The purpose of this Act is to promote balance in the burden of taxation and to contribute to effective raising of the financial revenue by reasonable taxation on income of each individual in accordance with the nature of income and capacity for the burden of each taxpayer.

[This Article Newly Inserted by Act No. 9897, Dec. 31, 2009]

(1) Any of the following individuals shall be liable to pay income tax on his/her income under this Act:

1. A resident;

2. Any nonresident individual who has income from domestic sources.

(2) Any of the following persons shall be liable to pay withholding income tax under this Act:

1. A resident;

2. A nonresident;

3. A domestic corporation;

4. A branch or business office in the Republic of Korea (including a local office and other offices corresponding thereto; hereinafter the same shall apply) of a foreign corporation;

5. Other withholding agents prescribed by this Act.

(3) This Act shall apply to non-juristic organizations, other than organizations deemed corporations under Article 13 (4) of the Framework Act on National Taxes (hereafter referred to as "entities deemed corporations"), among non-juristic entities under Article 13 (1) of the same Act, considering them as one resident where they have a principal office or substantive place of business management within the Republic of Korea, and as one nonresident in other cases: Provided, That in cases falling under any of the following subparagraphs, each member of the relevant entity shall, according to income classifications, be obliged to pay income tax or corporate tax [limited to cases where the members thereof are corporations (including an entity deemed as a corporation) under the Corporate Tax Act; hereinafter the same shall apply in this Article] on its income respectively pursuant to this Act or the Corporate Tax Act. <Amended by Act No. 10408, Dec. 27, 2010; Act No. 11611, Jan. 1, 2013; Act No. 16104, Dec. 31, 2018>

1. Where profit distribution ratios among the members are fixed and the profit distribution ratios by member are confirmed;

2. Where profit distribution ratios among the members are not fixed, but, it is confirmed that, in fact, profit is distributed to each member.

(4) Notwithstanding paragraph (3), where profit distribution ratios only among some of all members are confirmed, or profit is distributed only to some members, an obligation to pay income tax or corporate tax shall be as classified in the following: <Newly Inserted by Act No. 16104, Dec. 31, 2018>

1. As for confirmed portions: Each relevant member shall bear an obligation to pay income tax or corporate tax:

2. As for unconfirmed portions: The relevant entity shall bear an obligation to pay income tax by deeming it either as one resident or as one non-resident.

(5) Notwithstanding paragraphs (3) and (4), where a foreign investment vehicle which falls under a non-juristic entity other than an entity deemed as a corporation (referring a vehicle established abroad which conducts investment activities with money collected through investment solicitation, and thereby acquires, disposes, or otherwise manages any investment assets with property value, distributing and attributing the profits to its investors; hereinafter the same shall apply) is deemed a de facto beneficiary of domestic source income pursuant to Article 119-2 (1) 2, such foreign investment vehicle shall be obliged to pay income tax as one non-resident. <Newly Inserted by Act No. 16104, Dec. 31, 2018>

[This Article Wholly Amended by Act No. 9897, Dec. 31, 2009]

(1) A resident shall be imposed tax on all income prescribed by this Act: Provided, That as for a foreign resident who has had his/her domicile or place of residence for not more than five years in total from ten years before the end of the relevant taxable period, a tax shall be imposed only on his/her income paid in or remitted to the Republic of Korea, in cases of taxable income from foreign sources.

(2) A nonresident shall be imposed tax on Korea-source income only under Article 119.

(3) When applying paragraphs (1) and (2), a partner under subparagraph 2 of Article 100-14 of the Restriction of Special Taxation Act shall be imposed tax on the income distributed pursuant to Article 100-18 (1) of the same Act and income generated in excess of the value of his/her stake on the distribution date of the market price of assets distributed pursuant to Article 100-22 (1) of the same Act.

