Korean Tax Newsletter

News from the tax authorities

◉ Tax Administration Plan of NTS

On 26 August 2026, the National Tax Service (“NTS”) announced its Tax Administration Plan.

Supporting a Strong National Fiscal Foundation

As of June 2026, national tax revenues administered by the National Tax Service (NTS) amounted to KRW 218.6 trillion (53.7% of the budgeted revenue target of KRW 406.9 trillion), representing an increase of KRW 32.8 trillion compared to the same period of the previous year.

To secure stable tax revenues, the NTS plans to expand taxpayer assistance for accurate reporting of major tax items in the second half of the year, strengthen tax base management, operate dedicated tax arrears management teams, and enhance the integrated collection of non-tax revenues.

While continuing to improve taxpayer filing convenience, the NTS will focus its tax administration resources on areas with a high risk of tax evasion, including failures to report overseas trusts.

AI Transformation

The NTS plans to establish a “Taxpayer-Specific Arrears Database” by collecting information on delinquent non-tax revenues from individual government agencies and verifying arrears through dedicated management teams.

In addition, the NTS will develop an “Integrated Management System” that enables real-time linkage between the NTS tax administration system and government-wide information on non-tax revenue assessments and delinquencies.

The NTS also intends to accelerate AI transformation across all areas of tax administration to establish a leading public-sector AI model. Key initiatives include the launch of “Hometax AI Search” and “AI Call Consultation” services based on generative AI technology.

Management of National Tax Arrears

The NTS will operate approximately 10,000 dedicated personnel responsible for managing both national tax and non-tax revenue arrears, with the objective of assessing the status of accumulated arrears amounting to approximately KRW 130 trillion.

The tax arrears management teams will conduct tailored verification procedures, including telephone consultations for small-balance delinquent taxpayers and on-site visits for high-value or non-cooperative delinquent taxpayers. Based on the results, delinquent taxpayers will be categorized into three groups, enabling customized collection strategies.

The NTS will also continue to aggressively pursue offshore tax evasion. Through enhanced strategic information exchange and collection cooperation with jurisdictions where asset concealment risks are significant, the NTS aims to identify and recover hidden overseas assets of delinquent taxpayers.

Support to Taxpayer

To assist taxpayers facing financial difficulties resulting from high exchange rates, elevated energy prices, and persistent inflation, the NTS will provide proactive tax administration support measures, including extensions of tax payment deadlines, expedited tax refunds, and continued suspension of tax audits for small business owners.

The NTS also plans to establish dedicated tax consultation channels for small and medium-sized enterprises relocating to regional areas and provide tax-related investment incentives, including priority processing of tax credit and exemption consulting services. In addition, the deferral period for regular tax audits of regional businesses will be extended to up to three years.

To strengthen the global competitiveness of Korean businesses, the NTS will enhance tax administration partnerships with key trading partners, including Japan, Vietnam, and India, as well as emerging markets such as Mexico and Kazakhstan. Furthermore, the NTS will actively address double taxation issues in strategic industries, including semiconductors and energy.

In addition, the NTS plans to launch a new “One-Stop Global Expansion Strategy Day” program, providing businesses with guidance on overseas investment strategies and practical solutions to international tax challenges.

Recent tax rulings and cases

1. Tax Adjustments on Transactions with Foreign Related Parties
(Ministry of Economy and Finance, International Taxation Division-503, 13 July 2026)

◉ Tax Ruling response

Where, as described in the inquiry, the income of a domestic corporation has been reduced pursuant to Article 13(2) of the Law for the Coordination of International Tax Affairs and the corresponding amount has not been returned by the foreign related party, such unreturned amount is treated as income excluded from gross income under Article 18(2) of the Corporate Income Tax Act. Accordingly, upon the disposal of shares in the foreign related party, the domestic corporation is not required to include such amount in its taxable income.

2. Deduction of Delivery Fee from VAT Base
(Written Ruling No. 2023-VAT-4125, 24 July 2026)

◉ Facts
The taxpayer operates a food order brokerage service (the “Service”) that connects users of a mobile application or website (the “Customer Members”) with restaurants (the “Merchant Members”).

As consideration for the Service, the taxpayer receives a service fee (the “Service Fee”) from Merchant Members, calculated as a specified percentage of the food price.

Food delivery is provided under two delivery models:

Vendor Delivery (VD): A third-party delivery company selected by the Merchant Member delivers the food. The taxpayer collects the delivery fee from the Customer Member and remits the amount to the Merchant Member.
Own Delivery (OD): Delivery is arranged separately under the platform’s own delivery structure.

