subparagraph 1 of Article 27; and
(b) Provisional payments, etc. to a person with a special relationship under the provisions of Article 52 (1) with no connection to
the business of the concerned corporation, and which are prescribed by the Presidential Decree.
(2)through (4)Deleted. <by Act No. 7317, Dec. 31, 2004>
(5)Where the provisions of paragraph (1) and the provisions of the Restriction of Special Taxation Act on the non-inclusion of interest
on payment in the calculation of deductible expenses apply simultaneously, they shall apply in the order as prescribed by the Presidential
Decree. <Amended by Act No. 7317, Dec. 31, 2004>
(6)Matters necessary for the scope and calculation of loans and interest on payment under the provisions of paragraph (1) shall be
prescribed by the Presidential Decree. <Amended by Act No. 7317, Dec. 31, 2004>
Sub-Section 4 Inclusion of Reserve Funds and Appropriation Funds in Calculation of Deductible Expenses
Article 29 (Inclusion of Reserve Fund for Proper Purpose Businesses in Calculation of Deductible Expenses)
(1)Where a non-profit domestic corporation (limited to organizations prescribed by the Presidential Decree in case of organizations
treated as corporations) appropriates reserve funds for proper purpose businesses as deductible expenses each business year in order
to carry out the proper purpose businesses of the corporation or designated donations (hereafter referred to as proper purpose businesses,
etc. in this Article), they shall be included in deductible expenses in the calculation of the income amount for the concerned business
year within the scope of the amount of the sum of the amounts under each of the following subparagraphs: <Amended by Act No. 6558,
Dec. 31, 2001; Act No. 7005, Dec. 30, 2003; Act No. 7117, Jan. 29, 2004>
1.Interest income amount under the provisions of Article 16 (1) 1 through 11 of the Income Tax Act;
2.Distributed funds of investment trust proceeds under the provisions of Article 17 (1) 5 of the Income Tax Act;
3. Interest amount generated by loans to members or associates for welfare projects of non-profit domestic corporations established
under special Acts; and
4.The amount obtained by multiplying the income from profit-making businesses other than under subparagraphs 1 through 3 by 50/100
(80/100 for a corporation which is established under the Act on the Establishment and Operation of Public-Service Corporations and
in which not less than 50/100 of the amount used for the proper purpose businesses is spent for the purpose of scholarships).
(2)Where a non-profit domestic corporation uses the reserve fund for proper purpose businesses appropriated as deductible expenses
under the provisions of paragraph (1) for proper purpose businesses, etc., it shall set off the amount in order beginning with the
business reserve funds for education appropriated for the business year. In this case, where there is a positive balance in the reserve
fund for proper purpose businesses as of the last day of the immediately prior business year and the amount spent for proper purpose
businesses in the concerned business year, the amount shall be deemed as having been spent from the reserve fund for proper purpose
businesses to be set off for the concerned business year, and the provisions of paragraph (1) shall apply accordingly.
(3)Where a non-profit domestic corporation with a balance in the reserve fund for proper purpose businesses included in the calculation
of deductible expenses under the provisions of paragraph (1) comes to fall under one of the following subparagraphs, the balance
shall be included in gross income in the calculation of the income amount for the business year which includes the date on which
such cause occurs:
1.Where it is dissolved;
2.Where the proper purpose businesses are all discontinued;
3.Where the approval of an organization treated as a corporation is cancelled or it is changed to a resident under the provisions
of Article 13 (3) of the Framework Act on National Taxes; and
4.Where the reserve funds for proper purpose businesses, etc. appropriated as losses are not used for proper purpose businesses by
the date on which 5 years pass from the last day of the business year (limited to the balance not used within 5 years).
(4)Where the balance of reserve funds for proper purpose businesses is included in the calculation of gross income under the provisions
of paragraph (3) 4, an appropriate amount of interest calculated under the conditions as prescribed by the Presidential Decree shall
be added to the corporate tax for the concerned business year and paid.
(5)A non-profit domestic corporation which wishes to be subject to the provisions of paragraph (1) shall keep in custody a detailed
statement on the appropriation and expenditure of the concerned reserve fund and submit it to the chief of the district tax office
having jurisdiction over the place of tax payment under the conditions as prescribed by the Presidential Decree. <Amended by Act
No. 7117, Jan. 29, 2004>
(6)Matters necessary for the scope of proper purpose businesses and the calculation of income generated by profit-making businesses
under the provisions of paragraph (1) shall be prescribed by the Presidential Decree.
Article 30 (Inclusion of Liability Reserve Fund, etc. in Calculation of Deductible Expenses)
(1) Where a domestic corporation operating an insurance business under the provisions of the Insurance Business Act and other Acts
has appropriated the liability reserve fund and contingency reserve fund as deductible expenses for each business year, they shall
be included in deductible expenses in the calculation of the income amount fore the concerned business year within the scope of the
amount calculated under the conditions as prescribed by the Presidential Decree.
(2) The liability reserve fund included in the calculation of deductible expenses under the provisions of paragraph (1) shall be included
in gross income in the calculation of the income amount for the following business year.
(3) A domestic corporation which wishes to be subject to the provisions of paragraph (1) shall submit a detailed statement on the
concerned reserve fund to the chief of the district tax office having jurisdiction over the place of tax payment under the conditions
as prescribed by the Presidential Decree.
(4) Matters necessary for the disposition of the contingency reserve fund included in the calculation of deductible expenses under
the provisions of paragraph (1) shall be prescribed by the Presidential Decree.
Article 31 (Inclusion of Policyholder Dividend Reserve Fund in Calculation of Deductible Expenses)
(1) Where a domestic corporation operating an insurance business appropriates a policyholder dividend reserve fund in order to pay
dividend to insurance policyholders as losses for each business year, this shall be included in deductible expenses in the calculation
of the income amount for the concerned business year within the scope of the amount calculated under the conditions as prescribed
by the Presidential Decree.
(2) Where a domestic corporation which has included the policyholder dividend reserve funds in the calculation of deductible expenses
under the provisions of paragraph (1) pays dividends to an insurance policyholder, it shall set them off in order beginning with
the policyholder dividend reserve fund appropriated for the business year.
(3) The policyholder dividend reserve funds included in the calculation of deductible expenses under the provisions of paragraph (1)
shall be set off under the provisions of paragraph (2) until the date on which 3 years have passed from the last day of the concerned
business year, and the balance remaining shall be included in gross income in the calculation of the income amount for the business
year which contains the date on which 3 years have passed.
(4) Where a balance of policyholder dividend reserve funds is included in gross income pursuant to the provisions of paragraph (3),
an amount equivalent to the interest computed pursuant to the Presidential Decree shall be paid in addition to the corporate tax
for the corresponding business year. <Newly Inserted by Act No. 6293, Dec. 29, 2000>
(5) Where a domestic corporation that included a balance of its policyholder dividend reserve fund in its deductible expenses pursuant
to the provisions of paragraph (1) comes to fall under any of the following subparagraphs, the balance shall be included in its gross
income for the business year which includes the date on which such events occur:
1.Where it is dissolved: Provided, That where it is dissolved due to a merger and the balance is taken over by the succeeding corporation
that operates insurance business, this shall not apply; and
2.Where its license for insurance business is revoked.
(6) In applying the provisions of paragraphs (2) through (5), the amount taken over by the merged corporation under the provisions
of the proviso of paragraph (5) 1 shall be deemed to have been included in its deductible expenses by the merged corporation in the
business year where the extinguished corporation included the same in its deductible expenses. <Amended by Act No. 6293, Dec.
29, 2000>
(7) A domestic corporation that wishes to be subject to the provisions of paragraph (1) shall submit a detailed written statement
on the corresponding reserve to the chief of the district tax office having jurisdiction over the place of tax payment under the
conditions as provided in the Presidential Decree.
Article 32 Deleted.
<by Act No. 6293, Dec. 29, 2000>
Article 33 (Inclusion of Allowance for Severance and Retirement Benefits in Calculation of Deductible Expenses)
(1)Where a domestic corporation appropriates an allowance for severance and retirement benefits in order to pay severance and retirement
benefits to officers or employees as deductible expenses for each business year, this shall be included in the calculation of deductible
expenses in the calculation of the income amount for the concerned business year within the scope of the amount calculated under
the conditions as prescribed by the Presidential Decree.
(2) Where a domestic corporation which includes the allowance for severance and retirement benefits in the calculation of deductible
expenses under the provisions of paragraph (1) pays severance and retirement benefits to an officer or employee, it shall pay them
first from the concerned allowance for severance and retirement benefits.
(3) Where a domestic corporation which includes the allowance for severance and retirement benefits in the calculation of deductible
expenses under the provisions of paragraph (1) is merged or divided, the allowance for severance and retirement benefits of the said
corporation as of the date of the registration of the merger or the date of the registration of the division which is transferred
to the merged corporation, the corporation established by division, or counterpart corporation to the division and merger (hereinafter
referred to as a merged corporation, etc. ) shall be deemed the allowance for severance and retirement benefits of the merged corporation
as of the date of the registration of the merger or the date of the registration of the division. <Amended by Act No. 6558, Dec.
31, 2001>
(4) Where a businessman comprehensively transfers his business to a domestic corporation, the provisions of paragraph (3) shall apply
mutatis mutandis.
(5) A domestic corporation which wishes to be subject to the provisions of paragraph (1) shall submit a detailed statement on the
allowance for severance and retirement benefits to the chief of the district tax office having jurisdiction over the place of tax
payment under the conditions as prescribed by the Presidential Decree.
(6) Matters necessary for the disposition of the allowance for severance and retirement benefits under the provisions of paragraphs
(1) through (4) shall be prescribed by the Presidential Decree.
Article 34 (Inclusion of Bad Debt Allowance, etc. in Calculation of Deductible Expenses)
(1) Where a domestic corporation appropriates a bad debt allowance in order to cover bad debts from credit accounts, loans, and other
corresponding debentures as deductible expenses for each business year, they shall be included in deductible expenses in the calculation
of the income amount for the concerned business year within the scope of the amount calculated under the conditions as prescribed
by the Presidential Decree.
(2)The amounts of bonds which a domestic corporation possesses and which cannot be collected due to the obligor s bankruptcy and other
causes as prescribed by the Presidential Decree (hereafter referred to as bad debt expenses in this Article) shall be included
in deductible expenses in the calculation of the income amount for the concerned business year.
(3) The provisions of paragraphs (1) and (2) shall not apply to bonds falling under any of the following subparagraphs:
1.Claims for compensation arising from guarantees of obligation (excluding guarantees of obligation as prescribed by the Presidential
Decree); and
2.Payments falling under Article 28 (1) 4 (b).
(4) In case that any domestic corporation that appropriates bad debt allowance on the book as deductible expenses in accordance with
paragraph (1) and has bad debt expense accruing thereto under paragraph (2), such bad debt expenses shall be offset by its bad debt
allowance first and then the remaining amount of such bad debt allowance after offsetting such bad debt expenses shall be included
in gross income in the calculation of the income amount for the next business year. <Amended by Act No. 6558, Dec. 31, 2001>
(5) The amount of bad debt expenses included in the calculation of deductible expenses under the provisions of paragraph (2) which
is later collected shall be included in gross income in the calculation of the income amount for the business year which includes
the date of the collection.
(6) Where a domestic corporation which includes the bad debt allowance in the calculation of deductible expenses under the provisions
of paragraph (1) is merged or divided, the bad debt allowance of the said corporation as of the date of the registration of the merger
or the date of the registration of the division which is transferred to the merged corporation, etc. shall be deemed the bad debt
allowance of the merged corporation, etc. as of the date of the registration of the merger or the date of the registration of the
division. <Amended by Act No. 6558, Dec. 31, 2001>
(7) A domestic corporation which wishes to be subject to the provisions of paragraphs (1) and (2) shall submit a detailed statement
on the bad debt allowance and the bad debt expenses to the chief of the district tax office having jurisdiction over the place of
tax payment under the conditions as prescribed by the Presidential Decree.
(8) Matters necessary for credit accounts, loans, and other corresponding debentures, the scope of bad debt expenses, and the disposition
of the bad debt allowance and bad debt expenses under the provisions of paragraphs (1) and (2) shall be prescribed by the Presidential
Decree.
Article 35 (Inclusion of Allocation for Payment of Claims for Compensation in Calculation of Deductible Expenses)
(1) Where a corporation prescribed by the Presidential Decree among domestic corporations operating credit guarantee business under
Acts appropriates an allocation for payment of claims for compensation as deductible expenses each business year, this shall be included
in deductible expenses in the calculation of income amount for the corresponding business year within the scope of the amount calculated
under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 6293, Dec. 29, 2000>
(2) The allocation for payment of claims for compensation included in the calculation of deductible expenses under the provisions
of paragraph (1) shall be included in gross income in the calculation of the income amount for the following business year.
(3) A domestic corporation which wishes to be subject to the provisions of paragraph (1) shall submit a detailed statement on the
allocation for payment of claims for compensation to the chief of the district tax office having jurisdiction over the place of tax
payment under the conditions as prescribed by the Presidential Decree.
(4) Matters necessary for the disposition of the allocation for payment of claims for compensation under the provisions of paragraph
(1) shall be prescribed by the Presidential Decree.
Article 36 (Inclusion of Value of Assets Acquired through Treasury Subsidies, etc. for Business in Calculation of Deductible Expenses)
(1) Where a domestic corporation receives assets, including the payment of subsidies, under the Act on Budgeting and Management of
Subsidies, the Local Finance Act and other Acts prescribed by the Presidential Decree (hereafter referred to as the National Treasury
subsidies, etc. in this Article) and uses them to acquire or improve assets used for business as prescribed by the Presidential
Decree (hereafter referred to as the assets used for business in this Article) by the last day of the business year which includes
the date of said payment, an appropriate amount for the value of the National Treasury subsidies, etc. used for the acquisition or
improvement of the assets used for business may be included in deductible expenses in the calculation of the income amount for the
concerned business year as prescribed by the Presidential Decree. <Amended by Act No. 6047, Dec. 28, 1999; Act No. 6558, Dec.
31, 2001>
(2)Where a domestic corporation which does not use the National Treasury subsidies, etc. for the acquisition or improvement of assets
used for business by the last day of the business year which includes the date of payment intends to do so within 1 year of the first
day of the following business year, the provisions of paragraph (1) shall apply mutatis mutandis, and they may be included in the
calculation of deductible expenses. In this case, uses shall be deemed intends to use . <Amended by Act No. 6047, Dec. 28,
1999>
(3)Where a domestic corporation which has included an appropriate amount for the National Treasury subsidies, etc. in the calculation
of deductible expenses under the provisions of paragraph (2) fails to use such amount for the acquisition or improvement of assets
used for business within the time limit, or discontinues its business or goes bankrupt before using it, the unused amount shall be
included in gross income in the calculation of the income amount for the business year which includes the date of the occurrence
of such cause: Provided, That the same shall not apply to a case where such domestic corporation is merged or divided and the merged
corporation, etc. succeeds the amount. In this case, the amount shall be deemed included in deductible expenses by such merged corporation,
etc. under the provisions of paragraph (2). <Amended by Act No. 6047, Dec. 28, 1999; Act No. 6558, Dec. 31, 2001>
(4) In the application of paragraph (1), if any domestic corporation receives the National Treasury subsidies, etc. in assets, not
in money and uses such assets for its business operations, the use of such assets shall be deemed that assets for the business are
acquired and used for business improvements. <Newly Inserted by Act No. 6558, Dec. 31, 2001>
(5) A domestic corporation which wishes to be subject to the provisions of paragraphs (1) and (2) shall submit a detailed statement
on the National Treasury subsidies, etc., the assets used for business acquired though the National Treasury subsidies, etc. (in
case of paragraph (2), a plan for use of the National Treasury subsidies, etc.) to the chief of the district tax office having jurisdiction
over the place of tax payment under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 6047, Dec. 28,
1999>
(6)In the application of the provisions of paragraphs (1) through (3), matters necessary for the amount included in the calculation
of deductible expenses, the amount included in the calculation of gross income, and the method of calculation shall be prescribed
by the Presidential Decree.
Article 37 (Inclusion of Value of Fixed Assets Acquired through Construction Charges in Calculation of Deductible Expenses)
(1)Where a domestic corporation operating a business falling under one of the following subparagraphs is offered and receives fixed
assets which make up the facilities such as land from the persons who utilize electricity, gas, and heating, etc., or from persons
who receive benefit from the facilities in order to operate the facilities necessary for the business, or where it receives money,
etc. (hereafter referred to as construction charges in this Article) and uses it for the acquisition of fixed assets which constitute
the concerned facilities by the last day of the business year which includes the date of receiving the money, etc., the value of
the fixed assets (where they are acquired through construction charges, the appropriate amount of the construction charges used for
the acquisition of the fixed assets) may be included in deductible expenses in the calculation of the income amount for the concerned
business year under the conditions as prescribed by the Presidential Decree: <Amended by Act No. 7317, Dec. 31, 2004>
1.Electricity service business under the Electric Utility Act;
2.Urban gas business under the Urban Gas Business Act;
3.Liquefied petroleum gas replenishing business, collective liquefied petroleum gas providing business, and liquefied petroleum gas
sales business under the Safety Control and Business of Liquefied Petroleum Gas Act;
4.Integrated energy providing business under the provisions of subparagraph 2 of Article 2 of the Integrated Energy Supply Act; and
5.Business similar to those under subparagraphs 1 through 4 and as prescribed by the Presidential Decree.
(2) The provisions of Article 36 (2) and (3) shall apply mutatis mutandis with regard to the inclusion of cases of fixed assets acquired
through construction charges in the calculation of deductible expenses.
(3) A domestic corporation which wishes to be subject to the provisions of paragraphs (1) and (2) shall submit a detailed statement
on the fixed assets and construction charges received and the fixed assets acquired through construction charges (in case of paragraph
(2), a plan for use of construction charges) to the chief of the district tax office having jurisdiction over the place of tax payment
under the conditions as prescribed by the Presidential Decree.
(4) In the application of the provisions of paragraphs (1) and (2), matters necessary for the amount included in the calculation of
deductible expenses, the amount included in the calculation of gross income, and the method of calculation shall be prescribed by
the Presidential Decree.
Article 38 (Inclusion of Value of Fixed Assets Acquired through Insurance Marginal Profits in Calculation of Deductible Expenses)
(1) Where a domestic corporation receives payment of insurance money due to the destruction or damage of fixed assets and uses the
money for the acquisition of fixed assets of the same type to replace the destroyed fixed assets or for the improvement of the damaged
fixed assets (including the improvement of acquired fixed assets) by the last day of the business year which includes the date of
the payment, an appropriate amount for the insurance marginal profits used for the acquisition or improvement of fixed assets may
be included in deductible expenses in the calculation of the income amount for the concerned business year as prescribed by the Presidential
Decree.
(2)The provisions of Article 36 (2) and (3) shall apply mutatis mutandis with regard to the inclusion of cases of acquisition or improvement
of fixed assets through insurance marginal profits in the calculation of deductible expenses. In this case, 1 year in Article 36
(2) shall be deemed 2 years .
(3) A domestic corporation which wishes to be subject to the provisions of paragraphs (1) and (2) shall submit a detailed statement
on the insurance money received and the fixed assets acquired or improved through insurance marginal profits (in case of paragraph
(2), a plan for use of insurance marginal profits) to the chief of the district tax office having jurisdiction over the place of
tax payment under the conditions as prescribed by the Presidential Decree.
(4) In the application of the provisions of paragraphs (1) and (2), matters necessary for the amount included in the calculation of
deductible expenses, the amount included in the calculation of gross income, and the method of calculation shall be prescribed by
the Presidential Decree.
Article 39 Deleted.
<by Act No. 6558, Dec. 31, 2001>
Sub-Section 5 Period of Accrual of Gross Income and Deductible Expenses
Article 40 (Business Year of Accrual of Gross Income and Deductible Expenses)
(1) The business year of accrual of gross income and deductible expenses of a domestic corporation shall be the business year which
includes the date on which the concerned gross income and deductible expenses are settled.
(2) Matters necessary for the scope of the business year of accrual of gross income and deductible expenses under the provisions of
paragraph (1) shall be prescribed by the Presidential Decree.
Article 41 (Acquisition Value of Assets)
(1) The acquisition value of assets acquired by a domestic corporation through purchase, production, exchange, and donation shall
be the amounts under each of the following subparagraphs:
1.For assets purchased from another person, the amount of the total of the purchase price and any incidental costs;
2.For assets acquired through the corporation s own manufacture, production, construction, or other corresponding method, the amount
of the total of the cost of production and any incidental costs; and
3.For assets acquired other than those under subparagraphs 1 and 2, the amount as prescribed by the Presidential Decree.
(2) Matters necessary for the calculation of the acquisition value of assets, such as the scope of purchase price and incidental costs,
under the provisions of paragraph (1) shall be prescribed by the Presidential Decree.
Article 42 (Evaluation of Assets and Liabilities)
(1) Where the book value of assets and liabilities possessed by a domestic corporation increases or decreases (excluding depreciation;
hereafter referred to as evaluation in this Article), the book value of the concerned assets and liabilities in the calculation
of the income amount for the business year which includes the date of the evaluation and each subsequent business year shall be the
value before the evaluation: Provided, That this shall not apply to cases falling under any of the following subparagraphs:
1.Deleted; <by Act No. 6558, Dec. 31, 2001>
2.Evaluation of fixed assets under the Insurance Business Act and other Acts and subordinate statutes (limited to amount of increase);
and
3.Evaluation of inventory and other assets and liabilities as prescribed by the Presidential Decree.
