Korea’s MOFE Releases 2026 Tax Reform Proposals: key corporate and International Tax changes

operating in the targeted strategic sectors should evaluate their eligibility for the new domestic production tax credit and enhanced regional R&D and investment incentives, including the potential benefits of locating or expanding operations outside the Seoul metropolitan area. Businesses should also consider the restriction preventing the production credit from being combined with the integrated investment tax credit.

Employers of foreign nationals in Korea should reassess the cost-benefit of the flat tax regime in light of the increased 21% rate. Large corporate groups should likewise factor the withdrawal of the integrated employment tax credit into their workforce tax planning. Shareholders of Korean companies, particularly foreign shareholders, should review the withholding tax implications of the revised treasury share rules for any planned share buy-back transactions. With the bill expected to be submitted to the National Assembly in early September 2026, businesses should closely monitor its progress through the legislative process and begin preparing for the anticipated January 2027 effective date, including any required changes to compliance, reporting, and systems processes.