The Ministry of Economy and Finance’s "2025 Tax Reform Act" proposal, which we shared in our August 2025 newsletter, was finally passed by the National Assembly plenary session (December 2, 2025). The main content of the act has been largely maintained compared to the August proposal, with only a few details adjusted. We will summarize the main reforms that global companies and foreign-invested entities should be aware of as they enter the new year of 2026.

In addition, the first filing and payment due date for FY2024 Korea’s Pillar Two Global Minimum Tax (“GloBE”) Income Inclusion Rule (“IIR”), which were enacted in December 2022, is approaching on June 30, 2026. Please review the following carefully to avoid any adverse consequences arising from missed compliance obligations.
 

1. The First Filing/Reporting/Payment of Global Minimum Tax 

Due date: ~ June 30, 2026

Key takeaways:

The Global Minimum Tax applies to multinational groups with consolidated revenues of €750 million or more in each of two of the four preceding business years, where the effective tax rate of the multinational group's constituent entities in the same country is less than 15%, the difference between the effective tax rate and 15% will be taxed as “Top-up Tax”.

The general rule is Ultimate Parent Entity reporting/paying the Top-up Tax in its country of residence, but various cases exist, including:
  1) The Korean Ultimate Parent Entity (UPE) is responsible. 
 2) A Korean subsidiary acting as an Intermediate Parent Entity (IPE) and/or Partially-Owned Parent Entity (POPE) is responsible.  
Therefore, the Group should carefully analyze the cases in which Korean subsidiaries may be obligated to report/pay Top-up Tax.

Even if Korean subsidiaries are not obligated to report/pay Top-up Tax to Korean Tax Authority (“K-NTS”), they may be required to file a GloBE Information Report (“GIR”) to the K-NTS, if the Group meets the consolidated revenue requirement. However, similar to the Country-by-Country Report (“CbCR”) Notification, in case
  1) a foreign constituent entity that belongs to the Group submits a GIR to the tax authorities of its home country, and 
  2) a qualifying competent authority agreement is in place between that country and Korea,
the Korean constituent entity may be exempted from filing a GIR return by submitting a “GIR Notification” to K-NTS. Therefore, it is essential for a Korean entity to consult with the Group in advance to ensure compliance.

 

Implications:

Please refer to the attached “Guide on FY2024 GloBE Compliance for a South Korean Subsidiary” to review your compliance approach and the relevant filing/payment obligations.

2. Corporate Income Tax Rate

Key takeaways:

The corporate income tax rate, which was temporarily reduced in 2023-2025, will be returned to the 2022 level. (The following tax rates do not include local income tax.)

Implications:

• Effective from FY2026, a 1% increase in the corporate income tax rate will apply, requiring advance financial planning and review of the financial statement impact of the change in the effective tax rate, including measurement of deferred tax assets and liabilities.
  
   

3. Requirement to Submit “Application for Reduced Tax Rate on Domestic Source Income under the Tax Treaty” to get the Benefits of Tax Treaties. 

Key takeaways:

To strengthen administration over Korean source income, it will become mandatory (not merely a record-keeping requirement) to submit Application for Reduced Tax Rate on Domestic Source Income under the Tax Treaty (the “application”) to enjoy a reduced withholding tax rate under an applicable tax treaty.

• Mandatory submission of an income payment statement: If no exemption or exemption is claimed, the payer must file an income payment statement by the end of February of the year following the tax period in which the payment falls.
• Penalties for non-compliance: Failure to submit or misrepresentation of an income payment statement may trigger penalties for non-compliance with income payment statement filing obligations.
   

Implications:

Korean entities planning overseas payments (dividends, interest, royalties, etc.) on or after January 1, 2026, must ensure these applications are prepared and filed within the due date.

 

4. Mandatory application for treaty exemption/non-taxation on Korea-source personal services income and related reporting obligations

Key takeaway:

The following procedures will be mandatory for personal service income that was previously exempt from application filing.

• Application for tax exemption: A non-resident or a foreign corporation (beneficial owner) seeking treaty-based exemption/non-taxation must submit an application and supporting documents (e.g., certificate of residence) to the payer. Upon receipt, the payer must submit the documents to the tax office by the 9th day of the month following the month in which the payment is made.
• Mandatory submission of an income payment statement: If no exemption or exemption is claimed, the payer must file an income payment statement by the end of February of the year following the tax period in which the payment falls. 

Penalties for non-compliance: Failure to submit or misrepresentation of an income payment statement may trigger penalties for non-compliance with income payment statement filing obligations.

Implications:

Starting in 2026, it is essential to have the documentation in place to take advantage of tax treaty benefits when paying non-resident technicians, professionals, and others for personal services. Payers should proactively review their internal payment processes to ensure that they receive the documentation from the beneficial owner in time to file on time (9th of the following month). 

For further inquiries, please contact the International Business Division of Shinhan Accounting Corporation (RSM Korea).

Appendix)

Published: December 30, 2025

Issued by: Youngsik Kim, Vice President ([email protected])

Michael Min, Partner ([email protected])

Sia Woo, Senior Manager ([email protected])