The taxpayer operates a membership program under which Customer Members who pay a monthly subscription fee of KRW 0,000 (the “Subscription Fee”) receive a 100% discount on delivery charges, regardless of the delivery method, for orders exceeding the minimum order amount of KRW 00,000 during the relevant month.

The taxpayer treats the provision of membership benefits available through the application during the subscription period as a VAT-taxable service supplied to the membership subscriber. Accordingly, upon receipt of the Subscription Fee, the taxpayer issues a receipt pursuant to Article 36 of the Value Added Tax Act and reports and pays VAT on the Subscription Fee.

The taxpayer bears the entire cost of delivery fee discounts provided to subscribed Customer Members. Accordingly, subscribed Customer Members pay only the food price, excluding the delivery fee.

For VD orders, the taxpayer settles the delivery fee discount by deducting the corresponding amount from the Service Fees payable by Merchant Members.

◉ Issue
Whether the amount of the delivery fee discount provided to subscribed members and settled by deducting such amount from the Service Fees may be treated as a sales rebate (discount on sales proceeds) for VAT purposes and therefore be deducted from the taxable consideration of the Service Fees.

◉ Tax Ruling response
Where a platform operator provides intermediary and support services for transactions between Merchant Members and Customer Members and receives service fees from the Merchant Members, and where, pursuant to the terms and conditions agreed with the Merchant Members, an amount corresponding to delivery charges for orders placed by subscribed members is deducted from the fees otherwise chargeable to the Merchant Members, such deducted amount constitutes a direct reduction of the ordinary consideration in accordance with the conditions of the service supply.

Accordingly, the deducted amount qualifies as a sales rebate under Article 29(5)1 of the Value Added Tax Act and is therefore excluded from the VAT taxable base of the taxpayer.

3. Deductibility of RSU Compensation Costs Reimbursed by a Domestic Subsidiary to Its Foreign Parent Company
(Advance Ruling No. 2025-Law-Corporate-1097, 23 July 2026).)

◉ Facts and Issue
A foreign parent company operates a share-based compensation plan under which it grants Restricted Stock Units (RSUs) based on shares of the foreign parent company to employees of its wholly owned Korean subsidiary.
Under the RSU plan, shares of the foreign parent company are delivered to employees of the Korean subsidiary. The Korean subsidiary reimburses the foreign parent company for the costs associated with such share-based compensation (the “RSU Compensation Cost”).
Whether the amount reimbursed by the Korean subsidiary to the foreign parent company in respect of the RSU Compensation Cost (the “RSU Reimbursement Amount”) is deductible for Korean corporate income tax purposes.

◉ Tax Ruling response
Where the Restricted Stock Units (RSUs) described in the request satisfy all of the requirements set forth in Article 10-2 of the Enforcement Rules of the Corporate Income Tax Act (excluding the application of Article 10-2(3)1, which does not apply where compensation is provided in the form of shares), the amount reimbursed by the Korean subsidiary to the foreign parent company that granted the share-based compensation is deductible pursuant to Article 19(19) of the Enforcement Decree of the Corporate Income Tax Act.

4. Deductibility of Pre-Consolidation Tax Losses of a Merged Corporation Following a Merger Between Consolidated Group Members
(Written Ruling No. 2024-Law-Corporate-1118, 24 March 2026)

◉ Facts and Issue
The taxpayer is a corporation engaged in environmental technology development and holds 100% of the shares of Company C.

In December 2020, Company A established Company B, and Company B subsequently acquired 100% of the shares of the taxpayer.

Beginning from the 2021 business year, the taxpayer, Company B, and Company C elected to apply the consolidated tax return regime, with Company B serving as the consolidated parent corporation. In the same year, the taxpayer absorbed and merged Company B and Company C.

Where a qualified merger occurs between corporations that are members of a consolidated tax group, whether, in calculating the consolidated tax base, tax losses incurred by the merged corporation prior to the application of the consolidated tax return regime and succeeded to by the surviving corporation may be deducted, without separate accounting, up to the amount of the surviving corporation’s individually attributable consolidated income.

◉ Tax Ruling response
Under the facts presented, where a qualified merger is carried out between corporations that are members of a consolidated tax group, the tax losses of the merged corporation that arose prior to the application of the consolidated tax return regime may, in calculating the consolidated tax base by the consolidated parent corporation, be deducted without separate accounting pursuant to Article 76-13(3)1 of the former Corporate Income Tax Act (before its amendment by Act No. 18590 on 21 December 2021).

Such tax losses may be deducted from the income of each consolidated business year up to the amount of the surviving corporation’s individually attributable consolidated income.

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