Income Tax Act (Sodeuk Sebeop)
The Income Tax Act (Sodeuk Sebeop) governs the taxation of individual income in South Korea. Originally enacted in 1949, the Act establishes a progressive tax system with rates ranging from 6% to 45%. The Act classifies income into categories (employment, business, capital gains, interest, dividends) and provides various deductions and credits. South Korea operates both a withholding tax system and an annual comprehensive tax return system.
Legal area: Law governing the assessment and collection of taxes.
Year enacted: 1949
Full text: https://elaw.klri.re.kr/eng_service/law_view.do?hseq=south-korea-income-tax-act
Key Provisions
- Part I: General provisions (definitions, scope)
- Part II: Categories of income (employment, business, capital gains)
- Part III: Computation of taxable income
- Part IV: Deductions (personal, dependents, medical, education)
- Part V: Tax rates and calculation
- Part VI: Withholding tax system
- Part VII: Filing and payment (comprehensive return)
Significance
The Income Tax Act is the primary source of individual tax revenue in South Korea. The progressive tax system has been reformed to address inequality, with the highest marginal rate increasing from 35% to 45% in 2018. South Korea’s tax system has been modernised to address the digital economy and international tax issues. The comprehensive annual return system requires most taxpayers to file returns by May each year. The Act’s capital gains provisions have been extensively amended, particularly regarding real estate transactions.