Part 1 of 20 · Beginner-friendly guide

An Introduction to Korean Taxation: National vs. Local Levies and Key Tax Types

We break down Korea’s dual tax system in simple terms so everyone can follow—perfect for foreign-invested businesses and newcomers.

Contents 1) Why taxes exist 2) Two collectors: National vs. Local 3) The “Big Three” national taxes 4) Local taxes you’ll meet 5) Quick summary & next part

Imagine a City State: Why taxes exist

To keep the lights on, fund schools, maintain roads, and provide public services, governments need money. That money comes from taxes. In Korea, not all taxes flow to the same place—some fund the central government, others fund local governments.

1) The Two Collectors: National Tax vs. Local Tax

• National Tax: Imposed and collected by the central government. (Includes domestic taxes and customs duties.)
• Local Tax: Imposed and collected by local governments such as provinces and municipalities.

Foreign-invested company? If you establish a company in Korea through foreign capital investment, it is treated as a domestic corporation. In principle, corporate tax is due on worldwide income (income inside and outside Korea).

2) The Big Three: Core National Taxes

Among many national taxes, three are most common for businesses (including foreign-invested companies). They together account for a very large share of central government tax revenue.

Tax Name	Who Pays?	What is it Levied On?	Filing Requirement
Corporate Tax	Corporations/Companies	Corporate income	File corporate tax on annual income.
Income Tax	Individuals (employees, business owners)	Individual income	File income tax on annual income.
Value-Added Tax (VAT)	Businesses and importers	Supply of goods/services; import of goods	File a quarterly VAT return.

Most business taxpayers file quarterly VAT returns and then file either corporate tax (companies) or income tax (individuals) on annual income.

3) Local Taxes: The Neighborhood Fees

Local taxes finance municipal services and often arise when setting up a company or acquiring/holding assets.

• Corporate Local Income Tax: Local tax on corporate income.
• Registration & License Tax: Due on incorporation or capital changes.
• Acquisition Tax: Levied when acquiring certain assets (e.g., real estate).
• Property Tax: Annual tax on owners of property such as real estate.

Together with corporate/income tax and VAT, these local taxes are the core items when a foreign-invested company establishes itself, transfers shares, and acquires/holds business assets in Korea.

In Summary

• Korea has a dual tax structure: National (central) vs. Local (municipal) taxes.
• The national side relies on the Big Three: Corporate Tax, Income Tax, and VAT.
• Understanding this split is the first step to smooth compliance in Korea.

Next in the series (Part 2): A deeper dive into Corporate Tax — structure, progressive rates, filing steps, and common pitfalls.

Disclaimer

This post is for general information only and does not constitute legal or tax advice. Rules change, and actual obligations depend on your facts. Consult a qualified professional before acting.

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Korean Taxation Corporate Tax Income Tax VAT Local Tax Foreign Invested Company

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