The Government passed the 2018 budget on 6 December 2017. Under the budget, the threshold of the new highest corporate income tax rate of 25% has been increased from KRW 200 billion to KRW 300 billion. A 10% local income tax surcharge is also imposed on the current and proposed corporate income tax rates.
The Budget for 2018 also include a reduction in the R&D tax credit for large companies from 3% to 2%, with an increase in the credit for smaller companies from a range of 20% to 30% to a range of 25% to 40%.
In case of the individuals with annual taxable income exceeding KRW 500 million, tax rate would increase from 40% to 42%, with a new 40% bracket introduced for individuals earning KRW 300-KRW 500 million.
Moreover, the new budget increases the income tax rates for the top tax brackets for both corporations and individuals, as well as measures that would limit the deduction of interest expense in certain instances as part of Korea’s commitment to the OECD BEPS project.