[This Article Wholly Amended by Act No. 9897, Dec. 31, 2009]

(1) Income of a resident shall be classified as follows: <Amended by Act No. 11611, Jan. 1, 2013; Dec. 29, 2020>

1. Global income: Sum of each of the following incomes after deducting income under subparagraphs 2, 2-2 and 3 from all the taxable incomes under this Act:

(a) Interest income;

(b) Dividend income;

(c) Business income;

(d) Wage and salary income;

(e) Pension income;

(f) Other income;

2. Retirement income;

2-2. Financial investment income;

3. Capital gains.

(2) When classifying income under paragraph (1), profits from a trust, excluding trusts described in the following subparagraphs, shall be categorized based on the details of income generated from the property rights transferred to the trustee under Article 2 of the Trust Act or disposed of otherwise: <Amended by Act No. 10924, Jul. 25, 2011; Dec. 29, 2020; Dec. 31, 2022>

1. A trust in which the trustee pays corporate tax on income attributable to the trust property under Article 5 (2) of the Corporate Tax Act;

2. An investment trust as defined in Article 9 (18) 1 of the Financial Investment Services and Capital Markets Act: Provided, That until December 31, 2024, it shall be limited to a collective investment scheme as defined in Article 17 (1) 5 of the same Act;

3. A special account of an insurance company that runs collective investment business concurrently as defined in Article 251 (1) of the Financial Investment Services and Capital Markets Act.

(3) Income of a nonresident shall be classified pursuant to Article 119.

[This Article Wholly Amended by Act No. 9897, Dec. 31, 2009]

[Enforcement Date: Jan. 1, 2025] Articles 4 (1) 1 and 4 (1) 2-2

Domestic source income of a nonresident shall be classified as follows: <Amended by Act No. 10408, Dec. 27, 2010; Act No. 11146, Jan. 1, 2012; Act No. 11611, Jan. 1, 2013; Act No. 13558, Dec. 15, 2015; Act No. 14389, Dec. 20, 2016; Act No. 16104, Dec. 31, 2018; Dec. 31, 2019; Dec. 29, 2020; Dec. 31, 2022; Jul. 18, 2023>

1. Domestic source interest income: Interest prescribed in Article 16 (1) (excluding income under subparagraph 2-2 or 7 of the same paragraph), which is income falling under any of the following items: Provided, That interest on a loan for an overseas place of business of a resident or a domestic corporation directly borrowed by such overseas place of business shall be excluded:

(a) Income received from the State, a local government (including an association of local governments; hereafter the same shall apply in Article 156 (1) 1 (a)), a resident, a domestic corporation, a domestic place of business of a foreign corporation prescribed in Article 94 of the Corporate Tax Act, or a domestic place of business of a nonresident prescribed in Article 120;

(b) Income received from a foreign corporation or a nonresident, which is included in losses or necessary expenses in calculating the amount of income of his/her domestic place of business, substantially in connection with such domestic place of business of the foreign corporation or the nonresident who pays such income;

2. Domestic source dividend income: Any of the following incomes received from a domestic corporation, an organization deemed a corporation, or any other person located in the Republic of Korea:

(a) Gains from derivative-linked bonds under Article 16 (1) 2-2;

(b) Dividend income under Article 17 (1) (excluding income under subparagraph 6 of the same paragraph);

(c) Gains from the repurchase, etc. of collective investment securities under Article 87-6 (1) 4, as prescribed by Presidential Decree;

(d) Gains from derivatives-linked securities under Article 87-6 (1) 5, as prescribed by Presidential Decree;

(e) Amounts disposed of as dividends under Article 13 or 22 of the Adjustment of International Taxes Act;

3. Domestic source real estate income: Income generated from transfer, lease, or other operation of real estate in the Republic of Korea or a real property right, a mining right, a mining right by lease, a right to develop and use groundwater, a fisheries right, or a right to gather earth, sand, and stones acquired in the Republic of Korea: Provided, That domestic source capital gains on real estate, etc. under subparagraph 9 shall be excluded therefrom;