(2) Assets and liabilities under the provisions of paragraph (1) 3 shall be evaluated separately as assets or liabilities by the method
as prescribed by the Presidential Decree.
(3) For assets falling under any of the following subparagraphs, the book value may be reduced by the method as prescribed by the
Presidential Decree, notwithstanding the provisions of paragraphs (1) and (2): <Amended by Act No. 6558, Dec. 31, 2001>
1.Inventory which cannot be sold at the normal price due to damage, spoilage, or other causes;
2.Fixed assets which are damaged or broken due to natural disasters, fires, or other causes as prescribed by the Presidential Decree;
3.Stocks as prescribed by the Presidential Decree for which the issuing corporation does not honor the concerned stocks; and
4.In case any corporation that has issued stocks, etc. goes bankrupt, the relevant stocks, etc.
(4) A domestic corporation which evaluates assets and liabilities under the provisions of paragraphs (2) and (3) shall submit a detailed
statement on the evaluation of the concerned assets and liabilities to the chief of the district tax office having jurisdiction over
the place of tax payment under the conditions as prescribed by the Presidential Decree.
(5) Matters necessary for the disposition of evaluation marginal profits and evaluation marginal losses arising from the evaluation
of assets and liabilities under the provisions of paragraphs (2) and (3) shall be prescribed by the Presidential Decree.
Article 43 (Application of Corporate Accounting Standards and Practices)
In the calculation of the income amount for each business year of a domestic corporation, where the concerned corporation applies
corporate accounting standards which are generally acknowledged as fair and proper in the business year of accrual of gross income
and deductible expenses, and in the acquisition and evaluation of assets and liabilities, or continuously applies such practices,
the concerned corporate accounting standards or practices shall be followed except as otherwise provided in this Act and the Restriction
of Special Taxation Act.
Sub-Section 6 SpecialCasesconcerningMergers and Divisions
Article 44 (Inclusion of Reasonable Amount of Merger Evaluation Marginal Profits in Calculation of Deductible Expenses)
(1) For mergers which meet the conditions under each of the following subparagraphs, where the merged corporation evaluates and succeeds
to the assets of the extinguished corporation, an appropriate amount for merger evaluation marginal profits for the concerned assets
from the value of the assets acquired by succession (limited to assets prescribed by the Presidential Decree) may be included as
deductible expenses in the calculation of the income amount for the business year which includes the date of the registration of
the merger, under the conditions as prescribed by the Presidential Decree: <Amended by Act No. 6558, Dec. 31, 2001>
1.Where a merger occurs between domestic corporations which have continued to operate their businesses for one year or more as of
the date of registration of the merger;
2.Where the total amount of the price received by stockholders of an extinguished corporation in return for such merger from the merged
corporation is 95% or more of the value of the stocks; and
3.Where the merged corporation continues to operate a business it received by succession from the extinguished corporation until the
last day of the business year which includes the date of the registration of the merger.
(2) Where a merged corporation which includes an appropriate amount for merger evaluation marginal profits in the calculation of deductible
expenses under the provisions of paragraph (1) discontinues a business it acquired through succession from the extinguished corporation
within 3 years from the first day of the business year which follows the business year which includes the date of the registration
of the merger, the amount included in the calculation of deductible expenses shall be included as gross income in the calculation
of income for the business year which includes the date the business was discontinued.
(3) A merged corporation which wishes to be subject to the application of the provisions of paragraph (1) shall submit a detailed
statement on merger evaluation marginal profits to the chief of the district tax office having jurisdiction over the place of tax
payment under the conditions as prescribed by the Presidential Decree.
(4) In the application of the provisions of paragraphs (1) and (2), matters necessary for criteria for judgements regarding the continuance
or discontinuance of businesses acquired by succession, calculation of the amounts included in gross income and deductible expenses,
and the method for inclusion of gross income and deductible expenses in the calculation of income shall be prescribed by the Presidential
Decree.
Article 45 (Succession to Losses Carried Forward at Time of Merger)
(1) For mergers which meet the conditions under each of the following subparagraphs, where the merged corporation succeeds to the
assets of the extinguished corporation at book value, as of the date of the registration of the merger, the deficits of the extinguished
corporation under the provisions of subparagraph 1 of Article 13 shall be deemed the deficits of the merged corporation, and shall
be deducted from the calculation of tax base for each business year of the merged corporation as prescribed by the Presidential Decree
within the scope of the amount of income generated by the business acquired by succession: <Amended by Act No. 6558, Dec. 31,
2001>
1.Where mergers fall under each subparagraph of Article 44 (1);
2.Where the stocks, etc. which the stockholders, etc. of an extinguished corporation receive from a merged corporation are 10% or
more of the total stocks issued by the merged corporation or total investment as of the date of registration of the merger; and
3.Where a merged corporation maintains separate accounting under the provisions of Article 113 (3).
(2) Where a merged corporation which deducted the deficits of the extinguished corporation under the provisions of paragraph (1) discontinues
a business acquired by succession from the extinguished corporation within 3 years of the first day of the business year which follows
the business year which includes the date of the registration of the merger, the total amount deducted as deficits shall be included
as gross income in the calculation of the income amount for the business year which contains the date on which the business was discontinued.
(3) Where a merger is deemed to be a merger undertaken for the purpose of unjustly reducing tax payments as prescribed by the Presidential
Decree, the merged corporation may not deduct the deficits under the provisions of subparagraph 1 of Article 13 in the calculation
of the tax base for each business year.
(4) In the application of the provisions of paragraphs (1) through (3), matters necessary for criteria for judgements regarding the
discontinuance of businesses acquired by succession, the calculation of deficits to be deducted, and the inclusion of deducted deficits
as gross income in the calculation of the tax base for each business year shall be prescribed by the Presidential Decree.
Article 46 (Inclusion of Reasonable Amount for Division Evaluation Marginal Profits in Calculation of Deductible Expenses)
(1) For divisions which meet the conditions under each of the following subparagraphs (excluding spinoff), where the corporation established
through division or the corporation which is the counterpart of the division and merger evaluates and succeeds to the assets of the
divided corporation or the counterpart corporation to a corporation extinguished through division and merger, an appropriate amount
for division evaluation marginal profits for the concerned assets from the value of the assets acquired by succession (limited to
assets prescribed by the Presidential Decree) may be included as deductible expenses in the calculation of the income amount for
the business year which includes the date of the registration of the division, under the conditions as prescribed by the Presidential
Decree:
1.Where a domestic corporation which has continuously operated a business for 5 years or more as of the date of the registration of
the division is divided under the conditions as prescribed by the Presidential Decree;
2.Where the full amount of the cost of division received from the corporation established through division or the corporation which
is the counterpart of the division and merger by the stockholders of a divided corporation or counterpart corporation to a corporation
extinguished through division and merger (in case of division and merger, not less than the rate provided in Article 44 (1) 2) is
paid in stocks, and said stocks are allocated in proportion to the stocks in the divided corporation or counterpart corporation to
a corporation extinguished through division and merger held by each stockholder; and
3.Where the corporation established by division or the counterpart corporation to a division and merger continues to operate the business
acquired from the divided corporation or the counterpart corporation to a corporation extinguished through division and merger by
succession until the last day of the business year which includes the date on which the division was registered.
(2) Where any corporation established by a division or any counterpart corporation to a division and merger (referring to a merged
corporation in case any corporation established by a division or any counterpart corporation to a division and merger is merged with
another corporation) which includes an appropriate amount for division evaluation marginal profits in the calculation of deductible
expenses under the provisions of paragraph (1) discontinues a business it acquired through succession from a divided corporation
or a counterpart corporation to a corporation extinguished through division and merger within 3 years from the first day of the business
year following the business year which includes the date of the registration of the division, the amount included in deductible expenses
(referring to an amount equivalent to the amount of deductible expenses in case that any corporation established by a division or
a counterpart corporation to a division and merger is merged with another corporation and the merged corporation succeeds the amount
included in deductible expenses under paragraph (1) from such corporation established by a division or such counterpart corporation
to the division and merger) shall be included as gross income in the calculation of income for the business year which includes the
date the business was discontinued. In this case, if the merged corporation succeeds again the business that the corporation established
by a division or the counterpart corporation to the division and merger has succeeded from the divided corporation or the counterpart
corporation to the extinguished corporation that is merged through a division, such business shall not be deemed discontinued. <Amended
by Act No. 6558, Dec. 31, 2001>
(3) A corporation established by division or a counterpart corporation to a division and merger which wishes to be subject to the
application of the provisions of paragraph (1) shall submit a detailed statement on division evaluation marginal profits to the chief
of the district tax office having jurisdiction over the place of tax payment under the conditions as prescribed by the Presidential
Decree.
(4) In the application of the provisions of paragraphs (1) and (2), matters necessary for criteria for judgements regarding the continuance
or discontinuance of businesses acquired by succession, calculation of the amounts included in gross income and deductible expenses,
and the method for inclusion of income and deductible expenses in the calculation of income shall be prescribed by the Presidential
Decree.
Article 47 (Inclusion of Reasonable Amount for Asset Transfer Marginal Profits Due to Spinoff in Calculation of Deductible Expenses)
(1) Where a divided corporation acquires the stocks of a corporation established by a division or a counterpart corporation to a division
or merger and the conditions under each subparagraph of Article 46 (1) are met (in case of subparagraph 2 of the same paragraph,
the full amount must be in stocks), an appropriate amount for assets transfer marginal profits generated by the spinoff from the
value of the stocks concerned may be included as deductible expenses in the calculation of income for the business year which contains
the date of the registration of the spinoff, under the conditions as prescribed by the Presidential Decree. <Amended by Act No.
6558, Dec. 31, 2001>
(2) Where any corporation established by a division or any counterpart corporation to a division and merger (referring to any merged
corporation in case that any corporation established by a division or any counterpart corporation to a division and merger is merged
with another corporation) ceases to do the business it succeeds from any divided corporation that includes an amount equivalent to
transfer marginal profits in deductible expenses under paragraph (1), within 3 years from the date of the commencement of the business
year following the business year that includes the date on which such a division registration is made, the amount that is included
in deductible expenses under paragraph (1) (referring to the amount included in deductible expenses in accordance with paragraph
(3) in case that the amount falls under the same paragraph) shall be included in gross income in the calculation of income amount
for the business year that includes the date on which the business is discontinued. In this case, any merged corporation succeeds
again the business that the corporation established by a division or the counterpart corporation to the division and merger has succeeded
from any divided corporation, such business shall not be deemed discontinued. <Amended by Act No. 6558, Dec. 31, 2001>
(3) Where any merged corporation succeeds again the business that any corporation established by a division or any counterpart corporation
to a division and merger has succeeded from a divided corporation, such divided corporation may continue to include the amount included
in deductible expenses under paragraph (1) in deductible expenses without including such amount in gross income under the conditions
as prescribed by the Presidential Decree. <Newly Inserted by Act No. 6558, Dec. 31, 2001>
(4) A divided corporation which wishes to be subject to the provisions of paragraph (1) shall submit a detailed statement on transfer
marginal profits for assets generated by the division to the chief of the district tax office having jurisdiction over the place
of tax payment under the conditions as prescribed by the Presidential Decree.
(5) In the application of the provisions of paragraphs (1) through (3), matters necessary for the calculation of transfer marginal
profits, criteria for judgement on the discontinuation of businesses acquired by succession, calculation of the amounts included
in gross income and deductible expenses, and the method for inclusion of gross income and deductible expenses in the calculation
of income shall be prescribed by the Presidential Decree. <Amended by Act No. 6558, Dec. 31, 2001>
Article 48 (Special Cases of Calculation of Income for Corporations which Continue to Exist After Division)
(1) Where a domestic corporation continues to exist after a division (excluding spinoff), in the calculation of income for the business
year which includes the date on which the division registration of the concerned divided corporation is made, the amount of income
generated by the division, notwithstanding the provisions of Article 14 (1), shall be the amount calculated by balancing the amount
under subparagraph 1 with the amount under subparagraph 2, under the conditions as prescribed by the Presidential Decree:
1.The total amount of the cost of division that stockholders of a divided corporation receive due to the division from the corporation
established by division or the counterpart corporation to a division and merger; and
2.The decrease in the divided corporation s equity capital due to division (limited to divided business category).
(2) In the application of the provisions of paragraph (1), matters necessary for calculation of income amounts generated by the division
such as the total cost of the division and the calculation of the reduction of equity capital shall be prescribed by the Presidential
Decree.
Article 49 (Succession to Assets and Liabilities upon Merger and Division)
In case of the merger or division of domestic corporations, except where provided for in this Act or other Acts, in the calculation
of the income amount and the tax base for each business year of a corporation extinguished due to a merger, divided corporation,
or counterpart corporation to a corporation extinguished through division and merger (hereinafter referred to as an extinguished
corporation, etc. ), matters necessary for dispositions of the amounts included or not included in gross income or deductible expenses
in the calculation of the amount and the succession to that amount and other assets and liabilities by the merged corporation, etc.
shall be prescribed by the Presidential Decree.
Article 50 (Inclusion of Reasonable Amount for Asset Transfer Marginal Profits due to Exchange in Calculation of Deductible Expenses)
(1)Where assets as prescribed by the Presidential Decree which are fixed assets used directly for a business as prescribed by the
Presidential Decree by a domestic corporation which operates the concerned business for 2 years or more (hereafter referred to as
the fixed assets for business use in this Article) are exchanged for the same type of fixed assets for business use directly used
for the concerned business for 2 years or more by another domestic corporation (hereafter referred to as the assets acquired by
exchange in this Article) other than a person with a special relationship under the provisions of Article 52 (1) (including exchange
among many corporations as prescribed by the Presidential Decree), an appropriate amount for transfer marginal profit of the fixed
assets for business use generated by the exchange from the value of assets acquired by exchange may be included as deductible expenses
in the calculation of the income amount for the concerned business year under the conditions as prescribed by the Presidential Decree.
(2)The provisions of paragraph (1) shall apply only where a domestic corporation uses assets acquired by exchange for the same use
of that of immediately prior to the exchange until the last day of the business year which includes the date of the exchange.
(3)A domestic corporation which wishes to be subject to the provisions of paragraph (1) shall submit a detailed statement on the exchange
of assets to the chief of the district tax office having jurisdiction over the place of tax payment under the conditions as prescribed
by the Presidential Decree.
(4)In the application of the provisions of paragraph (1), matters necessary for the amount included in deductible expenses and the
method for inclusion of such amount in the calculation of gross income shall be prescribed by the Presidential Decree.
Sub-Section 7 Tax Exemption and Income Deduction
Article 51 (Non-Taxable Income)
Of the income of a domestic corporation for each business year, corporate tax shall not be levied on income accrued from the trust
estate of a charitable trust.
Article 51-2 (Income Deduction for Special Purpose Companies, etc.)
(1)Where any domestic corporation falling under any of the following subparagraphs pays not less than 90/100 of profits available
for dividends prescribed by the Presidential Decree, the amount shall be deducted from the calculation of income amount of the relevant
business year: <Amended by Act No. 6293, Dec. 29, 2000; Act No. 6558, Dec. 31, 2001; Act No. 7005, Dec. 30, 2003; Act No. 7117,
Jan. 29, 2004; Act No. 7317, Dec. 31, 2004>
1.A special purpose company under the Asset-Backed Securitization Act;
2.An investment company, private equity fund, and special purpose company pursuant to the Act on Business of Operating Indirect Investment
and Assets;
3.A corporate restructuring investment company under the Corporate Restructuring Investment Companies Act;
4.A real estate investment company for corporate restructuring and real estate investment company for consigned-management under the
Real Estate Investment Company Act;
5.A ship investment company pursuant to the Ship Investment Company Act; and
6.An investment company similar to those as provided in subparagraphs 1 through 5 which meets the following requirements:
(a) Its assets shall be used for an investment in plants and infrastructures, the development of resources, or a specific business
requiring a considerable time and money, whose profits are to be distributed to its stockholders;
(b) It shall have no business office, other than the headquarters, and no staff member and full-time officer;
(c) It shall exist for a limited period of not less than 2 years;
(d) It shall be a stock company under the Commercial Act or any other Act which is established in the form of incorporation by promoters;
(e) Its promoters shall not fall under any subparagraph of Article 4 (2) of the Corporate Restructuring Investment Company Act and
shall meet the requirements as set by the Presidential Decree;
(f) Its directors shall not fall under any subparagraph of Article 12 of the Corporate Restructuring Investment Company Act;
(g) Its auditor shall meet Article 17 of the Corporate Restructuring Investment Company Act. In this case, the corporate restructuring
investment company in the said Article shall be deemed the company ; and
(h) It shall satisfy the requirements as set by the Presidential Decree for the size of the capital and the report, etc. of the entrustment
and establishment of the asset management business and fund management business.
(2)Any person who intends to be subject to the application of the provisions of paragraph (1) shall file an application for income
deduction under the conditions as prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No. 6047, Dec. 28, 1999]
Sub-Section 8 Special Cases concerning Calculation of Income Amount
Article 52 (Repudiation of Wrongful Calculation)
(1) Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent
Regional Tax Office deems that the tax burden of a domestic corporation has been unjustly reduced through the wrongful calculation
of the income amount of the corporation in transactions with person with a special relationship as prescribed by the Presidential
Decree (hereinafter referred to as a person with a special relationship ), he may calculate the income amount for each business
year of the concerned corporation without regard to the wrongful calculation of the income amount of the corporation (hereinafter
referred to as wrongful calculation ).
(2) In the application of the provisions of paragraph (1), the standard for judgement shall be the prices applied or to be applied
in sound and generally-accepted practice and related activities in normal transactions between persons without a special relationship
(including premium rates, interest rates, rental rates, and exchange rates and other corresponding rates; hereafter referred to as
the market price in this Article).
(3) A domestic corporation shall submit a detailed statement reporting the particulars of transactions with a person with a special
relationship for each business year to the chief of the district tax office having jurisdiction over the place of tax payment under
the conditions as prescribed by the Presidential Decree.
(4) In the application of the provisions of paragraphs (1) through (3), matters necessary for the forms of wrongful calculation and
the assessment of market price shall be prescribed by the Presidential Decree.
Article 53 (Special Cases on Calculation of Income Amount from Transactions with Foreign Corporations, etc.)
(1) Where treaties are concluded between Korea and other countries in order to prevent double taxation (hereinafter referred to as
tax treaties ) on the transaction amount of transactions with foreign branches of domestic corporations or non-resident or foreign
corporations, the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent
Regional Tax Office may adjust and calculate the income amount for each business year of the corporation in accordance with the provisions
of the mutual agreed treaties.
(2) In the application of the provisions of paragraph (1), matters necessary for the application for settlement of the income amount
of a domestic corporation and the settlement procedures shall be prescribed by the Presidential Decree.
Article 54 (Regulations for Calculation of Income Amount)
Matters necessary for the calculation of the income amount for each business year of a domestic corporation which are not provided
for in this Act shall be prescribed by the Presidential Decree.
SECTION 2 Calculation of Tax Amount
Article 55 (Tax Rates)
(1) The corporate tax amount on the income for each business year of a domestic corporation shall be the amount calculated by applying
the following tax rates to the tax base under the provisions of Article 13 (hereinafter referred to as the calculated tax amount
, and in case that there is the corporate tax to be levied on the income accruing from the transfer of land, etc. under Article 55-2,
it shall be the sum of the amounts): <Amended by Act No. 6558, Dec. 31, 2001; Act No. 7005, Dec. 30, 2003>
Tax Base
Tax Rate
100,000,000 won or less
13/100 of tax base
More than 100,000,000 won
13,000,000 won ï¼?
25/100 of the amount in excess of 100,000,000 won
(2) For corporate tax on the income for each business year of a domestic corporation less than one year old, the amount obtained by
dividing the amount calculated for the business year by application of the provisions of Article 13 by the number of months in the
business year and multiplying by 12 shall be the tax base for the business year, and the tax amount obtained by multiplying the tax
amount calculated under the provisions of paragraph (1) by the number of months in the business year divided by 12 shall be the tax
amount. In the case, the calculation of the number of months shall be prescribed by the Presidential Decree.
Article 55-2 (Special Cases for Taxation on Income Accruing from Land Transfer)
(1)In case where a domestic corporation has transferred land and building (including any facilities and structures attached to such
building; hereafter referred to as land, etc. in this Article and Article 95-2) falling under any of the following subparagraphs,
it shall pay the tax amount calculated pursuant to the following subparagraphs in addition to the corporate tax amount calculated
by applying the tax rate pursuant to the provisions of Article 55 to the tax base pursuant to the provisions of Article 13 as corporate
tax on the transfer income of land, etc.: <Amended by Act No. 7005, Dec. 30, 2003>
1.In case the average price of land during the immediately preceding quarter in the area prescribed by the Presidential Decree, which
was investigated by the Minister of Construction and Transportation in accordance with the provisions of Article 125 of the National
Land Planning and Utilization Act, rises by not less than 3/100 compared with that during the quarter before the immediately preceding
quarter, or rises by not less than 10/100 compared with that during the same quarter of the preceding year, and any land, etc. located
in such area are transferred, a tax amount calculated by multiplying 10/100 (20/ 100 for any income accruing from the transfer of
unregistered land, etc.) by any income accruing from such transfer; and
2.In case a house(including annexed land) prescribed by the Presidential Decree has been transferred, tax amount calculated by multiplying
the transfer income of land, etc. by 30/100 (40/100 for any income accruing from transfer of unregistered land, etc.).
