Seoul: The government and the ruling Democratic Party (DP) have agreed to increase the corporate tax rate back to 25 percent. This decision reverses a previous tax cut implemented under the Yoon Suk Yeol administration in 2022.
According to Yonhap News Agency, during policy consultations on tax reform, the government and the DP also decided to lower the capital gains tax threshold for major shareholders from 5 billion won (US$3.6 million) to 1 billion won. This move rolls back a policy from the Yoon administration aimed at boosting investor sentiment. The corporate tax rate will now be raised from 24 percent to 25 percent, restoring it to its level before the Yoon administration's tax cut.
The conservative Yoon administration had initially reduced the corporate tax rate to 24 percent to encourage local firms to increase investments. Historically, the corporate tax rate was lowered from 25 percent to 22 percent in 2009 under the Lee Myung-bak administration. It was later raised to 25 percent in 2017 under the Moon Jae-in government before being reduced to 24 percent under the Yoon administration.
This move is part of President Lee Jae Myung's broader reform plan to reverse what the DP criticizes as tax cuts for the wealthy, which they argue largely benefit conglomerates. The reform aims to increase tax revenues as the government seeks to bolster the sagging economy with increased fiscal spending.
"This increase in the corporate tax rate will normalize the tax system to its 2022 level," stated DP Rep. Jung Tae-ho, a member of the National Assembly's strategy and finance committee. "The capital gains tax threshold will also be restored to its pre-Yoon administration level."
The main opposition, the People Power Party, has largely opposed the tax hike, suggesting it could dampen corporate investment and burden companies already facing pressure from U.S. tariffs. Jung also noted that DP lawmakers remain divided over whether to apply separate taxation on dividend income, a proposal the government claims will rejuvenate the stock market but critics argue will primarily benefit large shareholders.
Under the current tax code, financial income, including dividend income, is taxed at a 15.4 percent rate for amounts up to 20 million won per year. If the amount exceeds this threshold, the income becomes subject to comprehensive financial income taxation, with an accumulated tax rate of up to 49.5 percent.