4. Domestic source lease income from leasing ships, etc.: Income generated from lease of a vessel, an airplane, a registered automobile, construction machine, or an industrial, commercial, or scientific machine, equipment, apparatus, and other tools and instruments prescribed by Presidential Decree to a resident, a domestic corporation, or a domestic place of business of a foreign corporation prescribed in Article 94 of the Corporate Tax Act, or a domestic place of business of a nonresident prescribed in Article 120;

5. Domestic-source business income: Income prescribed by Presidential Decree, which is generated from business conducted by a nonresident (including income taxable as domestic source business income according to tax treaties): Provided, That domestic source personal services income under subparagraph 6 shall be excluded therefrom;

6. Domestic source personal services income: Income generated by providing personal services specified by Presidential Decree in the Republic of Korea (including income generated by providing any of the services specified by Presidential Decree, among personal services provided in a foreign country, which is deemed generated in the Republic of Korea under a tax treaty). In such cases, when the person receiving such personal services bears the expenses specified by Presidential Decree, such as an air fare, in connection with personal services, the income means the amount from which such expenses are excluded;

7. Domestic source earned income: Income received in consideration of labor provided in the Republic of Korea and labor prescribed by Presidential Decree;

8. Domestic source retirement income: Retirement income received in consideration of labor provided in the Republic of Korea;

8-2. Domestic source pension income: Pension income received in the Republic of Korea pursuant to each subparagraph of Article 20-3 (1);

9. Domestic source capital gains on real estate, etc.: Income generated by transferring any assets or rights falling under any of the following subparagraphs, which are located in the Republic of Korea: Provided, That this shall only apply where assets or rights that generate such income are located in the Republic of Korea:

(a) Assets or rights under Article 94 (1) 1, 2, and 4 (a) and (b);

(b) Unlisted stocks or equity shares (including deposit certificates issued on the basis of stocks or equity shares and preemptive rights to new stocks; hereafter the same shall apply in this Chapter) of a domestic corporation (hereafter referred to as "real estate stocks, etc."), where the sum of the following values is at least 50/100 of the total assets of the corporation as at the beginning of the business year in which such assets are transferred. In such cases, regarding the interpretation and application of a tax treaty, real estate stocks, etc. acknowledged as subject to taxation in the Republic of Korea under a mutual agreement with the contracting state of the tax treaty are also included in the real estate stocks, etc. defined in the former part:

(i) The value of the assets under Article 94 (1) 1 and 2;

(ii) The value computed by multiplying the value of stocks owned by another corporation excessively owning real estate which is held by the domestic corporation, by the ratio of real estate owned by the other corporation. In such cases, the methods for determining whether the other corporation excessively owns real estate and for computing the ratio of real estate owned shall be prescribed by Presidential Decree;

10. Domestic source royalty income: Income generated from transfer of the consideration, right, etc., where any of the following rights, assets, or information (hereafter referred to as "rights, etc." in this subparagraph) are used in the Republic of Korea, or the consideration for the rights, etc. is paid in the Republic of Korea. In such cases, income generated from leasing industrial, commercial, or scientific machinery, equipment, apparatuses, etc. as mentioned in subparagraph 4 shall be included if the tax treaty classifies it as rental income:

(a) The copyright of any scientific or artistic work (including films of motion pictures), patent right, trademark right, designs, models, drawings, secret formula or processes, films and tapes for radio or television broadcast, and other assets or rights similar thereto;

(b) Information or know-how on industrial, commercial, or scientific knowledge and experience;

(c) Other similar property or rights that are included in the definition of royalties in a tax treaty that provides for the eligibility of domestic source income based on the place of use (hereafter referred to in this Article as "place of use-based tax treaty") [referring to those cases where patent rights, utility model rights, trademark rights, design rights, and other rights that require registration for their exercise (hereafter referred to in this Article as "patent rights, etc.") are not registered in the Republic of Korea, but are actually practiced or used in the Republic of Korea. This includes manufacturing methods, technologies, or information contained therein relates to manufacturing or production in the Republic of Korea];