(2) The provisions of paragraph (1) shall not apply to any transfer income of the land, etc. falling under any of the following subparagraphs:
Provided, That the provisions of paragraph (1) shall apply to any transfer income of any unregistered land, etc.: <Amended by
Act No. 6852, Dec. 30, 2002>
1.Income accruing from the disposal of land, etc. that is made by the adjudication of bankruptcy;
2.Income accruing from the exchange, separation or integration of farmland that is cultivated by a corporation and prescribed by the
Presidential Decree; and
3.Income accruing from the grounds, prescribed by the Presidential Decree, including any land substitution disposition taken in accordance
with the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for the Residents and other Acts.
(3) The term unregistered land, etc. in paragraphs (1) and (2) means the land, etc. that any corporation transfers without registering
its acquisition thereof: Provided, That the same shall not apply to the land, etc. which is acquired on the condition of long-term
installment and of which the contract term makes it impossible to register its acquisition at the time when it is transferred, and
other land, etc. prescribed by the Presidential Decree.
(4) The transfer income of land, etc. shall be an amount obtained by subtracting the book value thereof at the time of transfer from
the transfer amount of land, etc.
(5) In the application of paragraphs (1) through (4), necessary matters concerning the method of calculating the transfer income of
land, etc. in the case of any loss from the transfer of such land during the relevant business year and the business year of accrual
of any profit or loss from the transfer of land, etc. shall be prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No. 6558, Dec. 31, 2001]
Article 56 Deleted.
<by Act No. 6558, Dec. 31, 2001>
Article 57 (Deduction of Tax Amount Paid in Foreign Country)
(1) Where the tax base for each business year of a domestic corporation includes income generated in a foreign country, and an amount
of foreign corporate tax on income generated in a foreign country as prescribed by the Presidential Decree (hereafter referred to
as the foreign corporate tax amount in this Article) has been paid or will be paid, the corporation may choose to be subject to
the application of a method under one of the following subparagraphs, notwithstanding the provisions of subparagraph 1 of Article
21: <Amended by Act No. 6558, Dec. 31, 2001>
1.Method of deducting the amount of the foreign corporate tax up to the limit (hereafter referred to as the deduction limit in this
Article) of the amount obtained by multiplying the corporate tax amount for the concerned business year (excluding any corporate
tax amount on any income accruing from the transfer of land, etc.) calculated under the provisions of Article 55 by the percentage
of the tax base for the concerned business year constituted by income generated in a foreign country (where the tax amount is reduced
or exempted under the Restriction of Special Taxation Act and other Acts and subordinate statutes, the percentage as prescribed by
the Presidential Decree) from the corporate tax amount for the concerned business year; and
2.Method of including the foreign corporate tax amount paid or to be paid on income generated in a foreign country in deductible expenses
in the calculation of the income amount for each business year.
(2)Where a foreign corporate tax amount in excess of the deduction limit is paid or will be paid to a foreign government, the amount
in excess may be carried forward in each business year within 5 years of the first day of the business year following the concerned
business year, and may be deducted within the scope of the deduction limit for each business year in which it is carried forward.
(3)The appropriate amount of the reduced or exempted amount of corporate tax on income a domestic corporation generates in a foreign
country which is a party to a tax treaty shall be the foreign corporate tax amount of the tax deduction amount or the amount included
in the calculation of deductible expenses under the provisions of paragraph (1), within the scope as prescribed by the concerned
tax treaty.
(4)Where the income amount for each business year of a domestic corporation includes profits from dividends or distribution of surplus
funds from a foreign company (hereafter referred to as revenue dividends amount in this Article), of the foreign corporate tax
amount levied on the income of the foreign subsidiary, the amount corresponding to the concerned revenue dividends calculated as
prescribed by the Presidential Decree shall be deemed the foreign corporate tax amount deducted or included in the calculation of
deductible expenses under the provisions of paragraph (1), within the scope of as prescribed by the tax treaty.
(5)The term foreign subsidiary in paragraph (4) means a foreign corporation with 20% or more of the total number of stocks issued
by or total amount of financing invested by a domestic corporation and which meets the requirements as prescribed by the Presidential
Decree.
(6)Matters necessary for the tax amount deducted or included in the calculation of deductible expenses under the provisions of paragraphs
(1) through (4) shall be prescribed by the Presidential Decree.
Article 58 (Tax Deduction for Losses in Disasters)
(1)Where a domestic corporation loses 30% or more of the total amount of assets for each business year as prescribed by the Presidential
Decree (hereafter referred to as the total amount of assets in this Article) due to natural disasters and other accidents (hereinafter
referred to as disasters ) and it is deemed difficult for it to pay taxes, the amount (limited to the value of lost asset) calculated
by multiplying the corporate tax amount under each of the following subparagraphs by the percentage of the total amount of assets
prior to the loss constituted by the value of the lost assets shall be deducted from the tax amount. In this case, the value of land
shall not be included in the value of the assets: <Amended by Act No. 7317, Dec. 31, 2004>
1.Corporate tax not yet paid as of the day of the occurrence of the disaster and corporate tax which must be paid (including additional
charges); and
2.Corporate tax on income for the business year which includes the date of the occurrence of the disaster.
(2)A domestic corporation which wishes to receive a tax amount deduction under the provisions of paragraph (1) shall apply to the
chief of the district tax office having jurisdiction over the place of tax payment under the conditions as prescribed by the Presidential
Decree.
(3)Where the chief of the district tax office having jurisdiction over the place of tax payment receives an application for corporate
tax deduction referred to in paragraph (1) 1 under the provisions of paragraph (2) (excluding those whose time limit for reporting
has not passed), he shall determine the amount to be deducted from tax amount and notify the concerned corporation thereof.
(4)In the application of the provisions of paragraphs (1) through (3), matters necessary for the tax deduction amount for disasters
such as the calculation of the percentage of lost assets shall be prescribed by the Presidential Decree.
Article 58-2 (Tax Deduction for Agricultural Income Tax)
(1)The agricultural income tax amount paid by a domestic corporation for each business year shall be deducted from its corporate tax
amount payable for the corresponding business year: Provided, That where the agricultural income tax amount exceeds its corporate
tax amount, such excess amount shall not be refunded.
(2)A domestic corporation that intends to get tax deducted pursuant to paragraph (1) shall apply to the chief of the district tax
office having jurisdiction over the place of tax payment under the conditions as prescribed by the President Decree.
[This Article Newly Inserted by Act No. 6293, Dec. 29, 2000]
Article 58-3 (Tax Deduction following Correction due to Wrongful Accounting Handling)
(1) If a domestic corporation has received correction pursuant to the provisions of Article 66 (2) 4, the overpaid tax amount shall
be orderly deducted from the corporate tax amount of each business year that concludes within 5 years from the starting date of the
business year to which the correction date belongs.
(2) In applying the provisions of paragraph (1), in case the domestic corporation has payable tax for a business year before the business
year where the correction date belongs according to a revised report pursuant to the provisions of Article 45 of the Framework Act
on National Taxes, the overpaid tax pursuant to the provisions of paragraph (1) shall be deducted from the payable tax beforehand.
(3) The concrete methods and procedures relating to tax deduction pursuant to paragraphs (1) and (2) shall be prescribed by the Presidential
Decree.
[This Article Newly Inserted by Act No. 7005, Dec. 30, 2003]
Article 59 (Calculation of Amount of Tax Reduction/Exemption and Tax Deduction)
(1) In the application of this Act and other Acts, where the provisions on the reduction and exemption of corporate tax and the provisions
on the tax deduction amount apply simultaneously, they shall apply in the order of the following subparagraphs, except where provided
otherwise. In this case, where the amount of the sum of subparagraphs 1 and 2 excesses the corporate tax amount (excluding the corporate
tax on income accruing from the transfer of land, etc. and additional tax) to be paid by the corporation, the amount in excess shall
be deemed not to exist: <Amended by Act No. 6558, Dec. 31, 2001; Act No. 7005, Dec. 30, 2003>
1.Reduction and exemption (including exemption) of the tax amount on income for each business year;
2.Unconfirmed tax deduction amount of the deduction carried forward;
3.Confirmed tax deduction amount of the deduction carried forward.
In this case, where the tax deduction amount generated during the concerned business year and the carried forward amount not deducted
are together, the carried forward amount not deducted shall be deducted first; and
4. Tax deduction pursuant to the provisions of Article 58-3. In case there are tax deduction concerned and tax deduction carried forward,
the tax deduction carried forward shall be deducted beforehand.
(2) Where taxes are reduced or exempted under the provisions of paragraph (1) 1, the amount of the tax reduction or exemption shall
be the amount obtained by multiplying the calculated tax amount (excluding the corporate tax on income accruing from the transfer
of land, etc.) by the percentage (where it is in excess of 100%, it shall be 100%) of the tax base under the provisions of Article
13 constituted by the reduced or exempted income (in case of reduction and exemption, the amount obtained by multiplying such amount
by the percentage of the concerned reduction and exemption), except where provided otherwise. <Amended by Act No. 6558, Dec. 31,
2001>
(3) Matters necessary for the method for application to extinguished corporations, etc. which received tax reduction and exemption
and tax deduction under each subparagraph of paragraph (1) in cases of merger or division and the calculation of tax reduction and
exemption and the amount of tax deduction under the provisions of paragraphs (1) and (2) shall be prescribed by the Presidential
Decree.
SECTION 3 Report and Payment
Article 60 (Report on Tax Base, etc.)
(1) A domestic corporation with a duty to pay taxes shall report the corporate tax base and tax amount on income for the concerned
business year within 3 months of the last day of each business year to the chief of the district tax office having jurisdiction over
the place of tax payment under the conditions as prescribed by the Presidential Decree.
(2) The documents under each of the following subparagraphs shall be attached to the report under the provisions of paragraph (1):
1.The balance sheet, profits and losses invoice, and profits surplus funds disposition invoice (or deficits settlement statement)
prepared by applying corporate accounting standards mutatis mutandis;
2.The tax settlement invoice prepared under the conditions as prescribed by the Presidential Decree (hereinafter referred to as the
tax settlement invoice ); and
3.Other documents as prescribed by the Presidential Decree.
(3) The provisions of paragraph (1) shall also apply where a domestic corporation has no income or has deficits for each business
year.
(4) Where the documents under paragraph (2) 1 and 2 are not attached to a report under the provisions of paragraph (1), it shall not
be deemed a report under this Act: Provided, That this shall not apply to a nonprofit domestic corporation which is not operating
a profit-making business under the provisions of Article 3 (2) 1 and 6.
(5) Where there are errors or omissions in the report and other documents submitted under the provisions of paragraphs (1) and (2),
the chief of the district tax office having jurisdiction over the place of tax payment and the Commissioner of the competent Regional
Tax Office may request that they be corrected.
Article 61 (Special Cases concerning Appropriation of Reserve Fund as Deductible Expenses)
(1) For any domestic corporation which appropriates a reserve fund under the Restriction of Special Taxation Act in the tax settlement
invoice or for any non-profit domestic corporation which is subject to audit performed by auditors under the provisions of Article
3 of the Act on External Audit of Stock Companies and which appropriates a reserve fund for proper purpose businesses under Article
29 in the tax settlement invoice, with regard to the appropriate amount for the disposition of profits for the concerned business
year, where the concerned reserve fund is accumulated as reserves, that amount shall be deemed to be appropriated as deductible expenses.
<Amended by Act No. 6558, Dec. 31, 2001>
(2) Matters necessary for the appropriation of a reserve fund as deductible expenses and the settlement of the amount under the provisions
of paragraph (1) shall be prescribed by the Presidential Decree.
Article 62 (Special Cases concerning Tax Base Report of Non-Profit Domestic Corporations)
(1) For interest, discount amounts, and profits (excluding profits from no-business loans under Article 16 (1) 12 of the Income Tax
Act, and including distributed funds from investment trust proceeds, hereafter referred to as interest income in this Article)
under the provisions of Article 3 (2) 2, a non-profit domestic corporation may choose not to submit a tax base report on withheld
interest income under the provisions of Article 73, notwithstanding the provisions of Article 60 (1). In this case, the interest
income not reported as tax base shall not be included in the calculation of the income amount for each business year under the provisions
of Article 14. <Amended by Act No. 7005, Dec. 30, 2003>
(2) Matters necessary for the tax base report on corporate tax on the interest income of a non-profit domestic corporation and the
collection of it under the provisions of paragraph (1) shall be prescribed by the Presidential Decree.
Article 62-2 (Special Cases concerning Taxation of Income Accruing from Transfer of Assets by Non-profit Domestic Corporation)
(1) In case that any non-profit domestic corporation (excluding any non-profit domestic corporation that runs the profit-making business
in accordance with Article 3 (2) 1; hereafter the same shall apply in the Article) earns income accruing from the transfer of assets
(hereafter referred to as the income accruing from the transfer of assets in this Article) falling under any of the following subparagraphs,
as the revenue provided for in Article 3 (2) 4 and 5, notwithstanding the provisions of Article 60 (1), a return of tax base may
not be filed. In this case, any income on which no return of tax base is filed shall not be included in the calculation of income
amount of each business year provided for in Article 14:
1.Stocks or equity shares falling under the provisions of Article 94 (1) 3 of the Income Tax Act or stocks and equity shares prescribed
by the Presidential Decree; and
2.Land or buildings (including facilities or structures attached to such buildings).
(2) With respect to any income accruing from the transfer of assets on which no return of tax base is filed in accordance with paragraph
(1), an amount calculated by applying the rates of each subparagraph of Article 104 (1) of the Income Tax Act to the tax base calculated
by applying mutatis mutandis Article 92 of the same Act shall be paid as the corporate tax. In this case, if tax rates weighted under
Article 104 (4) of the Income Tax Act are applied, the provisions of Article 55-2 shall not be applied.
(3) In the application of paragraph (2), the tax base calculated by applying mutatis mutandis the provisions of Article 92 of the
Income Tax Act shall be the amount calculated by deducting necessary expenses from the total income accruing from the transfer of
assets (hereafter referred to as transfer value in this Article) and then deducting the amounts provided for in Articles 95 (2)
and 103 of the Income Tax Act from the deducted amount (hereinafter referred to as transfer marginal profits ).
(4) The provisions of Articles 96, 97, 98 and 100 of the Income Tax Act shall apply mutatis mutandis to the calculation of the transfer
value, necessary expenses and transfer marginal profits under paragraph (3): Provided, That in case that any non-profit corporation
that has received any property in contribution, which is 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 transfers any assets prescribed by the Presidential Decree, the
acquisition value of the relevant assets by the contributor thereof shall be the acquisition value of the relevant corporation and
in the case of an organization treated as a corporation under Article 13 (2) of the Framework Act on National Taxes, the first acquisition
value prior to obtaining approval therefor in accordance with the same paragraph shall be deemed the acquisition value.
(5) The provisions of Articles 101 and 102 of the Income Tax Act shall apply mutatis mutandis to the calculation of a tax base on
the income accruing from the transfer of assets, and the provisions of Article 93 of the same Act shall apply mutatis mutandis to
the calculation of a tax amount on the income accruing from the transfer of assets.
(6) The provisions concerning the return for tax base, payment, decision, correction and collection of the corporate tax on the income
of each business year to which the date of transfer of assets belongs shall apply mutatis mutandis to those of the corporate tax
under paragraph (2), and such corporate tax shall be returned, paid, decided, corrected and collected jointly with other corporate
tax. In this case the provisions of Article 76 (1) shall apply mutatis mutandis.
(7) The corporate tax calculated in accordance with paragraph (2) shall be paid by self-return after filing a preliminary return on
the tax base of transfer income by applying mutatis mutandis the provisions of Articles 105 through 108 of the Income Tax Act. In
this case, the provisions of Articles 112 and 112-2 of the Income Tax Act shall apply mutatis mutandis.
(8) In case that any non-profit domestic corporation files a preliminary return on the tax base of transfer income in accordance with
paragraph (7), it shall be deemed to file a return on the tax base provided for in paragraph (6): Provided, That if any non-profit
domestic corporation falls under the provisions of the proviso of Article 110 (4) of the Income Tax Act, it shall file a return on
the tax base provided for in paragraph (6).
(9) Necessary matters concerning the application methods of the special cases to the income accruing from the transfer of assets,
etc. provided for in paragraphs (1) through (8) shall be prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No. 6558, Dec. 31, 2001]
Article 63 (Interim Prepayment)
(1) Domestic corporations with a business year (excluding the first business year after the establishment of a corporation which is
newly established without a merger or division) in excess of 6 months shall use the period of 6 months from the first day of the
concerned business year as the prepayment period, and of the calculated tax amount (including additional taxes, but excluding the
corporate tax on the income accruing from transfer of land) confirmed as the corporate tax for the business year immediately preceding
the concerned business year, they shall pay the amount obtained by dividing the amounts by deducting the following amounts from such
calculated tax amount by the number of months in the immediately preceding business year and multiplying by 6 (hereinafter referred
to as the interim prepaid tax amount ) within 2 months of the date of the expiration of the interim prepayment period at the district
tax office having jurisdiction over the place of tax payment, the Bank of Korea (including its agents), or government postal office
(hereinafter referred to as the district tax office having jurisdiction over the place of tax payment, etc. ) under the conditions
as prescribed by the Presidential Decree: Provided, That where a domestic corporation liable to make interim prepayment of tax has
no corporate tax payable in the immediately preceding business year (excluding corporations falling under each subparagraph of Article
51-2 (1)) or where its corporate tax amount for the immediately preceding business year is not determined by the last day of the
corresponding interim prepayment period, or where a corporation established through a division or the counterpart corporation to
a division and merger enters the first business year after such a division, such a domestic corporation shall compute and pay the
interim prepaid tax amount under the provisions of paragraph (4): <Amended by Act No. 6293, Dec. 29, 2000; Act No. 6558, Dec.
31, 2001>
1.The corporate tax amount reduced and exempted in the business year immediately preceding the concerned business year (excluding
the amount deducted from income);
2.The amount of withholding tax paid as corporate tax in the business year immediately preceding the concerned business year; and
3.The amount of occasionally levied tax paid as corporate tax in the business year immediately preceding the concerned business year.
(2)Where the interim prepaid tax amount under the provisions of paragraph (1) for the first business year after the establishment
of a merged corporation established through merger is paid, the business year immediately preceding the business year which includes
the date of the registration of the merger of the extinguished corporation shall be deemed the immediately preceding business year
under the provisions of paragraph (1).
(3) Where a merged corporation which continues to exist after a merger pays the interim prepaid tax amount under the provisions of
paragraph (1) for the first business year after the merger, the immediately preceding business year of the merged corporation and
the business year immediately preceding the business year which includes the date of the registration of the merger of the extinguished
corporation shall both be deemed as the immediately preceding business year under the provisions of paragraph (1).
(4) A domestic corporation which shall make interim prepayment under the provisions of paragraph (1) may use the concerned interim
prepayment period as 1 business year, and use the amount obtained by deducting the amounts under each of the following subparagraphs
from the corporate tax amount calculated by application of the tax rates under the provisions of Article 55 to the tax base calculated
under the provisions of Articles 13 through 54 as the interim prepaid tax amount and pay it at the district tax office having jurisdiction
over the place of tax payment, etc., notwithstanding the provisions the same paragraph:
1.The reduced or exempted tax amount falling under the concerned interim prepayment period (excluding the amount deducted from income);
2.The withholding tax amount paid as corporate tax during the concerned interim prepayment period; and
3.The occasionally levied tax amount levied as corporate tax during the concerned interim prepayment period.
(5) Deleted. <by Act No. 6558, Dec. 31, 2001>
(6) Where the chief of the district tax office having jurisdiction over the place of tax payment deems it necessary, he may determine
the interim prepaid tax amount not to exceed the scope of the corporate tax amount for the immediately preceding business year of
the concerned corporation (in cases falling under the provisions of paragraph (4), the amount of the concerned interim prepaid tax
amount divided by 6 and multiplied by the number of months in the concerned business year) under the conditions as prescribed by
the Presidential Decree, notwithstanding the provisions of paragraphs (1) through (5).
(7) Where the tax amount to be paid by a domestic corporation under paragraphs (1) and (4) is in excess of 10,000,000 won, the provisions
of Article 64 (2) shall apply mutatis mutandis and payments may be made in installments. <Amended by Act No. 6558, Dec. 31, 2001>
Article 64 (Payment)
(1) A domestic corporation shall pay the corporate tax amounts under each of the following subparagraphs (excluding additional taxes)
deducted from the calculated tax amount of corporate tax on income for each business year as corporate tax on income for each business
year within the time period for report under the provisions of Article 60 at the district tax office having jurisdiction over the
place of tax payment, etc.:
1.The reduced and exempted tax amount for the concerned business year;
2.The interim prepaid tax amount for the concerned business year under the provisions of Article 63;
3.The occasionally levied tax amount for the concerned business year under the provisions of Article 69; and
4.The withheld tax amount for the concerned business year under the provisions of Article 73.
(2) Where the tax amount to be paid by a domestic corporation under the provisions of paragraph (1) is in excess of 10,000,000 won,
part of the tax amount to be paid may be paid in installments within 1 month of the date of the expiration of the payment period
(45 days for small and medium enterprises under the provisions of Article 25 (1) 1) under the conditions as prescribed by the Presidential
Decree.
