South Korea Cross-Border Tax Guide

183-Day Rule — Tax Residency

• General rule: An individual is treated as a Korean tax resident if they are present in Korea for 183 days or more in a 365-day period. The Korean tax liability for the residents is on the worldwide income (거주자 — 전 세계 소득 과세).
• Non-resident status: An individual who stays in Korea for less than 183 days is treated as a non-resident (비거주자) and is taxed only on the Korean-source income (국내원천소득).
• Tie-breaker rule: If the individual is a resident of both Korea and another country under the respective domestic laws, the double tax agreement (DTA) tie-breaker rules apply. The tie-breaker examines: the permanent home (항구적 주거), the centre of vital interests (중대한 이해관계의 중심지), the habitual abode (일상적 거소), and the nationality (국적).
• Exception — Korean domicile (주소): Even if the individual is present for fewer than 183 days, they may still be treated as a resident if they maintain a domestic domicile (주소) in Korea — see the Tax Residency Guide for details.

For example: a foreign executive who stays in Korea for 90 days per year and maintains no Korean domicile is treated as a non-resident and is taxed only on the Korean-source income.

Foreign Income Exclusion — Residents Working Abroad

• Scope: A Korean tax resident who works abroad may claim a foreign income exclusion (국외근로소득 비과세) under Article 12 of the Corporate Tax Law / Personal Income Tax Law. The exclusion applies to the employment income earned from the work performed outside Korea by a Korean resident who is assigned to a foreign workplace.
• Exclusion amount: Up to KRW 3,000,000 per month (KRW 36,000,000 per year) of the foreign-source employment income may be excluded from the Korean taxable income. If the foreign employer pays the Korean income tax on behalf of the employee (the tax equalisation), the tax is added to the taxable income but the exclusion still applies to the base salary.
• Conditions: The individual must be a Korean resident assigned to a non-Korean workplace, and the work must be performed outside Korea for at least 183 days in the tax year. The exclusion applies only to the employment income (the 근로소득), not to the business income or the investment income.

For example: a Korean resident working in Singapore for the full year earns KRW 100,000,000 in salary. Up to KRW 36,000,000 is excluded, and the remaining KRW 64,000,000 is subject to the Korean income tax.

Double Tax Agreement (DTA) Network — 100+ Countries

• Network size: South Korea has one of the largest double tax agreement (DTA) networks in the world, with over 100 treaties in force as of 2026. The treaties cover the OECD Model Tax Convention principles.
• Key treaties: Korea has DTAs with the United States, the United Kingdom, Japan, China, Australia, Germany, France, Singapore, and most other major economies. The withholding tax rates under the treaties are typically reduced to 5–15% for the dividends, the interest, and the royalties.
• Withholding tax rates: The domestic withholding tax rates are: dividends — 20%; interest — 14%; royalties — 20%. Under the DTAs, the rates are usually reduced: the dividends — 5–15% (depending on the shareholding); the interest — 10–15%; the royalties — 10–15%.
• Permanent establishment (PE): A foreign enterprise is subject to the Korean corporate tax only if it has a permanent establishment in Korea. The DTA defines the PE to include a fixed place of business, a construction site (lasting more than 6–12 months), and a dependent agent with the authority to conclude contracts.

For example: a US company receives KRW 100,000,000 in royalty income from a Korean licensee. Under the Korea-US DTA, the withholding tax is reduced from 20% to 10% — saving KRW 10,000,000 in tax.

Territorial Aspects of Korean Taxation

• Worldwide income — residents: Korean tax residents are taxed on their worldwide income. The foreign-source income is included in the global income tax return (종합소득세 신고) and the foreign tax credit (외국납부세액공제) is available to avoid double taxation.
• Korean-source income — non-residents: Non-residents are taxed only on the Korean-source income (국내원천소득), including: the employment income for work performed in Korea; the business income from a Korean PE; the dividend, interest, and royalty income from a Korean payer; and the capital gains from the Korean real estate.
• Foreign tax credit (FTC): The Korean residents may claim a foreign tax credit for the taxes paid abroad on the foreign-source income. The FTC is limited to the Korean tax payable on the foreign-source income (the per-country limitation). The excess FTC may be carried forward for up to 5 years.
• Exit tax: Korea does NOT have an exit tax on the unrealised gains of the individuals. There is no departure tax upon emigration, unlike the United States or Canada.

For example: a Korean resident earns KRW 50,000,000 in dividend income from a US stock and pays US$3,000 (approx. KRW 4,000,000) in US withholding tax. The Korean tax on the dividend is KRW 5,000,000 (20%). The foreign tax credit of KRW 4,000,000 reduces the Korean tax to KRW 1,000,000.

FAQs

Does Korea tax the foreign inheritance or the gift income?

Yes. Korea imposes the inheritance tax (상속세) and the gift tax (증여세) on the worldwide assets of the Korean residents. The foreign inheritance tax paid abroad may be credited against the Korean inheritance tax under the DTA or the domestic foreign tax credit rules. The non-residents are subject to the Korean inheritance/gift tax only on the Korean-situated assets.

What is the Korean CFC (Controlled Foreign Corporation) rule?

Korea has a CFC rule under the International Tax Coordination Act (국제조세조정에관한법률). A Korean resident who controls a foreign corporation with the passive income exceeding 50% of the total income may be subject to the current taxation of the foreign corporation's undistributed income. The threshold is a 10% direct or indirect shareholding in a foreign corporation located in a jurisdiction with a statutory tax rate below 15%.

How does the Korea-Japan DTA affect the dividend withholding tax?

The Korea-Japan DTA reduces the dividend withholding tax to 5% if the beneficial owner is a company that holds at least 10% of the voting shares of the payer. Otherwise, the rate is 15%. The interest withholding tax is reduced to 10%.