11. Domestic source capital gains on securities: Income prescribed by Presidential Decree, generated from transferring any of the following stocks, investment shares (including real estate stocks, etc. listed on the securities market), or other securities (including securities under Article 4 of the Financial Investment Services and Capital Markets Act; hereinafter the same shall apply):

(a) Stocks, investment shares, or other securities issued by a domestic corporation;

(b) Stocks or investment shares issued by a foreign corporation (only applicable to those listed on the securities market);

(c) Other securities issued by a domestic place of business of a foreign corporation;

12. Domestic source other income: Income falling under any of the following, other than income under subparagraphs 1 through 8, 8-2, and 9:

(a) Insurance money, an indemnity, or damages received in connection with real property or other assets located in the Republic of Korea and business conducted in the Republic of Korea;

(b) Income prescribed by Presidential Decree, as a penalty or an indemnity paid in the Republic of Korea;

(c) Prize money, a reward, or a prize given in the Republic of Korea and other income similar thereto: Provided, That the prize money and supplementary prize prescribed in subparagraph 5 (c) of Article 12 shall be excluded;

(d) Income generated from buried property discovered in the Republic of Korea;

(e) Income generated from the transfer of a license, permit, or other rights established by similar administrative dispositions under the Korean laws and regulations, or income generated from the transfer of domestic assets other than real estate;

(f) Prize money and other valuables received by winning a lottery, a gift coupon, or a lottery ticket issued in the Republic of Korea, and refund received by a purchaser of a horse racing ticket, a winner wager ticket, a bullfighting match wager ticket, or a sports promotion wager ticket;

(g) Prize money or valuables received by using slot machines, etc.;

(h) The amount treated as other income pursuant to Article 67 of the Corporate Tax Act;

(i) Income generated from increase in values of stocks or investment shares of a domestic corporation due to capital transaction prescribed by Presidential Decree, which are held by related nonresidents prescribed by Presidential Decree (hereafter referred to as "foreign related persons" in Article 156);

(j) Income under Article 21 (1) 21, as a receipt other than pension received from the pension account in the Republic of Korea;

(k) Damages, compensation, settlement funds, lost profits, or other similar income paid in the Republic of Korea for damages resulting from the infringement of patent rights, etc. owned by a resident of the contracting state of a place of use-based tax treaty, but not registered in the Republic of Korea. In such casse, it is limited to income paid in connection with the actual practice or use in the Republic of Korea wherein the manufacturing methods, technologies, information, etc. contained in the patent rights, etc. are related to manufacturing or production in the Republic of Korea;

(l) Virtual asset income under Article 21 (1) 27 [If a nonresident withdraws virtual assets custodied and managed by a virtual asset business entity or similar business entity as defined in subparagraph 2 of Article 2 of the Act on the Protection of Users of Virtual Assets (hereinafter referred to as "virtual asset business entity, etc."), it shall include the amount calculated as prescribed by Presidential Decree by considering the time of withdrawal as the point of transfer];

(m) Other than the provisions under items (a) through (l), income (where the amount received by redemption of foreign currency bonds issued by the State or financial institutions, etc. incorporated under special Acts exceeds the issuance value of such foreign currency bonds, such difference shall not be included) from economic benefits, received in connection with business conducted in the Republic of Korea, personal services provided in the Republic of Korea, or assets located in the Republic of Korea, or as income similar thereto, income prescribed by Presidential Decree.

[This Article Wholly Amended by Act No. 9897, Dec. 31, 2009]

[Enforcement Date: Jan. 1, 2025] Subparagraph 2 (a), (c), and (d) of Article 119

[Enforcement Date: Jan. 1, 2025] Subparagraph 1 of Article 119, subparagraph 12 (l) and (m) of Article 119