Article 65 (Payment in Kind)
(1)Where it is deemed difficult for a domestic corporation to pay in cash corporate taxes on income from the transfer of land, etc.
for a public business falling under the Act on the Acquisition of Land, etc. for Public Works and the Compensation Therefor to the
operator of the concerned public business or from the expropriation of land under the same Act and other Acts, payment may be made
in the bonds which were received as payment for the concerned land, etc.: Provided, That this shall not apply in cases as prescribed
by the Presidential Decree. <Amended by Act No. 7005, Dec. 30, 2003>
(2)Matters necessary for the objects of payment in bonds, the evaluation of the bonds, and the procedures for payment under the provisions
of paragraph (1) shall be prescribed by the Presidential Decree.
SECTION 4 Settlement, Correction, and Collection
Sub-Section 1 Settlement and Correction of Tax Base
Article 66 (Settlement and Correction)
(1)Where a domestic corporation does not make a report under the provisions of Article 60, the chief of the district tax office having
jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall determine the tax base
and tax amount of corporate tax on income for each business year of the concerned corporation.
(2)Where a report by domestic corporation under the provisions of Article 60 falls under any of the following subparagraphs, the chief
of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office
shall determine the tax base and tax amount of corporate tax on income for each business year of the concerned corporation: <Amended
by Act No. 6293, Dec. 29, 2000; Act No. 7005, Dec. 30, 2003; Act No. 7317, Dec. 31, 2004>
1.Where there are errors or omissions in the contents of the report;
2.Where all or parts of payment statements under the provisions of Article 120 or 120-2, or sales and purchase invoice aggregate balance
sheet or sales and purchase tax invoice balance sheet under the provisions of Article 121 are not submitted;
3.Where it is judged that the contents of the report are dishonest, taking into consideration the scope of facilities or the business
environment, because a corporation designated as a credit card affiliate member or cash receipt affiliate member under the provisions
of Article 117 and the provisions of Article 32-2 of the Value-Added Tax Act does not join the credit card affiliation or cash receipt
affiliation without a reasonable cause; and
4. In submitting a business report pursuant to the provisions of Article 186-2 of the Securities and Exchange Act, and an audit report
pursuant to the provisions of Article 8 of the Act on External Audit of Stock Companies by a domestic corporation, where the domestic
corporation concerned has applied for correction pursuant to the provisions of Article 45-2 of the Framework Act on National Taxes
because of overstated tax base and tax amount, in case where the domestic corporation concerned, its auditor, or a certified public
accountant attached to it has received disposition of warning, attention, etc. prescribed by the Presidential Decree because the
domestic corporation performed wrongful accounting handling such as overstating revenue or asset, or underestimating loss or liability,
etc.
(3)Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent
Regional Tax Office determines or corrects the tax base and tax amount of corporate tax under the provisions of paragraphs (1) and
(2), it shall be based on the account book or other documentary evidence: Provided, That where the income amount cannot be calculated
in accordance with the account book or other documentary evidence due to causes as prescribed by the Presidential Decree, it may
be estimated under the conditions as prescribed by the Presidential Decree.
(4)Where errors or omissions are discovered after the chief of the district tax office having jurisdiction over the place of tax payment
or the Commissioner of the competent Regional Tax Office determines or corrects the tax base and tax amount of corporate tax, he
shall correct them again without delay.
Article 67 (Disposal of Income)
In making the report on the tax base for corporate tax on income for each business year under the provisions of Article 60 or determining
or correcting the tax base of corporate tax under the provisions of Article 66 or 69, the amount included in the calculation of gross
income shall be disposed of as bonus, dividends, or other outflows from or reserves held by the company, depending upon to whom the
income accrues, as prescribed by the Presidential Decree.
Article 68 (Special Cases concerning Estimation of Tax Base and Calculation of Tax Amount)
Where the tax base and tax amount of corporate tax is estimated under the provisions of the proviso of Article 66 (3), the provisions
of subparagraph 1 of Article 13 and Article 57 shall not apply: Provided, That where the account book or other documentary evidence
is destroyed by natural disaster, etc. and then the amounts are estimated under the conditions as prescribed by the Presidential
Decree, this shall not apply.
Article 69 (Determination of Occasional Imposts)
(1) Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent
Regional Tax Office deems that it is likely that a domestic corporation will evade payment of corporate taxes in the business year
due to causes as prescribed by the Presidential Decree, he may levy occasional corporate tax on the concerned corporation (hereinafter
referred to as occasional imposts ). In this case also, the corporation shall make report on income for each business year under
the provisions of Article 60.
(2) The occasional impost period shall be from the first day of the business year until the date on which the cause as prescribed
by the Presidential Decree occurs, and the provisions of paragraph (1) shall apply accordingly.
(3) Matters necessary for occasional imposts under the provisions of paragraph (1) shall be prescribed by the Presidential Decree.
Article 70 (Notification of Tax Base and Tax Amount)
Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent
Regional Tax Office determines or corrects the tax base and tax amount of corporate tax on income for each business year of a domestic
corporation under the provisions of Article 53 or 66, he shall notify the concerned domestic corporation thereof under the conditions
as prescribed by the Presidential Decree.
Sub-Section 2 Collection and Return of Tax Amount
Article 71 (Collection and Return)
(1) Where a domestic corporation fails to pay all or part of the tax amount which shall be paid as corporate tax on income for each
business year under the provisions of Article 64, the chief of the district tax office having jurisdiction over the place of tax
payment shall collect the unpaid corporate tax amount within 2 months of the date of the expiration of the payment period.
(2) Where a domestic corporation fails to pay all or part of the interim prepaid tax amount which shall be paid under the provisions
of Article 63, the chief of the district tax office having jurisdiction over the place of tax payment shall collect the unpaid interim
prepaid tax amount within 2 months of the date of the expiration of the payment period: Provided, That where the corporation which
has not paid the interim prepaid tax amount falls under the proviso of Article 63 (1), the interim prepaid tax amount shall be determined
under the provisions of paragraph (4) of the same Article and paid within 3 months of the date of the expiration of the payment period.
(3) Where the person responsible for collecting withholding taxes under the provisions of Article 73 does not collect the tax amount
which shall be collected or does not pay the collected tax amount within the time limit, the chief of the district tax office having
jurisdiction over the place of tax payment shall without delay collect from the person responsible for collecting withholding taxes
the amount of the sum of the appropriate amount for the tax amount to be withheld and paid by person responsible for collecting withholding
taxes and the additional tax amount under the provisions of Article 76 (2): Provided, That where the person responsible for collecting
withholding taxes has not withheld the taxes and where the person liable to pay taxes has already paid the corporate tax amount,
only additional tax shall be collected upon the person responsible for collecting withholding taxes. <Amended by Act No. 7005,
Dec. 30, 2003>
(4) Where the interim prepaid, occasional levied, or withheld corporate tax amount under the provisions of Article 63, 69, or 73 (including
the additional tax) is in excess of the corporate tax amount on income for each business year, the chief of the district tax office
having jurisdiction over the place of tax payment shall return the amount in excess or appropriate it as national taxes, additional
charges, or disposition costs for the collection of taxes in arrears under the provisions of Article 51 of the Framework Act on National
Taxes. <Amended by Act No. 6558, Dec. 31, 2001>
Article 72 (Return by Retroactive Deduction of Deficits)
(1) Where a small and medium enterprise under the provisions of Article 25 (1) 1 generates deficits for each business year under the
provisions of Article 14 (2), it may apply for the return of the amount calculated as prescribed by the Presidential Decree up to
the limit of the corporate tax amount (referring to the corporate tax amount as prescribed by the Presidential Decree) levied on
income during the business year immediately preceding the business year in which the deficits occurred. In this case, in the application
of the provisions of subparagraph 1 of Article 13 to the concerned deficits, it shall be deemed the amount deducted.
(2) A domestic corporation which wishes to receive a corporate tax amount return under the provisions of paragraph (1) shall apply
to the chief of the district tax office having jurisdiction over the place of tax payment within the time limit for report under
the provisions of Article 60 under the conditions as prescribed by the Presidential Decree.
(3) Where the chief of the district tax office having jurisdiction over the place of tax payment receives an application under the
provisions of paragraph (2), he shall without delay determine the tax return amount and return it under the provisions of Articles
51 and 52 of the Framework Act on National Taxes.
(4) Application of the provisions of paragraphs (1) through (3) shall be limited to where the concerned domestic corporation makes
a report on the business year in which the deficits occur and the tax base and tax amount of the corporate tax on income for the
immediately preceding business year within the time limit for report under the provisions of Article 60.
(5)Where the deficits are reduced after the chief of the district tax office having jurisdiction over the place of tax payment grants
a return under the provisions of paragraph (3) due to a correction in the tax base and tax amount of corporate tax for the business
year in which the deficits occurred, the appropriate tax amount for the reduced deficits and an appropriate amount for interest shall
be collected as corporate tax for the business year in which the concerned deficits occurred.
(6)The calculation of the tax amount to be returned by retroactive deduction of deficits and other necessary matters shall be prescribed
by the Presidential Decree.
Article 72-2 (Refund following Correction due to Wrongful Accounting Handling)
(1)If there remains an amount after deducting the tax amount pursuant to the provisions of Articles 58-3 and 59 in the process of
correction pursuant to the provisions of Article 66 (2) 4 by the chief of the district tax office having jurisdiction over the place
of tax payment or the Commissioner of the competent Regional Tax Office, he shall pay the refund and the additional refund immediately.
(2)In applying the provisions of paragraph (1), in case the relevant domestic corporation dissolves (excluding dissolution by merger
or division), the corporate tax amount to pay upon the liquidation income pursuant to the provisions of Article 77 shall be deducted
beforehand, and the remaining amount shall be refunded immediately.
[This Article Newly Inserted by Act No. 7005, Dec. 30, 2003]
Article 73 (Withholding)
(1)The person who pays the interest income amount under Article 127 (1) 1 of the Income Tax Act (including the revenue amount of financial
insurance businesses as prescribed by the Presidential Decree) and the distributed funds from investment trust proceeds under Article
17 (1) 5 of the same Act to a domestic corporation (hereinafter referred to as the person responsible for collecting withholding
taxes ) shall collect the appropriate corporate tax amount calculated by the application of the tax rate under each of the following
subparagraphs to the amount paid (hereinafter referred to as withholding ) and pay it at the district tax office having jurisdiction
over the place of tax payment, etc. by the 10th day of the month following the month which includes the date of the tax collection:
<Amended by Act No. 6047, Dec. 28, 1999; Act No. 6293, Dec. 29, 2000; Act No. 7005, Dec. 30, 2003; Act No. 7317, Dec. 31, 2004>
1.14/100 for interest income (25/100 for profits from not-for-profit loans under Article 16 (1) 12 of the Income Tax Act); and
2.14/100 for proceeds distributed from investment trust funds.
(2)Notwithstanding the provisions of Article 5, the provisions of paragraph (1) shall apply to the interest income prescribed by the
Presidential Decree among those accruing to a trust estate of a corporation which is regulated under the Trust Business Act and the
Act on Business of Operating Indirect Investment and Assets by treating the concerned trust estate as a domestic corporation. <Amended
by Act No. 7005, Dec. 30, 2003>
(3)In the application of the provisions of paragraphs (1) and (2), where financial institutions, etc. prescribed by the Presidential
Decree (hereafter referred to as financial institutions, etc. in this paragraph) directly utilize or keep and manage a trust estate
or investment company s asset under the Trust Business Act and the Act on Business of Operating Indirect Investment and Assets, it
shall be deemed that there is a relationship of representation or commission with the party paying the interest income amount accruing
to the financial institution, etc. and the concerned trust estate or investment company s asset. <Amended by Act No. 7005, Dec.
30, 2003>
(4)The actions of the person representing or commissioned by the person responsible for collecting withholding taxes under the provisions
of paragraph (1) shall be deemed the actions of the principal or his delegate within the scope of the delegation or commission, and
the provisions of paragraphs (1) through (3) shall apply.
(5)Where a financial institution falling under any item of subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions
and Guarantee of Secrecy (hereafter referred to as the financial institution in this paragraph) takes over, trades or brokers bills
or obligation certificates or carries on such transactions on behalf of it, which are issued by a domestic corporation (including
a resident; hereafter in this paragraph the same shall apply), the provisions of paragraph (1) shall apply to the case in the light
of the existence of a relationship of the representation or commission between such financial institution and such domestic corporation.
<Amended by Act No. 6047, Dec. 28, 1999>
(6)Deleted. <by Act No. 6293, Dec. 29, 2000>
(7)The person responsible for collecting withholding taxes as prescribed by the Presidential Decree considering the number of regular
employees and categories of business may pay the withheld corporate tax by the 10th day of the month following the last month of
the semiannual period which includes the date of the collection under the conditions as prescribed by the Presidential Decree, notwithstanding
the provisions of paragraph (1).
(8)Where a domestic corporation sells (including brokering, arranging, and other cases prescribed by the Presidential Decree, but
excluding the cases such as purchase and sale of repurchase bond, etc. prescribed by the Presidential Decree; hereafter the same
shall apply in this Article and Article 74) the bonds, etc. under Article 46 (1) of the Income Tax Act (excluding any bonds, etc.
that are untaxed or exempted from the corporate tax and other bonds, etc. prescribed by the Presidential Decree; hereafter referred
to as bonds, etc. in this Article) during the calculation period of the interest and discounts accrued or generated from bonds,
etc. (hereafter referred to as interest, etc. in this Article), the corporation concerned shall collect withholding tax in place
of the person liable to collect withholding tax pursuant to the provisions of paragraph (1) regarding the interest, etc. accompanying
the period of possession of bond, etc. in accordance with the Presidential Decree. In this case, this Act shall apply to the corporation
concerned since it is deemed as the person liable to collect withholding tax. <Newly Inserted by Act No. 6293, Dec. 29, 2000;
Act No. 6558, Dec. 31, 2001; Act No. 7317, Dec. 31, 2004>
(9)In applying the provisions of paragraphs (1) through (5), (7) and (8), the period of payment of interest income, scope and calculation
of the amount of income subject to withholding corporate tax, calculation and payment of withholding tax amount, scope of persons
responsible for collecting withholding tax, calculation of the period wherein bonds, etc. are held, and other related matters shall
be prescribed by the Presidential Decree. <Amended by Act No. 6293, Dec. 29, 2000>
Article 74 (Issue of Withholding Receipt)
(1)Where the person responsible for collecting withholding taxes under the provisions of Article 73 withholds corporate tax from the
person liable to pay taxes, the former shall issue a withholding receipt to the latter under the conditions as prescribed by the
Presidential Decree.
(2)In applying the provisions of paragraph (1), the corporation concerned shall be deemed as the person liable to pay taxes regarding
the corporate tax amount paid by the person liable to collect withholding tax in the capacity of the person liable to pay taxes on
the amount equivalent to the interest accompanying sale of bonds, etc. pursuant to the provisions of Article 73 (8). <Newly Inserted
by Act No. 7317, Dec. 31, 2004>
(3)Matters necessary for the issue of the withholding receipt under the provisions of paragraph (1) shall be prescribed by the Presidential
Decree.
Article 75 (Non-Collection of Small Amounts)
Where the withholding tax amount under the provisions of Article 73 (1) is less than 1,000 won, the concerned corporate tax shall
not be collected.
Article 76 (Additional Taxes)
(1)In the collection of the corporate tax on income for each business year under the provisions of Article 71, where the concerned
domestic corporation falls under any of the following subparagraphs, the chief of the district tax office having jurisdiction over
the place of tax payment shall collect the amount of the sum of the amounts under the provisions of the concerned subparagraphs in
addition to the corporate tax: Provided, That the provisions of subparagraph 2 shall not apply where the provisions of subparagraph
1 apply, and the provisions of subparagraph 1 on additional taxes on the account book shall not apply to non-profit domestic corporations:
<Amended by Act No. 6558, Dec. 31, 2001>
1.Where the domestic corporation does not report under the provisions of Article 60, or fails to perform the duty to keep the accounting
records on file under the provisions of Article 112, 20% of the calculated tax amount (excluding the amount of the corporate tax
on the income accruing from the transfer of land, etc.; hereafter in this paragraph the same shall apply) determined by the chief
of the district tax office having jurisdiction over the place of tax payment (where such amount is less than 7/10,000 of the revenue
amount of the concerned corporation or there is no calculated tax amount, the amount corresponding to 7/10,000 of the revenue amount):
Provided, That where the unreported income amount is in excess of 5,000,000,000 won, it shall be 30% of the calculated tax amount
(where such amount is less than 10/10,000 of the revenue amount of the concerned corporation or there is no calculated tax amount,
the amount corresponding to 10/10,000 of the revenue amount);
2.Where the domestic corporation makes a report of the tax base below the tax base which shall be reported under Article 60, the amounts
under each of the following items:
(a) Where the reported amount is 1/3 or more of the tax base which must be reported and the wrongfully under-reported amount as prescribed
by the Presidential Decree (hereafter referred to as the wrongfully under-reported amount in this subparagraph) is in excess of
5,000,000,000 won, the amount corresponding to 30% of the calculated tax amount on the amount reported: Provided, That where the
such amount is less than 10/10,000 of the reported amount or there is no calculated tax amount, it shall be 10/10,000 of the reported
amount; and
(b) In cases other than those under item (a), the amount corresponding to 10/10,000 of the calculated tax amount on the amount reported
(20% for the wrongfully under-reported amount): Provided, That this shall not apply where there is no calculated tax amount; and
3.Where the corporate tax under the provisions of Article 63 or 64 (including the amount, etc. equivalent to the interest to be paid
in addition to the corporate tax under Article 29 (4), Article 31 (4) and the Restriction of Special Taxation Act) is not paid or
underpaid, an amount calculated by applying the following formula:
The unpaid tax amount (in case of underpaid tax amount, the underpaid tax amount) ?? the number of date during the period from the
date following the date of payment time limit until the date of payment by self-return or the date of notice ?? the interest rate
prescribed by the Presidential Decree taking into account interest rate that financial institutions apply to loans in arrears.
(2)Where the person responsible for collecting withholding taxes under the provisions of Article 73 fails to pay or pays less than
the tax amount withheld or which shall be withheld within the time limit for payment, he shall pay an amount with an addition as
additional tax whichever is larger among the amounts falling under the following subparagraphs: Provided, That where the person responsible
for collecting withholding taxes is the State or a local government, this shall not apply: <Amended by Act No. 7317, Dec. 31,
2004>
1.Tax amount not paid (shortage of tax where tax was paid less) ?? period from the next day of time limit through voluntarily paid
date or day of notification of payment ?? interest rate prescribed by the Presidential Decree in consideration of the rate that the
financial institutions apply to overdue loans. In this case, the amount concerned shall be limited to 10/100 of the tax amount not
paid (shortage of tax where tax was paid less); and
2. 5/100 of the tax amount not paid (shortage of tax where tax was paid less).
(3) Deleted. <by Act No. 6558, Dec. 31, 2001>
(4)Where a domestic corporation which shall submit a group enterprise combined balance sheet, etc. under the provisions of Article
115 fails to submit it within the time limit, excluding cases as prescribed by the Presidential Decree, the chief of the district
tax office having jurisdiction over the place of tax payment shall collect the bigger one of the sum of the amount corresponding
to 2% of the calculated tax amount reported under the provisions of Article 60 and the settled or corrected tax amount calculated
under the provisions of Article 66 and the amount corresponding to 8/100,000 of the revenue amount of the concerned corporation in
addition to the corporate tax.
(5)Where a corporation (excluding corporations as prescribed by the Presidential Decree) is provided with commodities or services
in connection with business from a businessman as prescribed by the Presidential Decree and does not receive documentary evidence
under any subparagraph of Article 116 (2), excluding cases which are under the application of the provisions of the proviso of the
same paragraph, the chief of the district tax office having jurisdiction over the place of tax payment shall collect the amount corresponding
to 0.02 percent of the amount for which the documentary evidence is not received in addition to the corporate tax. In this case,
the additional tax shall be collected even if the calculated tax amount is nonexistent. <Amended by Act No. 6558, Dec. 31, 2001>
(6)Where a domestic corporation which shall submit a detailed statement on the state of fluctuation of stocks, etc. under the provisions
of Article 119 (hereafter referred to as the detailed statement on the state of fluctuation in this Article) fails to submit a
detailed statement on the state of fluctuation or submits a statement which omits the state of fluctuation, and where the detailed
statement on the state of fluctuation submitted is unclear as prescribed by the Presidential Decree, the chief of the district tax
office having jurisdiction over the place of tax payment shall collect the amount corresponding to 2% of the face value or finance
value of the non-submitted, submitted with omission, and unclearly submitted stocks in addition to the corporate tax. In this case,
the additional tax shall be collected even if the calculated tax amount is non-existent. <Amended by Act No. 6558, Dec. 31, 2001>
(7)Where a domestic corporation that is liable to submit a written payment statement under the provisions of Articles 120 and 120-2
or under the provisions of Articles 164 and 164-2 of the Income Tax Act fails to do so within the time limit under the provisions
of paragraphs (1) and (3) of the same Articles of the same Act, or the written payment statement submitted under the provisions of
the same Articles are unclear as prescribed by the Presidential Decree, the chief of the district tax office having jurisdiction
over the place of tax payment shall collect the amount corresponding to 2% of the portion for which the statement was not submitted
or the portion that the unclear statement was submitted in addition to the corporate tax. In this case, the additional tax shall
be collected even if the calculated tax amount is nonexistent. <Amended by Act No. 6293, Dec. 29, 2000>
(8)Where the contents and the person receiving payment are unclear in the written payment statement submitted under the provisions
of Article 120 or 120-2, the application of additional tax under the provisions of paragraph (7) shall be limited to one year or
less from the day on which the time limit for submitting the written payment statement under the provisions of Article 60 expires
for the business year to which the date of payments based on the written payment statement under the provisions of Article 120 or
120-2 belongs. <Amended by Act No. 6293, Dec. 29, 2000>
(9)Where a corporation (excluding corporations as prescribed by the Presidential Decree) falls under any of the following subparagraphs,
the chief of the district tax office having jurisdiction over the place of tax payment shall collect the amount corresponding to
1% of the value provided in addition to its corporate tax. In this case, such additional tax shall be collected even if the calculated
tax amount is nonexistent, the provisions of subparagraph 1 shall not apply to the case where the provisions of subparagraph 2 apply,
and this shall not apply to the portions on which additional taxes are levied under the provisions of Article 22 (2) through (4)
of the Value-Added Tax Act: <Amended by Act No. 6558, Dec. 31, 2001>
1.Where an invoice under the provisions of Article 121 (1) or (2) is not delivered or all or part of the matters which shall be recorded
on the invoice as prescribed by the Presidential Decree are not recorded on the delivered invoice or they are recorded differently
from the actual facts; and
2.Where the sales and purchase invoice aggregate balance sheet under the provisions of Article 121 (5) is not submitted within the
time period under the same Article or all or part of the matters which shall be recorded on such an aggregate balance sheet as prescribed
by the Presidential Decree are not recorded on the delivered invoice or they are recorded differently from the actual facts.
