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1. Taxpayer

Companies subject to corporation tax in Korea can be classified into two types: domestic

or foreign and for-profit or non-profit. For tax purposes, a company with its head or main

office in Korea is deemed to be a domestic company and is liable to tax on its worldwide

income. Otherwise, it is considered to be a foreign company, and the tax liabilities of

foreign companies are limited to Korean-source income.

a. Domestic Corporation

(1)  A corporation with its head or main office in Korea is liable to corporation tax on its

worldwide income.

(2)  A for-profit domestic corporation is liable to tax on the following items of income.

i)  All items of ordinary business income including income from sales of real estate property

ii)  Liquidation income: income realized upon liquidation of the business due to a

corporate merger, a consolidation, or a cessation of the company as a taxable entity

(3)  For a non-profit domestic corporation, the following items of income are taxable:

i)

income from profit-making businesses under the Korean Standard Industrial Classification,

ii)

interest income and discount from deposits and debenture (including public bonds),

iii) dividend and distribution of profit from companies,

iv) capital gains from the alienation of stocks, preemptive rights, or shares,

v) capital gains from the alienation of fixed assets not used directly for nonprofit corporations,

vi) gains from the transfer of bonds and debentures.

b. Foreign Corporation

(1) When a corporation with its head office or main office located in a foreign country

earns income from domestic sources, only the income from a domestic source is

subject to corporation tax; however, income from liquidation of a foreign corporation is

not taxable.

(2) For non-profit foreign corporations, no corporation tax is assessed on income other

than that from profit making businesses in Korea.

c. Rules and Special Cases Determining Liability

(1) When a corporation to which the corporate income is legally attributed is different

from the corporation to which the said income actually belongs, the corporation tax shall

be assessed on the corporation to which the said income actually belongs.

(2) For income attributable to a trust estate, the beneficiary of the trust is subject to corporation tax.