CHAPTER III CORPORATETAXON LIQUIDATIONINCOMEOF DOMESTIC CORPORATION
SECTION 1 Tax Base and its Calculation
Article 77 (Tax Base)
The tax base of corporate taxes for liquidation income of a domestic corporation shall be the amount of liquidation income under the
provisions of Articles 79 through 81.
Article 78 (Special Cases for Taxation of Liquidation Income due to Restructuring of Corporation)
Where a domestic corporation falls under any of the following subparagraphs, corporate tax shall not be levied on the liquidation
income:
1.Where it restructures pursuant to the provisions of the Commercial Act;
2.Where a corporation established pursuant to a special Act restructures to a company pursuant to the Commercial Act because the relevant
special Act has been amended or repelled; and
3.Where a domestic corporation restructures pursuant to other Acts, as prescribed by the Presidential Decree.
[This Article Wholly Amended by Act No. 7005, Dec. 30, 2003]
Article 79 (Calculation of Liquidation Income Amount due to Dissolution)
(1) Where a domestic corporation is dissolved (excluding dissolution by merger or division), the liquidation income (hereinafter referred
to as the liquidation income from dissolution ) amount shall be the sum of the paid-in capital or investment funds and the surplus
funds (hereinafter referred to as the total amount of equity capital ) as of the date of the registration of the dissolution of
corporation deducted from the value of the residual assets from dissolution of the corporation.
(2) Where a domestic corporation in the process of liquidation due to dissolution continues to conduct business under the provisions
of Article 229, 285, 519, or 610 of the Commercial Act after part of the residual assets from dissolution are distributed to the
stockholders, the liquidation income amount from dissolution of the corporation shall be the total amount of equity capital as of
the date of the date of registration of the dissolution deducted from the total amount of the residual assets distributed from the
date of registration of the dissolution to the date of registration of the continuation.
(3)In the calculation of the liquidation income amount due to dissolution of a domestic corporation, where there is a corporate tax
amount to be refunded under the Framework Act on National Taxes during the period of liquidation, an appropriate corresponding amount
shall be added to the total amount of equity capital of the corporation as of the date of the registration of the dissolution.
(4)In the calculation of the amount of liquidation income generated from dissolution of a domestic corporation, where the concerned
domestic corporation registers any loss carried forward prescribed by the Presidential Decree as of the date of the registration
of the dissolution, an appropriate amount corresponding to the losses carried forward shall be set off from the total amount of the
corporation s equity capital as of that date: Provided, That the amount to be set off for losses carried forward may not exceed the
amount of surplus funds from the total amount of equity capital, and where the amount of losses carried forward does exceed the surplus
funds, it shall be deemed not to exist. <Amended by Act No. 6558, Dec. 31, 2001>
(5)In the calculation of the amount of liquidation income due to dissolution of a domestic corporation, where there is income for
each business year generated during the period of liquidation, it shall be included in the calculation of the income amount for the
concerned business year of the corporation.
(6)In the calculation of the liquidation income amount under paragraph (1) and the income amount for each business year during the
period of liquidation under paragraph (5), the provisions of Articles 14 through 54 shall apply mutatis mutandis except where provided
for in paragraphs (1) through (5).
(7) In the application of the provisions of paragraphs (1) through (6), matters necessary for the calculation of the value of residual
assets shall be prescribed by the Presidential Decree.
Article 80 (Calculation of Liquidation Income Amount due to Merger)
(1) Where a domestic corporation is dissolved due to a merger, the amount of the liquidation income (hereinafter referred to as the
liquidation income due to merger ) shall be the amount of the total merger cost which the stockholders of the extinguished corporation
receive from the merged corporation minus the total amount of equity capital of the extinguished corporation as of the day of the
registration of the merger.
(2) In the calculation of the total cost of merger under the provisions of paragraph (1), where the merged corporation acquires the
stocks of the extinguished corporation (in case of establishment by merger or the merger of 3 or more corporations, including the
acquisition of an extinguished corporation s stocks by another extinguished corporation; hereafter referred to as the combined stocks,
etc. in this Article) within 2 years prior to the date of the registration of the merger, and such combined stocks, etc. are not
exchanged for stocks of the merged corporation, the total cost of the merger shall be the sum of the acquisition value of the concerned
stocks. In this case, where stocks, etc. are exchanged, the value of the transferred stocks, etc. shall be deducted from the sum
of the acquisition value of the concerned combined stocks, etc.
(3) In the calculation of the liquidation income amount due to merger, the provisions of Article 79 (3), (4), and (6) shall apply
mutatis mutandis.
(4) In the application of the provisions of paragraphs (1) through (3), matters necessary for the calculation of the total cost of
merger and other calculations for the liquidation income amount due to merger shall be prescribed by the Presidential Decree.
Article 81 (Calculation of Liquidation Income Amount due to Division)
(1)Where a domestic corporation is dissolved through a division, the amount of the liquidation income (hereinafter referred to as
the liquidation income due to division ) shall be the total amount of the cost of the division which the stockholders of the divided
corporation receive from the corporation established by division or the counterpart corporation to the division and merger minus
the total amount of equity capital of the divided corporation as of the date of the registration of the division.
(2) In the calculation of the total cost of division under the provisions of paragraph (1) in the case of division and merger, where
the counterpart corporation to a division and merger or counterpart corporation to a corporation extinguished through division and
merger acquires stocks of divided corporation within 2 years prior the date of the registration of the division (hereafter referred
to as the combined stocks in this Article) and such combined stocks are not exchanged for stocks of the corporation established
by division or counterpart corporation to a division and merger, the total cost of the division shall be the sum of the acquisition
value of the concerned combined stocks. In this case, where stocks are exchanged, the value of the transferred stocks shall be deducted
from the sum of the acquisition value of the concerned combined stocks.
(3) The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to the calculation of liquidation income amount due to division
for a counterpart corporation to a corporation extinguished through division and merger.
(4)The provisions of Article 79 (3), (4), and (6) shall apply mutatis mutandis to the calculation of liquidation income amount due
to division.
(5) In the application of the provisions of paragraphs (1) through (4), matters necessary for the calculation of the total cost of
division and other calculations for the liquidation income amount due to division shall be prescribed by the Presidential Decree.
Article 82 (Detailed Rules for Calculation of Liquidation Income Amount)
Matters necessary for the calculation of the liquidation income amount of a domestic corporation not provided for in this Act shall
be prescribed by the Presidential Decree.
SECTION 2 Calculation of Tax Amount
Article 83 (Tax Rate)
The corporate tax on liquidation income of a domestic corporation shall be the tax amount calculated by application of the tax rate
under the provisions of Article 55 (1) to the tax base under the provisions of Article 77.
SECTION 3 Report and Payment
Article 84 (Settlement Report)
(1) A domestic corporation liable to pay corporate tax on liquidation income shall report the tax base and tax amount of the corporate
tax on liquidation income within the period under each of the following subparagraphs to the chief of the district tax office having
jurisdiction over the place of tax payment under the conditions as prescribed by the Presidential Decree:
1.For cases falling under the provisions of Article 79 (1), within three months of the date the value of the residual assets is settled
as prescribed by the Presidential Decree;
2.For cases falling under the provisions of Article 79 (2), within three months of the date of the registration of continuation;
3.For cases falling under the provisions of Article 80, within three months from the date of the registration of the merger; and
4.For cases falling under the provisions of Article 81, within three months from the date of the registration of the division.
(2) The documents under each of the following subparagraphs shall accompany the report under the provisions of paragraph (1):
1.For cases under paragraph (1) 1 and 2, the balance sheet of the dissolved corporation as of the date of the settlement of the value
of the residual assets or the date of the registration of continuation;
2.For cases under paragraph (1) 3 and 4, the balance sheet of the extinguished corporation, etc. as of the date of the registration
of the merger or the date of the registration of the division and a detailed statement on the assets and liabilities succeeded to
by the merged corporation, etc. due to the merger or division; and
3.Other documents as prescribed by the Presidential Decree.
(3) The provisions of paragraphs (1) and (2) shall apply even where there is no liquidation income amount.
Article 85 (Interim Report)
(1)Where a domestic corporation falls under any of the following subparagraphs, it shall report to the chief of the district tax office
having jurisdiction over the place of tax payment as prescribed by the Presidential Decree within one month of the date as prescribed
in the concerned subparagraph: Provided, That for a corporation liquidating in accordance with the liquidation process under the
provisions of Article 55 of the State Properties Act, the provisions of subparagraph 2 shall not apply:
1.Where the part of the residual assets from dissolution are distributed to the stockholders prior to the settlement of the value
of the residual assets from dissolution, the date of the distribution; and
2.Where the value of the residual assets has not been settled by the date of one year from the date of the registration of the dissolution,
the date on which one year has passed.
(2) The balance sheet as of the date of the registration of the dissolution and the date of distribution or the date on which one
year has passed from the date of the registration of the dissolution, and other documents as prescribed by the Presidential Decree
shall each accompany the report under the provisions of paragraph (1).
Article 86 (Payment)
(1) A domestic corporation falling under the provisions of Article 79 (1) or (2) which has made the settlement report under the provisions
of Article 84 shall pay the tax amount calculated by application of the provisions of Article 83 to the amount of liquidation income
from dissolution, minus the total tax amount paid under the provisions of paragraph (3) or (4), as corporate tax at the district
tax office having jurisdiction over the place of tax payment, etc. within the time limit for report.
(2) A domestic corporation falling under the provisions of Article 80 or 81 which has made the settlement report under the provisions
of Article 84 shall pay the tax amount calculated by application of the provisions of Article 83 to the amount of liquidation income
from merger or division as corporate tax at the district tax office having jurisdiction over the place of tax payment, etc. within
the time limit for report.
(3) For a domestic corporation liable to report under the provisions of Article 85 (1) 1, where the value of distributed residual
assets (where there are residual assets previously distributed, the total value amount) is in excess of the total amount of equity
capital as of the date of the registration of the dissolution, the corporation shall pay the tax amount calculated by application
of the provisions of Article 83 to the amount in excess (where corporate tax has previously been paid on previously distributed portions
of residual assets, the tax amount after deducting the previously paid amount from the total tax amount) at the district tax office
having jurisdiction over the place of tax payment, etc. within the time limit for report.
(4) For a domestic corporation liable to report under the provisions of Article 85 (1) 2, where the predicted value of the residual
assets as prescribed by the Presidential Decree as of the date on which one year has passed from the date of the registration of
the dissolution is in excess of the total amount of equity capital as of the date of the registration of the dissolution, the corporation
shall pay the tax amount calculated by application of the provisions of Article 83 to the amount in excess at the district tax office
having jurisdiction over the place of tax payment, etc. within the time limit for report.
SECTION 4 Settlement, Correction, and Collection
Article 87 (Settlement and Correction)
(1) Where a domestic corporation does not report under the provisions of Articles 84 and 85, the chief of the district tax office
having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall determine the tax
base and tax amount of corporate tax on liquidation income for the concerned corporation.
(2) Where there are errors or omissions in a report by a domestic corporation under the provisions of Articles 84 and 85, the chief
of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office
shall determine the tax base and tax amount of corporate tax on liquidation income for the concerned corporation.
(3) Where errors or omissions are discovered after the chief of the district of tax office having jurisdiction over the place of tax
payment or the Commissioner of the competent Regional Tax Office determines or corrects the tax base and tax amount of corporate
tax on liquidation income, he shall correct them again without delay.
(4) The provisions of Article 66 (3) shall apply mutatis mutandis to settlement and correction under the provisions of paragraphs
(1) and (2).
Article 88 (Notification of Tax Base and Tax Amount)
Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent
Regional Tax Office determines or corrects the tax base and tax amount of corporate tax on liquidation income of a domestic corporation
under the provisions of Article 87, he shall notify the concerned corporation or liquidator thereof: Provided, That where it is not
possible to notify the corporation or liquidator, he may make public notification instead.
Article 89 (Collection)
(1)Where a domestic corporation fails to pay all or part of the tax amount which shall be paid as corporate tax on liquidation income
under the provisions of Article 86, the chief of the district tax office having jurisdiction over the place of tax payment shall
collect the unpaid corporate tax amount within 2 months of the date of the expiration of the payment period.
(2) Where the corporate tax amount paid under the provisions of Article 86 or collected under the provisions of paragraph (1) does
not reach the corporate tax amount determined or corrected by the chief of the district tax office having jurisdiction over the place
of tax payment or the Commissioner of the competent Regional Tax Office under the provisions of Article 87, the chief of the district
tax office having jurisdiction over the place of tax payment shall collect the appropriate corporate tax amount of the deficiency.
Article 90 (Additional Taxes, etc.)
(1) In the collection of corporate tax on liquidation income, the provisions of Article 76 (1) shall apply mutatis mutandis: Provided,
That where there is no corporate tax amount on liquidation income, this shall not apply.
(2) In the collection of corporate tax on liquidation income, the provisions of Articles 21 and 22 of the National Tax Collection
Act shall not apply.
CHAPTER IV CORPORATE TAX ON INCOME FOR EACH BUSINESS YEAR OF FOREIGN CORPORATION
SECTION 1 Tax Base and its Calculation
Article 91 (Tax Base)
(1) The tax base for corporate tax on the income for each business year of foreign corporations with a domestic place of business,
foreign corporations with real estate income under the provisions of subparagraph 3 of Article 93 or foreign corporations with woodlands
income under the provisions of subparagraph 8 of the same Article shall be the total amount of income generated from sources in Korea
(excluding the amount of income generated from sources in Korea withheld under the provisions of Article 98 (1)) minus the amount
or income under the provisions of each of the following items deducted in sequential order:
1.The deficits generated during the business year which began within 5 years of the first day of each business year (limited to deficits
generated in Korea) which were not deducted in the calculation of the tax base for each business year afterward;
2.Non-taxable income under this Act and other Acts and subordinate statutes; and
3.Income generated by the navigation of a ship or aircraft to a foreign country: Provided, That this shall be limited to where the
country in which the foreign corporation has its headquarters or main office affords the same exemption to ships and aircraft utilized
by Korean corporations.
(2)For foreign corporations which do not fall under the provisions of paragraph (1), the amount of income generated in Korea under
each subparagraph of Article 93 shall be the tax base for corporate tax on income for the each business year of the concerned corporation.
(3)The tax base for corporate tax on income generated in Korea by a foreign corporation falling under provisions of paragraph (1)
which was withheld under the provisions of Article 98 (1) shall be the amount of income generated in Korea under each subparagraph
of Article 93.
(4)The provisions of paragraph (1) 3 shall also apply to foreign corporations which have no domestic place of business.
Article 92 (Calculation of Amount of Income Generated from Sources in Korea)
(1) The total amount of income generated from sources in Korea by a foreign corporation for each business year falling under the provisions
of Article 91 (1) shall be the amount calculated by the mutatis mutandis application of the provisions of Articles 14 through 54
of this Act and Articles 104 and 135 through 138 of the Restriction of Special Taxation Act as prescribed by the Presidential Decree.
<Amended by Act No. 6558, Dec. 31, 2001>
(2)The amount of the income generated from sources in Korea other than the income provided for in subparagraph 7 of Article 93 each
business year by a foreign corporation under the provisions of Article 91 (2) and (3) shall be the amount falling under each of the
following subparagraphs: <Amended by Act No. 6293, Dec. 29, 2000; Act No. 6558, Dec. 31, 2001>
1.Deleted; <by Act No. 6558, Dec. 31, 2001>
2.In case of the income generated from sources in Korea under subparagraphs 1 through 6 and 8 through 11 of Article 93, the amount
of such income shall be the revenue amount by income under each subparagraph (excluding subparagraph 7) of the same Article: Provided,
That for the income generated from sources in Korea as prescribed by subparagraph 10 of Article 93, it may be replaced by an amount
calculated by deducting the acquisition value and expenses incurred for transfer of the concerned securities confirmed under the
Presidential Decree from the revenue amount; and
3.Where the income generated from sources in Korea under the provisions of subparagraph 10 of Article 93 by a foreign corporation
with no domestic place of business meets the conditions under each of the following items, the normal price as prescribed by the
Presidential Decree (hereafter referred to as the normal price in this subparagraph) shall be the concerned revenue amount, notwithstanding
the provisions of subparagraph 2:
(a) Transactions between a foreign corporation with no domestic place of business and a foreign corporation with a special relationship
as prescribed by the Presidential Decree (including non-residents); and
(b) Where transaction prices in transactions under item (a) fall short of normal prices.
(3)For any foreign corporation under Article 91 (2), the amount of transfer income provided for in subparagraph 7 of Article 93 from
among the amount of the income generated from sources in Korea each business year shall be an amount calculated by deducting the
amount falling under each of subparagraphs from the transfer value of income-generating assets (hereafter referred to as the land,
etc. in this Article) under subparagraph 7 of the same Article: <Newly Inserted by Act No. 6558, Dec. 31, 2001>
1.The acquisition value: Provided, That in case any foreign corporation, that is given any property in donation which is not included
in the taxable value of the inheritance tax or the taxable value of the gift tax under the Inheritance Tax or Gift Tax Act, transfers
the land, etc. prescribed by the Presidential Decree, the acquisition value of the contributor who gives such property in contribution
shall be deemed the acquisition value of such foreign corporation; and
2.Expenses directly paid to transfer the land, etc.
(4)In the application of paragraph (3), the acquisition value and the transfer value shall be the value of actual transaction and
if the value of actual transaction is unclear, such value shall be a value computed by applying mutatis mutandis the provisions of
Articles 99, 100 and 114 (5) of the Income Tax Act. <Newly Inserted by Act No. 6558, Dec. 31, 2001>
(5)In the application of paragraph (3), the provisions of Article 98 of the Income Tax Act shall apply mutatis mutandis to the transfer
time and the acquisition time of the relevant assets. <Newly Inserted by Act No. 6558, Dec. 31, 2001>
(6)The provisions of Article 101 of the Income Tax Act shall apply mutatis mutandis to any act of unfairly calculating such a transfer
income as prescribed in paragraph (3). In this case, the person with a special relationship in Article 101 of the same Act shall
be deemed the person with a special relationship provided for in Article 52 (1) . <Newly Inserted by Act No. 6558, Dec. 31, 2001>
Article 93 (Income Generated from Sources in Korea)
The income generated from sources in Korea by a foreign corporation shall be classified as follows: <Amended by Act No. 6293, Dec.
29, 2000; Act No. 6558, Dec. 31, 2001; Act No. 7005, Dec. 30, 2003; Act Nos. 7289 & 7317, Dec. 31, 2004>
1.Income under the provisions of each of the following items which is interest income under the provisions of Article 16 (1) of the
Income Tax Act (excluding income under subparagraph 8 of the same paragraph) and other interest on loans and profits from trusts:
Provided, That this shall not apply to interest on loans for a foreign place of business of a resident or domestic corporation which
are directly borrowed by the foreign place of business:
(a) Income received as payment from the State, a local government, a domestic place of business of a resident, domestic corporation
or foreign corporation, or a domestic place of business of a non-resident under the provisions of Article 120 of the Income Tax Act;
and
(b) Income received as payment from a foreign corporation or non-resident which is substantially related to the domestic place of
business of the foreign corporation or non-resident and included in the calculation of deductible expenses or necessary expenses
in the calculation of the income amount for the domestic place of business;
2.The dividend income provided for in Article 17 (1) of the Income Tax Act (excluding any income provided for in subparagraph 6 of
the same paragraph) that is paid in Korea by any domestic corporation or any organization treated as a corporation and the amount
disposed of as a dividend under Article 9 of the Adjustment of International Taxes Act;
3.Income generated from domestic real estate or real estate rights and domestically acquired mining claims, mining concessions, rights
concerning gathering earth, sand, and rock, or the development, transfer or lease of usage rights or other management of underground
water: Provided, That transfer income under the provisions of subparagraph 7 shall be excluded;
4.Income generated by the rental of ship, aircraft, registered automobiles, construction machinery, or machinery/facility/equipment
for industry/commerce/science, and other tools prescribed by the Presidential Decree to a domestic place of business of a resident,
a domestic corporation, a foreign corporation, or a domestic place of business of a non-resident under the provisions of Article
120 of the Income Tax Act;
5.Income generated by a business operated by a foreign corporation (including income which can be taxed as domestically generated
business income under tax treaties) as prescribed by the Presidential Decree: Provided, That income under the provisions of subparagraph
6 shall be excluded;
6.Income generated domestically from the provision of human services as prescribed by the Presidential Decree;
7.Transfer income under the provisions of Article 94 of the Income Tax Act (excluding income under the provisions of paragraph (1)
3 of the same Article) as prescribed by the Presidential Decree: Provided, That this shall be limited to cases where the assets which
generate the income are situated in Korea;
8.Forestry income under the provisions of Article 23 of the Income Tax Act: Provided, That this shall be limited to cases where the
assets which generate the income are situated in Korea;
9.Where assets, information, or rights falling under any of the following items are used domestically or the price is paid domestically,
the concerned price and the income generated by the transfer of the assets, information, or rights: Provided, That where the standards
for use are determined in treaties for the prevention of double taxation on income and there are provisions therein to determine
whether the concerned income falls under income generated in Korea, the price of assets, information, or rights used abroad shall
not be deemed as income generated in Korea, regardless of whether it was paid in Korea:
(a) Copyrights, patent rights, trademark rights, designs, forms, and sketches of works of learning or fine art (including movie film)
or secret formulae or processes, film and tape for radio and television broadcasts and other similar assets or rights; and
(b) Information or know-how related to industrial, commercial, or scientific knowledge and experience;
10.Such income as prescribed by the Presidential Decree among income generated by transfer of stocks, subscription certificates, or
other securities falling under any of the following items (the other assets under the provisions of Article 94 (1) 4 of the Income
Tax Act are excluded, however, the other assets concerned shall be included where they are stocks or subscription certificates of
stock-listed corporations or Association-registered corporations; hereafter the same shall apply in this subparagraph):
(a) Stocks, subscription certificates, or other securities issued by a domestic corporation; and
(b) Stocks or subscription certificates issued by a foreign corporation (limited to stock-listed corporations or Association-registered
corporations under the Securities and Exchange Act), or other securities issued by a foreign corporation s domestic place of business;
and
11.Income falling under any of the following items, other than those under the provisions of subparagraphs 1 through 10:
(a) Insurance money, compensatory payment, or punitive damages received on real property or other assets situated in Korea, or received
in connection with businesses carried on in Korea;
(b) Penalties or compensation for damages paid in Korea as prescribed by the Presidential Decree;
(c) Income generated by inheritance of assets in Korea;
(d) Prize, reward, compensation, other similar income paid in Korea;
(e) Income generated from underground deposits discovered in Korea;
(f) Income generated from licenses, approval, or rights established by other similar administrative disposal under the domestic acts,
and from transfer of domestic assets other than real properties;
(g) Prize received based on lottery, gift tickets, or other drawing tickets, or refunds or premiums paid on or to the purchasers of
horse-race tickets, all issued in Korea;
(h)Amount disposed of as other income in disposal of income referred to in Article 67 of this Act and the amount adjusted under Article
9 of the Adjustment of International Taxes Act, which is disposed of as other income;
(i) Income accrued from increase in value due to capital transactions prescribed by the Presidential Decree from the stocks and investment
allotment possessed by the person in special relationship which is prescribed by the Presidential Decree (hereafter referred to as
the specially related person abroad in Article 98); and
(j) Income from businesses operated in Korea, from personal services rendered in Korea, or from economic benefits received in relation
to assets located in Korea (excluding the difference, if any, between the amount received for redemption of and the issue prices
of foreign currency-denominated bonds issued by the State or financial institutions established under special Acts), or other similar
income as prescribed by the Presidential Decree, except those falling under any of items (a) through (i).
Article 94 (Domestic Place of Business of Foreign Corporation)
(1) Where a foreign corporation has a fixed place where it conducts all or part of its domestic business, it shall be deemed to have
a domestic place of business.
(2) The domestic place of business under the provisions of paragraph (1) shall include places falling under any of the following subparagraphs:
<Amended by Act No. 6558, Dec. 31, 2001>
1.Branches, offices, or business offices;
2.Shops and other fixed places for selling;
3.Workshops, factories, or storage areas;
4.Places used for building, construction and assembly sites, foundation construction sites, or places used for management and direction
of such sites continuously for more than 6 months;
5.Places falling under any of the following items where services are provided by employees:
(a) Place where services are provided for a period of not less than 6 months during a period of 12 months in which such services continue
to be provided; and
(b) Place where similar services are continually and repeatedly provided for not less than 2 years in case services are provided for
a total period of not more than 6 months during a period of 12 months in which such services continue to be provided; and
6.Places for exploration and gathering of mining, quarry, or marine natural resources and other natural resources (including places
where there are seas and low-lying lands of marine areas adjacent to the coast of Korea outside its territorial waters where Korea
exercises sovereignty under international laws).
(3) Even where a foreign corporation does not have a fixed place under the provisions of paragraph (1), where it has a person in Korea
with the authority to conclude contracts on its behalf who repeatedly exercises such authority or a similar person as prescribed
by the Presidential Decree operating its business, the location of that person s place of business (where there is no place of business,
it shall be the location of the address, and where there is no location of the address, it shall be the location of residence) shall
be deemed the domestic place of business.
(4) The domestic place of business under the provisions of paragraph (1) shall not include the places under each of the following
subparagraphs:
1.Fixed places used by a foreign corporation only for the simple procurement of assets;
2.Fixed places used by a foreign corporation only for storage and holding of assets not for the purpose of selling;
3.Fixed places used by a foreign corporation for advertisement, publicity, gathering and providing information, market research, and
other places used in order to conduct such preparatory and supporting business activities; and
4.Fixed places used by a foreign corporation only in order to have its own assets processed by another person.
SECTION 2 Calculation of Tax Amount
Article 95 (Tax Rate)
The corporate tax on income for each business year of foreign corporations under the provisions of Article 91 (1) and foreign corporations
under the provisions of paragraphs (2) and (3) of the same Article which have income generated from sources in Korea under the provisions
of subparagraph 7 of Article 93 shall be the amount calculated by application of the provisions of Article 55 to the tax base under
the provisions of Article 91 (in case the amount of the corporate tax on the income accruing from the transfer of land, etc. under
Article 95-2 exists, such amount of the corporate tax shall be added up in the above-referenced corporate tax). <Amended by Act
No. 6558, Dec. 31, 2001>
Article 95-2 (Special Cases for Taxation on Income Accruing from Transfer of Land, etc. by Foreign Corporation)
The provisions of Article 55-2 shall apply mutatis mutandis to the payment of the corporate tax on the income accruing from the transfer
of land, etc., earned by any foreign corporation provided for in Article 91 (1) and any foreign corporation provided for in paragraph
(2) of the same Article. In this case, the income accruing from the transfer of land, etc., earned by any foreign corporation provided
for in Article 91 (2) shall be an amount calculated by applying mutatis mutandis the provisions of Article 92 (3).
[This Article Newly Inserted by Act No. 6558, Dec. 31, 2001]
Article 96 (Special Cases for Taxation on Domestic Place of Business of Foreign Corporation)
(1)The domestic place of business of a foreign corporation (excluding non-profit foreign corporations) shall add the amount calculated
by application of the tax rate under the provisions of paragraph (3) to the income amount subject to taxation (in the event that
any tax treaty concluded between Korea and any foreign country where the relevant foreign corporation is based makes taxable the
amount of profit remittance, the income amount subject to taxation shall be the amount of remittance prescribed by the Presidential
Decree) under the provisions of paragraph (2) to the corporate tax under the provisions of Article 95 and pay it under the provisions
of tax treaties concluded between Korea and the country of residence of the concerned foreign corporation. <Amended by Act No.
6558, Dec. 31, 2001>
(2)The income amount subject to taxation under paragraph (1) shall be the income amount from the concerned domestic place of business
for each business year less the amount under each of the following subparagraphs: <Amended by Act No. 6293, Dec. 29, 2000>
1.The amount of corporate tax under the provisions of Article 95 less the amount under item (a) but with the amount under item (b)
added:
(a) Tax amount deducted under the provisions of Article 57 (1) 1, and Articles 58 and 58-2 that are applied mutatis mutandis pursuant
to the provisions of Article 97 (1), and tax amount deducted or exempted under other Acts; and
(b) Additional tax under the provisions of Article 76 or tax paid additionally under this Act or the Restriction of Special Taxation
Act;
1-2.Income-proportional resident tax;
2.The amount as prescribed by the Presidential Decree including those that are deemed to be reinvested into business by the corresponding
domestic place of business; and
3.The amount not included in deductible expenses pursuant to the provisions of Article 14 of the Adjustment of International Taxes
Act.
(3)The tax rate applied under paragraph (1) shall be the tax rate under Article 98 (1) 3, and where there are different provisions
in the tax treaties concluded between Korea and the country of residence of the concerned foreign corporation, the provisions of
the treaty shall be observed.
SECTION 3 Report, Payment, Settlement, Correction, and Collection
Article 97 (Report, Payment, Settlement, Correction, and Collection)
(1)Except as otherwise provided in this Section, the provisions of Articles 57 (1) and (2), 58, 58-2, 59, 60 (excluding the profits
surplus disposal statement or deficits disposal statement pursuant to the provisions of paragraph (2) 1 of the same Article), 61,
62 and 63 through 76 shall apply mutatis mutandis to report, payment, settlement, correction, and collection of the corporate tax
for each business year of foreign corporations falling under the provisions of Article 91 (1) and foreign corporations under paragraphs
(2) and (3) of the same Article that have income generated in Korea under the provisions of subparagraph 7 of Article 93. In this
case, in the mutatis mutandis application of the provisions of Article 64, where the tax base for corporate tax on income of a foreign
corporation for each business year under the provisions of Article 91 (1) includes the income withheld under the provisions of Articles
98 and 98-3, the concerned withholding tax amount shall be deemed the tax amount deducted under the provisions of Article 64 (1)
4. <Amended by Act No. 6293, Dec. 29, 2000; Act No. 6558, Dec. 31, 2001; Act No. 7005, Dec. 30, 2003; Act No. 7317, Dec. 31, 2004>
(2)Where a foreign corporation which shall make report on the tax base for corporate tax on the income for each business year under
the provisions of paragraph (1) cannot submit the report within the time limit due to causes as prescribed by the Presidential Decree,
it may obtain the approval of the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner
of the competent Regional Tax Office and extend the time limit for report under the conditions as prescribed by the Presidential
Decree, notwithstanding the provisions of paragraph (1).
(3)Where a foreign corporation which has received approval to extend the time limit for report under the provisions of paragraph (2)
pays the tax amount, it shall add the amount calculated by application of the rate as prescribed by the Presidential Decree with
reference to the interest rates charged by financial institutions to the number of days of the extension.
(4)The number of days of the extension in the calculation of the amount to be added under the provisions of paragraph (3) shall be
the number of days from the day following the time limit for report under the provisions of Article 60 until the day for which approval
for extension was obtained: Provided, That where the report and payment is made within the extended time limit, it shall be the number
of days until the day of such report and payment.
Article 98 (Special Cases for Withholding or Collection for Foreign Corporations)
(1)With regard to a foreign corporation, where the person who pays the amount of income generated in Korea under the provisions of
subparagraphs 1, 2, 4 through 7, and 9 through 11 of Article 93 which has no substantial connection with the domestic place of business
or does not accrue to the domestic place of business (including the amount paid to foreign corporations with no domestic place of
business) makes such payment, the amounts under each of the following subparagraphs shall be withheld as corporate tax on the income
for the business year of the concerned corporation and paid at the district tax office having jurisdiction over the place of tax
payment, etc. under the conditions as prescribed by the Presidential Decree by the 10th day of the month following the month which
included the date of the withholding, notwithstanding the provisions of Article 97: Provided, That this shall not apply to income
under the provisions of subparagraph 5 of Article 93 which may be taxed as business income generated in Korea under tax treaties:
<Amended by Act No. 6293, Dec. 29, 2000; Act No. 7005, Dec. 30, 2003>
1.For income under the provisions of subparagraphs 4 and 5 of Article 93, 2% of the amount paid;
2.For income under the provisions of subparagraph 6 of Article 93, 20% of the amount paid;
3.For income under the provisions of subparagraphs 1, 2, 9, and 11 of Article 93, 25% of the amount paid;
3-2. For income under the provisions of subparagraph 7 of Article 93, 10/100 of the amount paid: Provided, That the acquisition amount
and transfer expenses of the real estate concerned are confirmed, either an amount equivalent to 10/100 of the amount paid or an
amount equivalent to 25/100 of gains on transfer, whichever is smaller; and
4.For income under the provisions of subparagraph 10 of Article 93, 10% of the amount paid (for cases falling under the provisions
of Article 92 (2) 3, this refers to the normal price under the same subparagraph; hereafter referred to as the amount paid, etc.
in this subparagraph): Provided, That where the acquisition value and transfer expenses incurred for transfer of the concerned securities
are determined pursuant to the provisions of the proviso of Article 92 (2) 2, it shall be whichever the smaller between the amount
corresponding to 10% of the amount paid, etc. and the amount corresponding to 25% of the amount calculated under the provisions of
the proviso of the same subparagraph of the same paragraph.
(2)Where a person who withholds corporate tax under the provisions of paragraphs (1) and (4) through (7) pays the withheld corporate
tax after the time limit for payment has passed, he shall add the amount of additional taxes under the provisions of Article 76 (2)
to the corporate tax amount.
(3)Where the amount which shall be withheld as corporate tax on the income of a foreign corporation for each business year under the
provisions of paragraphs (1) and (4) through (7) is not withheld or is not paid within the time limit for payment under the provisions
of paragraph (1), the amount under the provisions of Article 76 (2) shall be added to the collected amount, and collected as corporate
tax from the person responsible for collecting withholding taxes without delay according to the example of the collection of national
taxes: Provided, That where it is the State or a local government, this shall not apply.
(4)A person who pays a foreign corporation with no domestic place of business the income amount generated in Korea under the provisions
of subparagraphs 1, 5, 6, and 9 of Article 93 as foreign loan funds shall withhold under the provisions of paragraph (1) each time
the income amount is to be paid in accordance with the terms of payment in the contract, even where he does not directly pay the
income amount under the terms of the concerned contract.
(5)The domestic agency of a foreign corporation operating a ship or aircraft going to a foreign country who does not fall under the
provisions of Article 94 (3) shall withhold taxes on the amount of income generated in Korea by the foreign corporation under the
provisions of paragraph (1) when he pays the income from the voyage of the ship or aircraft to a foreign country to the foreign corporation.
(6) Where securities under the provisions of subparagraph 10 of Article 93 are transferred through a securities company under the
Securities and Exchange Act, the concerned securities company shall withhold taxes under the provisions of paragraph (1): Provided,
That where previously issued stocks are transferred in case stocks are listed under the Securities and Exchange Act, the corporation
which issued the concerned stocks shall withhold taxes.
(7) The person paying the income amount generated in Korea through providing services related to the establishment, foundation, and
conducting or leading or guiding of other operations for building, construction machinery, equipment, or income generated in Korea
under the provisions of subparagraph 6 of Article 93 to a foreign corporation shall withhold taxes under the provisions of paragraph
(1), even where the concerned income accrues to the domestic place of business: Provided, That this shall not apply where the concerned
domestic place of business has registered its business under the provisions of Article 111.
(8) Where income generated in Korea under the provisions of paragraph (1) is paid in a foreign country and the person making payment
has a domestic address, residence, headquarters, main office, or domestic place of business (including domestic place of business
under the provisions of Article 120 of the Income Tax Act), it shall be deemed that the person making payment paid the concerned
income amount generated in Korea and the provisions of paragraph (1) shall apply.
(9) Where the person responsible for collecting withholding taxes withholds corporate taxes under the provisions of paragraphs (1)
and (4) through (7), he shall issue a withholding receipt to the person receiving payment with the amount of payment and other necessary
matters noted as prescribed by the Presidential Decree.
(10)Income generated in Korea pursuant to the provisions of subparagraph 11 (i) of Article 93 shall be collected by withholding by
the domestic corporation who issued the relevant stocks or investment certificates from the specially related person abroad who possesses
the stocks or investment certificates at the time when the Presidential Decree prescribes. <Newly Inserted by Act No. 7005, Dec.
30, 2003>
(11) The concrete methods of collecting by withholding pursuant to the provisions of paragraph (10) shall be prescribed by the Presidential
Decree. <Newly Inserted by Act No. 7005, Dec. 30, 2003>
Article 98-2 (Special Cases for Report, Payment, etc. on Income Accruing from Transfer of Securities by Foreign Corporations)
(1)Where a foreign corporation with no domestic place of business comes to satisfy the taxation criteria provided in the corresponding
taxation treaty by transferring stocks or subscription certificates of one identical domestic corporation twice or more times within
one identical business year (referring to the business year of the domestic corporation which issues the stocks or subscription certificates;
hereafter the same shall apply in this Article), such a foreign corporation shall, within three months from the closing day of the
business year to which the date of transfer belongs, report and pay to the chief of the district tax office having jurisdiction over
the place of tax payment an amount equivalent to the withholding tax on the income of transfer margin (hereafter referred to as
income in this Article) that was not paid at the time of such transfers, under the conditions as prescribed by the Presidential
Decree.
(2)The provisions of paragraph (1) shall apply mutatis mutandis to such income of a foreign corporation with a domestic place of business
that is not substantially related to or does not belong to the domestic place of business.
(3)Where a foreign corporation fails to make a report and payment under paragraphs (1) and (2), makes a report falling short of the
tax base to report, or pays a tax amount less than the correct payable amount, the chief of the district tax office having jurisdiction
over the place of tax payment shall, by applying mutatis mutandis the provisions of Article 66, collect the correct payable amount
together with the amount that is computed by applying mutatis mutandis the provisions of Article 76 (1).
[This Article Newly Inserted by Act No. 6293, Dec. 29, 2000]
Article 98-3 (Special Cases for Withholding by Foreign Corporations of Tax on Bonds, etc.)
(1)Any person who pays interest or discounts (hereafter referred to as the interest, etc. in this Article) on bonds, etc. provided
in Article 46 (1) of the Income Tax Act (hereafter referred to as the bonds, etc. in this Article) to a foreign corporation (referring
to a foreign corporation that is subject to the provisions of Article 98 (1); hereafter the same shall apply in this Article), or
buys bonds, etc. from foreign corporations before being paid the interest, etc. on bonds, etc. shall withhold the tax amount considering
the period of such bonds, etc. held by such a foreign corporation under the conditions as prescribed by the Presidential Decree.
<Amended by Act No. 7317, Dec. 31, 2004>
(2)Deleted. <by Act No. 7317, Dec. 31, 2004>
(3)Any act performed by any person who acts in the capacity of a person who is liable to withhold taxes at source under paragraph
(1) or is commissioned to act in the capacity of the latter shall be deemed an act peformed by the latter or the mandator within
the scope of the delegation of power and commissioning, and is subject to the application of the provisions of paragraph (1). <Newly
Inserted by Act No. 6558, Dec. 31, 2001; Act No. 7317, Dec. 31, 2004>
(4)In the event that any financial institution falling under any item of subparagraph 1 of Article 2 of the Act on Real Name Financial
Transactions and Guarantee of Secrecy takes over, trades, brokers or acts by proxy on bonds, etc. issued by any domestic person or
any foreign corporation, the relationship of agency or delegation shall be deemed to exist among such financial institution, a person
liable to withhold taxes at source provided for in paragraph (1) and a foreign corporation that sells bonds, etc., and the provisions
of paragraph (3) shall apply. <Newly Inserted by Act No. 6558, Dec. 31, 2001>
(5)In the application of paragraphs (1) through (4), the provisions of Article 98 (1) through (3) shall apply mutatis mutandis to
the time limit for the payment of taxes withheld at source and the payment and collection of the additional tax. <Newly Inserted
by Act No. 6558, Dec. 31, 2001>
(6)In the application of the provisions of paragraph (1), the time of interest income payment, computation of the period such bonds,
etc. held, computation and payment of withholding tax amount, scope of persons liable for withholding or paying tax, issuance of
withholding tax receipts, etc. that are required shall be prescribed by the Presidential Decree. <Amended by Act No. 7317, Dec.
31, 2004>
[This Article Newly Inserted by Act No. 6293, Dec. 29, 2000]
Article 98-4 (Application for Non-Taxation on Income Generated from Sources in Korea by Foreign Corporation)
Any foreign corporation that intends to get its income generated from sources in Korea provided for in Article 93 (excluding the income
referred to in subparagraphs 5 and 6 of the same Article) untaxed or exempted from taxation in accordance with any tax treaty shall
file an application therefor with the chief of district tax office having jurisdiction over the place of tax payment under the conditions
as prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No. 6558, Dec. 31, 2001]
CHAPTER V Deleted.
Articles 99 through 108 Deleted.
CHAPTER VI SUPPLEMENTARY PROVISIONS
Article 109 (Report on Establishment or Foundation of Corporation)
(1)A domestic corporation shall submit a report on incorporation with the items under each of the following subparagraphs indicated,
along with such documents as prescribed under the Presidential Decree, within 2 months of the date of the incorporation registration
to the chief of the district tax office having jurisdiction over the place of tax payment. In this case, where the business is registered
under the provisions of Article 111, it shall be deemed that the report on such incorporation is submitted: <Amended by Act No.
6293, Dec. 29, 2000; Act No. 6558, Dec. 31, 2001>
1.Name of the corporation and its representative;
2.Location of its headquarters or main office;
3.Purpose of business; and
4.Date of establishment.
(2)Where a foreign corporation comes to have a domestic place of business, it shall submit a report on the establishment of a domestic
place of business with the matters under each of the following subparagraphs noted within 2 months of the date on which the domestic
place of business was established, with the balance sheet as of the day the domestic place of business was established and other
documents as prescribed by the Presidential Decree attached, to the chief of the district tax office having jurisdiction over the
place of tax payment. In this case, a foreign corporation which comes to have a place of business under the provisions of Article
94 (3), it may only submit a report on establishment of a domestic place of business:
1.Name of the corporation and its representative;
2.Location of its headquarters or main office;
3.Name of the person responsible for management or administration of the business conducted in Korea or the assets located in Korea;
4.Purpose and type of domestic business, and type and location of assets in Korea; and
5.Date of start of domestic business or date on which assets came to be held in Korea.
(3)Where there are changes in the contents of the report and other documents submitted by domestic corporations and foreign corporations
under the provisions of paragraphs (1) and (2), the changed contents shall be reported to the chief of the district tax office having
jurisdiction over the place of tax payment within 15 days of the changes. <Amended by Act No. 7317, Dec. 31, 2004>
(4)The provisions of paragraph (2) shall apply mutatis mutandis to the report by a foreign corporation with real estate income under
subparagraph 3 of Article 93 or forestry income under subparagraph 8 of the same Article.
Article 110 (Report on Start of Profit-Making Business by Non-Profit Corporation)
Where a non-profit domestic corporation or non-profit foreign corporation (limited to foreign corporations with a domestic place of
business) newly begins a profit-making business (limited to profit-making businesses under the provisions of Article 3 (2) 1 and
6), it shall submit a report detailing matters under each of the following subparagraphs, with the balance sheet of the profit-making
business as of the day it begins such business and other documents as prescribed by the Presidential Decree attached, to the chief
of the district tax office having jurisdiction over the place of tax payment within 2 months of the date of the start of the business:
1.Name of the corporation;
2.Location of its headquarters or main office;
3.Name of the representative and the person responsible for management or administration;
4.Proper purpose businesses;
5.Type of profit-making business;
6.Date of start of profit-making business; and
7.Place of business of profit-making business.
Article 111 (Registration of Business)
(1)A corporation starting a new business shall register itself with the chief of the district tax office having jurisdiction over
the place of tax payment as prescribed by the Presidential Decree.
(2)A businessman who has registered his business under the Value-Added Tax Act shall be deemed to have registered the concerned business
under the provisions of paragraph (1).
(3) The provisions of Article 5 of the Value-Added Tax Act shall apply mutatis mutandis to a corporation registering its business
under the provisions of this Act.
(4) Where the report on incorporation under the provisions of Article 109 has been made, it shall be deemed that application for registration
of business has been made.
Article 112 (Keeping of Account Books)
A corporation with tax liability shall keep its account books by the double entry system, and keep and preserve important documentary
evidence related to the account books: Provided, That for non-profit domestic corporations, this shall be limited to those operating
a profit-making business under Article 3 (2) 1 and 6.
Article 113 (Separate Accounting)
(1) Where a non-profit corporation operates a profit-making business, the assets, liabilities, and profits and losses of the concerned
profit-making business and the other business which is not a profit-making business shall be separately accounted and separate accounts
shall be maintained.
(2) A corporation under the application of the Trust Business Act and the Act on Business of Operating Indirect Investment and Assets
shall keep separate accounts for the income accruing to the trust estate and other income in the calculation of the income amount
for each business year. <Amended by Act No. 7005, Dec. 30, 2003>
(3)A merged corporation which wishes to deduct the losses carried forward of an extinguished corporation under the provisions of Article
45 (1) shall maintain separate accounting of the assets, liabilities, and profits and losses included in the business succeeded from
the extinguished corporation and those included in other business.
(4) Matters necessary for the separate accounting method under the provisions of paragraphs (1) through (3) and other necessary matters
shall be prescribed by the Presidential Decree.
Article 114 Deleted.
<by Act No. 6558, Dec. 31, 2001>
Article 115 (Duty to Submit Combined Financial Statements, etc.)
A company drawing up a combined financial statement under the Act on External Audit of Stock Companies shall submit the group enterprise
combined balance sheet, the group enterprise combined losses and profits invoice under the same Act, and other documents as prescribed
by the Presidential Decree within 6 months of the last day of the business year of the concerned corporation to the chief of the
district tax office having jurisdiction over the place of tax payment under the conditions as prescribed by the Presidential Decree.
Article 116 (Receipt and Safekeeping of Documentary Evidence of Expenditures)
(1)A corporation shall make or receive documentary evidence for all business related transactions for each business year and keep
them for 5 years from the date of the expiration of the time limit for report under the provisions of Article 60.
(2)In case of paragraph (1), where a corporation receives goods or services from a businessman as prescribed by the Presidential Decree
and pays for them, it shall receive and keep the documentary evidence falling under any one of the following subparagraphs: Provided,
That in cases as prescribed by the Presidential Decree, this shall not apply:
1.Credit card sales slip under the Specialized Credit Financial Business Act (in case of transactions using things similar to a credit
card as prescribed by the Presidential Decree, it shall include the concerned documentary evidence);
2.The tax invoice under the provisions of Article 16 of the Value-Added Tax Act; and
3.The invoice under the provisions of Article 121 of this Act and Article 163 of the Income Tax Act.
(3)In the application of the provisions of paragraphs (1) and (2), matters necessary for the receipt and keeping of documentary evidence
shall be prescribed by the Presidential Decree.
Article 117 (Administrative Guidance on Joining Credit Card Affiliation)
(1) Where the Commissioner of the National Tax Service deems that a corporation as prescribed by the Presidential Decree which provides
goods or services to consumers who are not mainly businessmen is in need of tax management, he may designate it as a person subject
to joining credit card affiliation under the Specialized Credit Financial Business Act, or as a person subject to joining cash receipt
service affiliation pursuant to the provisions of Article 126-3 of the Restriction of Special Taxation Act, and guide it to join
the credit card affiliation or cash receipt service affiliation. <Amended by Act No. 7317, Dec. 31, 2004>
(2)Matters necessary for the designation as a person subject to joining a credit card affiliation under the provisions of paragraph
(1) shall be prescribed by the Presidential Decree.
Article 118 (Making and Keeping Registry of Names of Stockholders)
A domestic corporation (excluding non-profit domestic corporations) shall make and keep a stockholder registry or employee registry
with the names, addresses, and resident registration numbers (for stockholders or employees which are corporations, the name of the
corporations, the location of the headquarters of the corporations, and the business registration numbers) of the stockholders or
employees (referring to limited partnership employees; hereafter the same shall apply in this Article) and other matters as prescribed
by the Presidential Decree.
Article 119 (Submission of Detailed Statement on State of Fluctuation of Stocks, etc.)
(1)A corporation with changes in the state of stocks, etc. during the business year (excluding partnership corporations, etc. as prescribed
by the Presidential Decree) shall submit a detailed statement on the state of fluctuation of stocks, etc. as prescribed by the Presidential
Decree within the time limit for report under the provisions of Article 60 to the chief of the district tax office having jurisdiction
over the place of tax payment.
(2)The provisions of paragraph (1) shall not apply to the stocks held by minority stockholders of stock-listed corporations and Association-registered
corporations and the contribution quotas of corporations which are not joint-use corporations as prescribed by the Presidential Decree.
Article 120 (Duty to Submit Written Evidence of Payment)
(1)The person responsible for collecting withholding taxes under the provisions of Article 73 (1) shall submit written evidence of
payment to the chief of the district tax office having jurisdiction over the place of tax payment as prescribed by the Presidential
Decree.
(2)The provisions of Article 164 of the Income Tax Act shall apply mutatis mutandis to the submission of written evidence of payment
under the provisions of paragraph (1).
Article 120-2 (Special Cases for Submission of Written Payment Statements on Income, etc. Generated from Sources in Korea by Foreign
Corporations)
(1)Any person who pays the income generated from sources in Korea to any foreign corporation in accordance with Article 93 shall file
a written payment statement with the chief of district tax office having jurisdiction over the place of tax payment by the end of
February of the year next to the year(in the case of suspension of closure of business, by the end of the month 2 months from the
month to which such suspension or closure belongs) to which the payment day belongs: Provided, That the same shall not apply to a
case where the income prescribed by the Presidential Decree is paid, including the income, etc. that are confirmed subject to non-taxation
under Article 98-4. <Amended by Act No. 6558, Dec. 31, 2001; Act No. 7005, Dec. 30, 2003>
(2) The provisions of Article 164 of the Income Tax Act shall apply mutatis mutandis to submission of written payment statements pursuant
to the provisions of paragraph (1).
[This Article Newly Inserted by Act No. 6293, Dec. 29, 2000]
Article 121 (Making and Issuing Invoice)
(1) When a corporation provides goods or services, it shall make an invoice or receipt (hereinafter referred to as an invoice, etc.
) as prescribed by the Presidential Decree and deliver it to the person receiving the goods or services.
(2) Where agricultural products, livestock products, marine products, and forest products exempted from the value-added tax under
the provisions of Article 12 (1) 1 of the Value-Added Tax Act sold on consignment or through a representative, the consignee or representative
shall be deemed as providing the goods and shall make an invoice, etc. and deliver it to the person receiving the concerned goods:
Provided, That where the invoice is delivered under the conditions as prescribed by the Presidential Decree under the provisions
of paragraph (1), this shall not apply.
(3) With respect to imported goods, the head of a customs house shall deliver an invoice to any corporation that imports such goods
under the conditions as prescribed by the Presidential Decree. <Newly Inserted by Act No. 6558, Dec. 31, 2001>
(4) In the event that the delivery of any invoice, etc. including the case of sale of real estate, etc. is deemed inappropriate and
such inappropriateness is prescribed by the Presidential Decree, the provisions of paragraphs (1) through (3) shall not be applied.
<Newly Inserted by Act No. 6558, Dec. 31, 2001>
(5) A corporation shall submit a sales and purchase invoice aggregate balance sheet for invoices issued or received under the provisions
of paragraphs (1) through (3) (hereinafter referred to as a sales and purchase invoice aggregate balance sheet ) within the time
limit as prescribed by the Presidential Decree to the chief of the district tax office having jurisdiction over the place of tax
payment. <Amended by Act No. 6558, Dec. 31, 2001>
(6) Those who have made or issued tax invoices or receipts or submitted sales and purchase tax invoice aggregate balance sheets under
the Value-Added Tax Act shall be deemed to have made or issued invoices, etc. or submitted the sales and purchase invoice aggregate
balance sheet under the provisions of paragraphs (1) through (3), and (5). <Amended by Act No. 6558, Dec. 31, 2001>
(7) Necessary matters for making and issuing the invoice, etc. and submitting the sales and purchase invoice aggregate balance sheet
shall be prescribed by the Presidential Decree.
Article 122 (Inquiry and Investigation)
Where necessary to for a public servant engaging in the business affairs related to corporate tax to perform his duties, he may question
the persons falling under any of the following subparagraphs, or examine the concerned account books, documents and other items or
order them to be submitted:
1.Persons liable to pay taxes or persons deemed to have tax liability;
2.Persons responsible for collecting withholding taxes;
3.Persons liable to submit written evidence of payment and persons liable to submit the sales and purchase invoice aggregate balance
sheet;
4.Persons responsible for management or administration under the provisions of Article 109 (2) 3;
5.Persons deemed to have engaged in a transaction with persons under the provisions of subparagraph 1; and
6.Trade associations organized by persons liable to pay taxes and corresponding organizations.
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1999: Provided, That the amended provisions of Articles 8, 16, 17, 33, 34, 36, 46 through
49, 59, 63, 79, 81, 84, 86 and 99 (11) (limited to the sections on divisions) and the amended provisions of Article 29 (1) shall
enter into force on the date of its promulgation, the amended provisions of Articles 28 (2) through (4) and 76 (5) shall enter into
force on January 1, 2000, and the amended provisions of Articles 76 (9) 1 and 121 (2) shall enter into force on July 1, 1999.
Article 2 (General Applicable Examples)
This Act shall apply from the business year which starts first after the enforcement of this Act: Provided, That the amended provisions
on the corporate tax on liquidation income shall apply from the dissolution or merger which occurs first after the enforcement of
this Act or from the division of the business year which includes the date of the enforcement of this Act, and the amended provisions
on the special transfer income tax shall apply from the transfer which first occurs after the enforcement of this Act.
Article 3 (Applicable Examples for Special Cases of Merger and Division)
The amended provisions of Article 8, subparagraphs 3 and 4 of Article 17, and Articles 44 through 49, 59 (3), 99 (11) (limited to
the section on divisions) and 113 (3) shall apply from the first merger after the enforcement of this Act or from the division of
the business year which includes the date of the enforcement of this Act.
Article 4 (Applicable Examples for Report and Payment)
(1) The amended provisions of Articles 6, 7, 62, and 109 through 111 shall apply from the arrival of the first time limit for report
or registration after the enforcement of this Act.
(2) The amended provisions of Articles 60 and 63 through 65 shall apply from the first report or payment of corporate tax for the
business year which starts first after the enforcement of this Act: Provided, That the amended provisions of Article 63 (1) shall
apply to the first interim prepaid portion after the enforcement of this Act.
(3) The amended provisions of Articles 66 through 70 shall apply from the first report, settlement, or correction after the enforcement
of this Act.
(4) The amended provisions of Articles 71 and 89 shall apply from the arrival of the first time limit for the payment of corporate
tax after the enforcement of this Act.
(5) The amended provisions of Articles 73 through 75 shall apply from the first payment after the enforcement of this Act.
Article 5 (Applicable Examples for Legal Fiction of Dividends or Distributed Funds)
The amended provisions of Article 16 shall apply from the first retirement of stocks, entry into capital or dissolution after the
enforcement of this Act: Provided, That the amended provisions of Article 16 (1) 2 (a)(limited to merger evaluation marginal profits
and division evaluation marginal profits) shall apply from the first merger after the enforcement of this Act or the entry into capital
of funds generated by a division during the business year which includes the date of the enforcement of this Act, and the amended
provisions of subparagraph 6 of the same paragraph shall apply from the division of the business year which includes the date of
the enforcement of this Act.
Article 6 (Applicable Examples for Calculation of Deductible Expenses)
(1)The amended provisions of Article 28 (2) through (4) shall apply from the first business year starting on or after January 1, 2000.
(2)The amended provisions of Articles 29 (excluding paragraph (1)) through 34 (excluding paragraph (3)), 36 through 38, and 61 shall
apply from the entry into the calculation of deductible expenses in the business year beginning first after the enforcement of this
Act: Provided, That the amended provisions of Article 29 (1) shall apply from the entry into the calculation of deductible expenses
in the business year which includes the date of the enforcement of this Act, the amended provisions of Articles 31 (4), 32 (4), 33
(3), 34 (6), and 36 (3) (including where the amended provisions of Articles 37 (2) and 38 (2) shall apply mutatis mutandis) shall
apply from the first dissolution after the enforcement of this Act or from the division of the business year which includes the date
of the enforcement of this Act.
(3) The amended provisions of Article 34 (3) shall apply from the first guarantee of obligation (including guarantee of obligation
made prior to the enforcement of this Act for which the time limit has been extended) or payment after the enforcement of this Act:
Provided, That for a corporation which had been under the application of the previous provisions of Article 14 (1), the amended provisions
of Article 34 (3) 1 shall apply from the first guarantee of obligation after January 1, 1998 (including guarantee of obligation made
prior to December 31, 1997 for which the time limit has been extended).
(4)The amended provisions of Article 52 shall apply to the first transaction after the enforcement of this Act.
(5)The amended provisions of Articles 92 (2) 3 and 98 (1) 4 shall apply to the first transfer after the enforcement of this Act.
Article 7 (Applicable Examples for Additional Taxes)
(1)The amended provisions of Article 76 (1) shall apply from the collection of corporate tax in the first business year starting after
the enforcement of this Act.
(2) The amended provisions of Articles 76 (4) and 115 shall apply from the combined financial statements submitted in the first business
year starting after the enforcement of this Act. In this case, the time limit for submission for the business year which starts between
the date of the enforcement of this Act and December 31, 1999 shall be 7 months from the end of the concerned business year, notwithstanding
the amended provisions of Article 115.
(3) The amended provisions of Article 76 (5) shall apply from the first goods or services provided after January 1, 2000, and the
amended provisions of Article 116 shall apply from the first goods or services provided after the enforcement of this Act.
(4)The amended provisions of Article 76 (6) shall apply from the detailed statement submitted in the first business year starting
after the enforcement of this Act, and the amended provisions of Article 119 (1) (excluding the section on the time limit for report)
shall apply from the statement first submitted after the enforcement of this Act.
(5) The amended provisions of Article 76 (8) shall apply from the arrival of the first time limit for submission after the enforcement
of this Act.
(6) The amended provisions of Articles 76 (9) 1 and 121 (2) shall apply from the first provision after July 1, 1999.
(7) The amended provisions of Article 114 shall apply from the arrival of the first time limit for public notification after the enforcement
of this Act.
Article 8 (Special Cases concerning Calculation of Income of Profit-making Business)
(1)In the application of the amended provisions of Article 3 (2) 4, the acquisition value of stocks or contribution quotas acquired
before December 31, 1988 may be the higher of the book value or the amounts under each of the following subparagraphs:
1.For stocks or contribution quotas listed on a stock exchange, the higher amount of the stock exchange final market value on December
31, 1988 (regardless of the existence of any real transaction) or the average of the officially announced stock exchange final market
value for each day of December 1988; and
2.For stocks or contribution quotas not listed on a stock exchange, the value as of January 1, 1989 as evaluated under the provisions
of Article 60 of the Inheritance Tax and Gift Tax Act and Article 63 (1) 1 (b) and (c) of the same Act.
(2) In the application of the amended provisions of Article 3 (2) 5, the acquisition value of land and buildings acquired before December
31, 1988 (including attached facilities and constructions) may be the larger amount of the book value or the value as of January
1, 1989 as evaluated under the provisions of Article 60 of the Inheritance Tax and Gift Tax Act and Article 61 (1) through (3) of
the same Act: Provided, That the acquisition value of land and buildings acquired before December 31, 1990 not used for profit-making
business may be the larger amount of the book value or the value as of January 1, 1991 as evaluated under the provisions of Article
60 of the Inheritance Tax and Gift Tax Act and Article 61 (1) through (3) of the same Act.
Article 9 (Special Cases concerning Application of Non-Inclusion of Entertainment Expenses in Calculation of Deductible Expenses)
(1) In the application of the amended provisions of Article 25 (1) 2, for the business year starting between the date of the enforcement
of this Act and December 31, 1999, the rates applied shall be as in the following table, notwithstanding the table under the amended
provisions of the same Article.
Revenue Amount
Rate
10,000,000,000 won or less
30/10,000
More than 10,000,000,000 won
and up to 50,000,000,000 won
30,000,000 won ï¼?
15/10,000 of the amount in excess of 10,000,000,000 won
More than 50,000,000,000 won
90,000,000 won +
4/10,000 of the amount in excess of 50,000,000,000 won
(2) In the application of the amended provisions of Article 25 (2) and (4), for the business year starting between the date of the
enforcement of this Act and December 31, 1999, the amount of secret service funds under the previous provisions of the proviso of
Article 18-2 (3) within the scope of 10% of the sum of the amounts under each subparagraph of Article 25 (1) appropriate amount shall
be deemed the business-related entertainment expenses paid, and the amended provisions of Article 25 (2) shall not apply.
Article 10 (Special Cases concerning Time of Acquisition of Land, etc.)
In the application of the amended provisions of Article 99, the land, etc. acquired prior to December 31, 1984 shall be deemed as
land, etc. acquired on January 1, 1985.
Article 11 (General Transitional Measures)
Corporate tax paid or to be paid under the previous provisions prior to the enforcement of this Act shall be governed by the previous
provisions.
Article 12 (Transitional Measures on Non-Taxation of Interest Income)
Corporate Tax shall not be levied on income generated by bonds or savings under any of the following subparagraphs:
1.National housing bonds issued under the Housing Construction Promotion Act by the Korea Housing and Commercial Bank under the previous
Korea Housing and Commercial Bank Act before January 1, 1982;
2.Bonds issued before January 1, 1983 which fall under any of the following items:
(a) National bonds for industrial reconstruction issued by the State under the previous Industrial Reconstruction Bonds Act;
(b) Bonds issued by the State as compensation for requisition under the Act on Special Measures for Readjustment of Requisitioned
Properties;
(c) Bonds issued by the State under the previous Act on Temporary Measures on the Settlement of Communication Facilities;
(d) National housing bonds issued by the State under the Housing Construction Promotion Act;
(e) Subway public bonds, roads public bonds, and waterworks public bonds issued by local governments under the Local Finance Act;
and
(f) Land development bonds issued by the Korea Land Corporation under the Korea Land Corporation Act; and
3.Interest on savings in the National Savings Association generated before December 31, 1990.
Article 13 (Transitional Measures for Inclusion of Reserve Fund, etc. in Calculation of Gross Income, etc.)
(1) For the inclusion of reserve funds, etc. included in the calculation of deductible expenses under the provisions of the previous
Article 12 (3) before the enforcement of this Act in the calculation of gross income, the previous provisions shall govern.
(2) The time of accrual of gross income and deductible expenses for transactions, etc. under the application of the provisions of
the previous Article 17 at the time of the enforcement of this Act shall be governed by the previous provisions.
(3) The withholding tax rate on interest income from bonds, etc. issued under the provisions of the previous Article 39 (6) before
September 30, 1998 shall be 20%, notwithstanding the amended provisions of Article 73 (1) 1.
Article 14 Omitted.
Article 15 (Relation with Other Acts and Subordinate Statutes)
Where other Acts and subordinate statutes cite the provisions of the previous Corporate Tax Act at the time of the enforcement of
this Act, and there are corresponding provisions in this Act, they shall be deemed to have cited the concerned provisions of this
Act in lieu of the previous provisions.
ADDENDA <Act No. 6047, Dec. 28, 1999>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2000.
Article 2 (Applicable Examples)
(1) The amended provisions of Article 18-2 shall apply starting with the portion of a dividend received first from a subsidiary after
the enforcement of this Act.
(2) The amended provisions of Article 36 shall apply starting with the portion of assets acquired and renovated for business using
subsidies provided first after the enforcement of this Act.
(3) The amended provisions of Article 73 (1) and (5) shall apply starting with the portion of the payment of interest income accruing
first after the enforcement of this Act.
ADDENDA <Act No. 6259, Feb. 3, 2000>
(1)(Enforcement Date) This Act shall enter into force on the date of its promulgation.
(2)(General Applicable Examples) This Act shall apply starting with the portion of a declaration of tax base filed for the special
surtax and a determination or an alteration made with respect to the special surtax for the first time after the enforcement of this
Act. <Amended by Act No. 6293, Dec. 29, 2000>
(3)(Applicable Examples to Litigation Cases on Special Surtax) This Act shall apply to disposition pursuant to the provisions of Article
59-2 (1) (limited to appeals, requests for review, requests for adjudgment or administrative lawsuits that have already been filed)
under the previous Corporate Tax Act (referring to the Act before amendment by Act No. 5581). <Newly Inserted by Act No. 6293,
Dec. 29, 2000>
ADDENDA <Act No. 6293, Dec. 29, 2000>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2001: Provided, That the amended provisions of Articles 25 (2) and 98-2 shall enter
into force on the date of its promulgation, the amended provisions of Articles 73 (1), (6), (8) and (9), 74 (2) and 98-3 shall enter
into force on July 1, 2001, the amended provisions of the main sentence of Article 28 (2) shall enter into force on January 1, 2002,
and the amended provisions of Articles 66 (2), 76 (7) and (8) and 120-2 shall enter into force on July 1, 2002. <Amended by Act
No. 6558, Dec. 31, 2001>
Article 2 (General Applicable Examples)
This Act shall apply starting with the portion for the business year that starts first after the enforcement of this Act.
Article 3 (Applicable Examples to Exclusion of Received Dividend Amount from Gross Income)
The amended provisions of Articles 18-2 (1) and (3) and 18-3 shall apply starting with the portion of received dividend amount first
received after the enforcement of this Act.
Article 4 (Applicable Examples to Exclusion of Entertainment Expenses from Deductible Expenses)
The amended provisions of Article 25 (2) shall apply starting with the portion of entertainment expenses included in calculation of
deductible expenses for the business year to which the promulgation date of this Act belongs.
Article 5 (Applicable Examples to Exclusion of Paid Interest from Deductible Expenses)
The amended provisions of the main sentence of Article 28 (2) shall apply starting with the portion of paid interest for the business
year that first starts on or after January 1, 2002.
Article 6 (Applicable Examples to Inclusion of Policyholder Dividend Reserve Fund in Deductible Expenses)
The amended provisions of Article 31 (4) shall apply starting with the portion that is included in deductible expenses for the business
year to which the enforcement date of this Act belongs.
Article 7 (Applicable Examples to Securities Trading Reserve)
The amended provisions of Article 32 shall apply starting with the portion of the business year to which the enforcement date of this
Act belongs.
Article 8 (Applicable Examples to Income Deduction for Mutual Funds, etc.)
The amended provisions of Article 51-2 (1) 2 and 3 shall apply starting with the portion first distributed after the enforcement of
this Act.
Article 9 (Applicable Examples to Interim Prepayment)
The amended provisions of the proviso of Article 63 (1) shall apply starting with the portion of the first interim prepayment after
the enforcement of this Act.
Article 10 (Applicable Examples to Withholding at Source)
(1) The amended provisions of Article 73 (1) shall apply starting with the portion of interest income first accrued or earnings distributed
from securities investment trust fund first paid on or after July 1, 2001.
(2) The amended provisions of Articles 73 (6) and (8), 74 (2), and 98-3 shall apply starting with the portion of bonds, etc. first
sold or interest, etc. first paid on or after July 1, 2001.
(3) The previous provisions of Articles 73 (6) and 74 (2) shall apply to bonds, etc. issued before July 1, 2001 until the first payment
date of interest, etc. on bonds, etc. on or after July 1, 2001 wherethe interest computing period spans over the periods before or
on or after July 1, 2001.
Article 11 (Applicable Examples to Domestic Source Income of Foreign Corporations)
(1) The amended provisions of Article 92 (2) 2 (proviso), subparagraphs 7 and 10 of Article 93, and Article 98 (1) 4 (proviso) shall
apply starting with the portion first transferred after the enforcement of this Act.
(2) The amended provisions of subparagraph 11 of Article 93 shall apply starting with the portion of income first accrued after the
enforcement of this Act.
Article 12 (Applicable Examples to Special Cases for Reports, etc. on Securities Transfer Margin by Foreign Corporations)
The amended provisions of Article 98-2 shall apply starting with the portion that first meets the taxable criteria under the corresponding
taxation treaty after the promulgation of this Act.
Article 13 (Applicable Examples to Submission of Written Payment Statements by Foreign Corporations)
The amended provisions of Articles 66 (2) 2, 76 (7) and (8), and 120-2 shall apply starting with the portion first paid on or after
July 1, 2002. <Amended by Act No. 6558, Dec. 31, 2001>
Article 14 (Applicable Examples to Special Surtax)
The amended provisions of Articles 99, 102, and 104 shall apply starting with the portion first transferred after the enforcement
of this Act.
Article 15 (Transitional Measures for Inclusion of Securities Trading Reserve in Gross Income)
The previous provisions shall apply to inclusion, etc. of securities trading reserve included in calculation of deductible expenses
pursuant to the previous provisions of Article 32 before the enforcement of this Act in gross income.
ADDENDA <Act No. 6558, Dec. 31, 2001>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2002: Provided, That the amended provisions of Articles 45 (1), 61 (1), 76 (3) and (5),
and 114 shall enter into force on the date of its promulgation, and the amended provisions of Articles 98-4 and 120-2 (1) shall enter
into force on July 1, 2002.
Article 2 (General Applicable Examples)
This Act shall apply, starting with the portion of the business year that commences for the first time after the enforcement of this
Act.
Article 3 (Applicable Examples concerning Legal Fiction of Dividend or Distribution)
The amended provisions of Article 16 (1) 2 shall apply, starting with the portion of equity stocks or contribution quotas that is
retired for the first time after the enforcement of this Act.
Article 4 (Applicable Examples concerning Non-Inclusion of Received Dividend Amount in Gross Income)
The amended provisions of Articles 18-2 (1) 4 and 18-3 (2) shall apply, starting with the portion of dividend that is earned for the
first time after the enforcement of this Act.
Article 5 (Applicable Examples concerning Inclusion of Value of Assets for Business Acquired Using National Treasury Subsidies, etc.
in Deductible Expenses)
The amended provisions of Article 36 (1) and (4) shall apply, starting with the portion for which the National Treasury subsidies,
etc are given for the first time after the enforcement of this Act.
Article 6 (Applicable Examples concerning Succession of Losses Carried Forward at the Time of Merger)
The amended provisions of Article 45 (1) 1 shall apply, starting with the portion of a merger that is effected in the business year
to which the date of promulgation of this Act belongs.
Article 7 (Applicable Examples concerning Inclusion of Amount Equivalent to Transfer Marginal Profit of Assets Accruing from Spin-off
in Deductible Expenses)
The amended provisions of Article 47 shall apply, starting with the portion of any division or any merger that is effected for the
first time after the enforcement of this Act.
Article 8 (Applicable Examples concerning Income Deduction for Corporate Restructuring Real Estate Investment Company)
The amended provisions of Article 51-2 (1) 4 shall apply, starting with the portion of any dividend that is given for the first time
after the enforcement of this Act.
Article 9 (Applicable Examples concerning Special Cases for Taxation on Income Accruing from Transfer of Land, etc.)
The amended provisions of Articles 2 (2), 55, 55-2, 57, 59, 63 (1), 76 (1) 1, 92 (2) through (6), 95 and 95-2 shall apply, starting
with the portion that is transferred for the first time after the enforcement of this Act.
Article 10 (Applicable Examples concerning Special Cases for Appropriating Reserve Fund as Deductible Expenses)
The amended provisions of Article 61 (1) shall apply, starting with the portion that is appropriated in the statement of tax reconciliation
of the business year to which the date of promulgation of this Act belongs.
Article 11 (Applicable Examples concerning Special Cases for Taxation of Income Accruing from Transfer of Assets by Non-profit Domestic
Corporation)
The amended provisions of Article 62-2 shall apply, starting with the portion that is transferred for the first time after the enforcement
of this Act.
Article 12 (Applicable Examples concerning Additional Tax)
(1) The amended provisions of Article 76 (1) 3 shall apply, starting with the portion whose payment time limit comes due for the first
time after the enforcement of this Act.
(2) The amended provisions of Article 76 (5) will apply, starting with the portion that is supplied with goods and services in the
business year to which the date of enforcement of this Act belongs.
Article 13 (Applicable Examples concerning Income Generated from Source in Korea by Foreign Corporation)
The amended provisions of subparagraphs 2 and 11 of Article 93 shall apply, starting with the portion that is disposed of as a dividend
or other income for the first time after the enforcement of this Act.
Article 14 (Applicable Examples concerning Tax Withholding of Bonds, etc. of Foreign Corporation)
The amended provisions of Article 98-3 shall apply, starting with the portion to which interest, etc. is paid or bonds, etc. are sold
for the first time after the enforcement of this Act.
Article 15 (Applicable Examples concerning Application for Non-Taxation, etc. on Income Generated from Source in Korea by Foreign
Corporation)
The amended provisions of Article 98-4 shall apply, starting with the portion that is untaxed or exempted from taxation for the first
time after July 1, 2002.
Article 16 (Applicable Examples concerning Obligation to Publish Balance Sheet)
The amended provisions of Articles 76 (3) and 114 shall apply, starting with the business year to which the date of promulgation of
this Act belongs.
Article 17 (Applicable Examples concerning Submission of Written Payment Statement on Income Generated from Source in Korea by Foreign
Corporation)
The amended provisions of Article 120-2 (1) shall apply, starting with the portion that is paid for the first time after July 1, 2002.
Article 18 (Applicable Examples concerning Preparation and Delivery, etc. of Invoice)
The amended provisions of Article121 shall apply, starting with the portion of goods or services that are supplied or imported for
the first time after the enforcement of this Act.
Article 19 (Transitional Measures concerning Non-inclusion of Dividend Earned in Earnings by Corporation Belonging to Large Business
Group)
Notwithstanding the amended provisions of Article 18-3 (2), the non-inclusion of the amount of dividend that any domestic corporation
belonging to a large business group earns from its affiliate in the gross income shall be governed by the previous provisions.
Article 20 (Transitional Measures concerning Acquisition Tax on Non-Business Land)
The aquisition tax on the non-business land of any corporation under Article 112 (2) of the previous Local Tax Act (referring to the
Local Tax Act before the Local Tax Act is amended by Act No. 6312) (limited to the amount exceeding the tax amount under paragraph
(1) of the same Article of the same previous Act) and the non-inclusion of the refund amount in deductible expenses and gross income
shall be governed by the previous provisions of subparagraph 7 of Article 18 and subparagraph 3 of Article 21.
Article 21 (Transitional Measures concerning Inclusion of Amount Equivalent to Reappraisal Difference of Land in Deductible Expenses)
The amount that has been included in deductible expenses under the previous provisions of Article 39 and is later included in gross
income, etc. at the time that this Act enters into force shall be governed by the previous provisions.
Article 22 (Transitional Measures concerning Corporate Tax on Proper Excess Earned Reserve)
The disposal of the Corporate Development Reserve Fund raised under the previous provisions of Article 56 and the payment, etc. of
the corporate tax that is incurred by the disposal of such fund for other purposes at the time that this Act enters into force shall
be governed by the previous provisons.
Article 23 (Transitional Measures concerning Abolishment of Special Surtax)
Any special surtax that is levied or to be levied under the previous provisions at the time that this Act enters into force shall
be governed by the previous provisions.
Article 24 Omitted.
Article 25 (Transitional Measures concerning Amendments to Other Acts)
Where the special surtax is levied on the income generated from the transfer, etc. of lands or businesses before the enforcement of
this Act, the amount of such special surtax that is deemed to be the development cost shall be governed by the previous provisions,
notwithstanding the amended provisions of Article 24 of this Addenda.
ADDENDA <Act No. 6852, Dec. 30, 2002>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Articles 2 through 18 Omitted.
ADDENDA <Act No. 7005, Dec. 30, 2003>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2004: Provided, That the amended provisions of Articles 5 (2), 29 (1) 2, 51-2 (1) 2,
62 (1), 73 (1) through (3), 113 (2) shall enter into force on January 5, 2004, and the amended provisions of Article 55 (1) shall
enter into force on January 1, 2005.
Article 2 (General Applicable Examples)
This Act shall apply beginning with the first business year that starts after the enforcement of this Act.
Article 3 (Applicable Examples regarding Non-Inclusion of Holding Company s Received Dividend Amount in Calculation of Gross Income)
The amended provisions of Article 18-2 (1) 4 shall apply beginning with the first dividend from subsidiary after the enforcement of
this Act.
Article 4 (Applicable Examples regarding Income Deduction of Dividend Amount of Ship Investment Company)
The amended provisions of Article 51-2 (1) 5 shall apply beginning with the first dividend after the enforcement of this Act.
Article 5 (Applicable Examples regarding Special Cases for Taxation following Transfer of Land)
The amended provisions of Article 55-2 (1) shall apply beginning with the first transfer after the enforcement of this Act.
Article 6 (Applicable Examples regarding Correction, etc. of Corporate Tax resulting from Wrongful Accounting Handling)
The amended provisions of Articles 58-3, 59 (1) 4, 66 (2) 4 and 72-2 shall apply beginning with the first portion disposed warning,
attention, etc. due to wrongful accounting handling after the enforcement of this Act.
Article 7 (Applicable Examples regarding Exemption of Collection of Withholding Tax in case of Non-Execution of Withholding)
The amended provisions of proviso of Article 71 (3) shall apply beginning with the first payment after decision or correction after
the enforcement of this Act.
Article 8 (Applicable Examples regarding Extent of Income Generated from Sources in Korea)
(1) The amended provisions of subparagraph 4 of Article 93 shall apply beginning with the first lease after the enforcement of this
Act.
(2) The amended provisions of subparagraph 6 of Article 93 shall apply beginning with the first supply of service after the enforcement
of this Act.
(3) The amended provisions of subparagraph 11 (i) of Article 93, Article 98 (10) and (11) shall apply beginning with the first capital
transaction after the enforcement of this Act.
Article 9 (Applicable Examples regarding Report, etc. of Corporate Tax by Foreign Corporation)
The amended provisions of former part of Article 97 (1) shall apply beginning with the first report of tax base and tax amount after
the enforcement of this Act.
Article 10 (Applicable Examples regarding Withholding of Transfer Income)
The amended provisions of Article 98 (1) shall apply beginning with the first transfer after the enforcement of this Act.
Article 11 (Applicable Examples regarding Special Cases for Responsibility of Submission of Written Payment Statements on Income,
etc. Generated from Sources in Korea by Foreign Corporation)
The amended provisions of main sentence of Article 120-2 (1) shall apply beginning with the first payment of income generated from
sources in Korea after the enforcement of this Act.
Article 12 (Special Cases for Interim Prepayment)
In calculating the amount of interim prepayment tax for the interim prepayment period starting after January 1, 2005, the calculated
tax amount as fixed for corporate tax of the immediately preceding business year from the concerned business year stipulated in Article
63 (1) shall be calculated by applying the amended provisions of Article 55 (1) to the tax base of the immediately preceding business
year.
Article 13 (Applicable Examples regarding Investment Assets, Investment Company, etc.)
The provisions regarding investment assets, investment company, etc. to be amended following the enforcement of the Act on Business
of Operating Indirect Investment and Assets shall apply beginning with the first created or established portion after the date of
enforcement of the same Act, and for those created or established before the enforcement of the same Act, the former provisions shall
prevail.
Article 14 (Transitional Measures regarding House Transfer Income)
In case where a corporation who has a house corresponding to Article 55-2 (1) 2 at the time of enforcement of this Act transfers the
house concerned before December 31, 2004, the amended provisions of Article 55-2 (1) 2 shall not apply: Provided, That the corporation
concerned acquires another house newly after January 1, 2004, this shall not apply.
Article 15 (Transitional Measures regarding Extent of Income Generated from Sources in Korea of Industrial/Commercial/Scientific Machinery,
Facility, Equipment, etc.)
Income generated from price and transfer in the case of use in the country of the industrial/commercial/scientific machinery, facility,
equipment or the price being paid in the country shall, notwithstanding the amended provisions of subparagraph 4 of Article 93, be
regarded as income generated from price and transfer pursuant to the former provisions of subparagraph 9 (c) of Article 93.
ADDENDA <Act No. 7117, Jan. 29, 2004>
(1)(Enforcement Date) This Act shall enter into force on the date of its promulgation: Provided, That the amended provisions of Article
29 (1) shall take effect on January 1, 2005.
(2)(General Applicable Examples) This Act shall apply beginning with the first business year that starts after the enforcement of
this Act.
ADDENDA <Act No. 7289, Dec. 31, 2004>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Articles 2 through 5 Omitted.
ADDENDA <Act No. 7317, Dec. 31, 2004>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2005: Provided, That the amended provisions of Articles 73 (8), 74 (2), 98-3 (1) through
(3) and (6) shall enter into force on July 1, 2005, and the amended provisions of Article 51-2 (1) 4 shall enter into force on April
23, 2005.
Article 2 (Applicable Examples regarding Legal Fiction of Dividend or Allotment)
The amended provisions of Article 16 (1) 2 (a) shall begin to apply with the portion of loan that is converted into investment for
the first time after the enforcement of this Act.
Article 3 (Applicable Examples regarding Non-Inclusion of Received Dividend Amount in Calculation of Gross Income)
The amended provisions of Articles 18-2 (1) 3, and 18-3 (1) 1 (proviso) and 3 shall begin to apply with the portion of dividend that
is received for the first time after the enforcement of this Act.
Article 4 (Applicable Examples regarding Deduction of Income regarding Private Equity Funds, etc.)
The amended provisions of Article 51-2 (1) 2 shall begin to apply with the portion of dividend paid for the first time after the enforcement
of this Act.
Article 5 (Applicable Examples regarding Deduction of Income regarding Real Estate Investment Company for Consigned-Management)
The amended provisions of Article 51-2 (1) 4 shall begin to apply with the portion of dividend paid for the first time after April
23, 2005.
Article 6 (Applicable Examples regarding Deduction of Income regarding Loss from Disaster)
The amended provisions of Article 58 (1) shall begin to apply with the portion of asset lost for the first time after the enforcement
of this Act.
Article 7 (Applicable Examples regarding Decision and Correction)
The amended provisions of Article 66 (2) 3 shall begin to apply with the portion of decision or correction conducted in the first
business year after the enforcement of this Act.
Article 8 (Applicable Examples regarding Withholding)
The amended provisions of Article 73 (1) 1 and 2 shall begin to apply with the portion of interest income and allotment occurring
from trust fund revenue for the first time after the enforcement of this Act, and the amended provisions of Articles 73 (8) and 74
(2) shall begin to apply with the portion withheld for the first time after July 1, 2005.
Article 9 (Applicable Examples regarding Additional Tax on Unfaithful Payment of Withholding Tax)
The amended provisions of Article 76 (2) shall begin to apply with the portion of interest income amount and allotment from trust
fund paid for the first time after the enforcement of this Act.
Article 10 (Applicable Examples regarding Domestic Withholding Income)
The amended provisions of subparagraph 10 of Article 93 shall begin to apply with the portion transferred for the first time after
the enforcement of this Act.
Article 11 (Applicable Examples regarding Carried-Forward Deduction of Tax Paid Abroad)
The amended provisions of Article 97 (1) shall begin to apply with the portion reported for the first time after the enforcement of
this Act.
Article 12 (Applicable Examples regarding Special Cases of Withholding on Bonds, etc. of Foreign Corporations)
The amended provisions of Article 98-3 (1) through (3) and (6) shall begin to apply with the portion withheld for the first time after
July 1, 2005.
Article 13 (Applicable Examples regarding Report of Establishment or Installation of Corporation)
The amended provisions of Article 109 (3) shall begin to apply with the portion modified in the matters of report on establishment
or installation for the first time after the enforcement of this Act.
Article 14 (General Examples of Application)
This Act shall begin to apply with the first business year commencing after the enforcement of this Act.
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