Global Mobility Tax

Republic of Korea | 2025 Income tax reform plan announced

Summary

On 31st of July 2025, the Ministry of Economy and Finance of Korea announced the ‘2025 tax reform plan’, and it contains several income tax law changes which can impact the global mobility employees as described below. The details of the reform items may change during the National Assembly’s review process, and it is expected to be finalized and approved by the National Assembly in December 2025. The majority of the changes will come into effect on 1st of January 2026.

The detail

Expanding the Taxation of Exit Tax

Currently, an individual permanently leaving Korea, who has had his/her domicile or place of residence for over 5 years during the recent 10 years from the departure date and is major shareholders of a Korean company, is subject to exit tax on his/her deemed capital gain on stocks. According to the 2026 tax reform plan, the scope of deemed capital gains on stocks is expanded to include the foreign shares issued by foreign corporation or listed on a market in a foreign country, and in the case of foreign shares, the criteria of ‘major shareholder’ does not apply.

A taxpayer who is subject to the exit tax needs to report the details of shares one day before the departure date and file the capital gains tax return on the deemed capital gain, which is difference between the market value at the date of departure and the acquisition value, and pay relevant taxes within three months from the end of the month in which the departure date falls. Deemed capital gains are taxed at 20% on the tax base of KRW 300 million or less and 25% on the tax base exceeding KRW 300 million.

If this proposed tax law amendment bill is approved by the National Assembly by the end this year, it will be applicable to the individuals who permanently leave Korea on and after January 1st, 2027.

Increased tax incentives provided to ease the burden of childcare

As a part of government’s effort to address the decline in birth rates in Korea, the 2026 tax reform plan contains multiple tax incentives expanded to ease the burden of childcare for the taxpayers. Major incentive items applicable for the global mobility employees are as below.

1. Credit card/debit card usage deduction expanded depending on the number of children
   The ceiling of the taxable income deduction of the credit card/debit card usage is KRW 3 million for the taxpayers who have KRW 70 million or less of gross wage & salary income and KRW 2.5 million for the taxpayers who have over KRW 70 million. The ceiling amount is increased by KRW 500,000 per child (maximum KRW 1 million) for the taxpayers who have KRW 70 million or less of gross wages & salary income, and by KRW 250,000 per child (maximum KRW 500,000) for the taxpayers who have over KRW 70 million.
2. Non-taxable amount of childcare allowance expanded
   Childcare cash allowance paid to an employee relating to children between the ages of 3 to 6 is non- taxable up to KRW 200,000 per month regardless of the number of children. The non-taxable amount is increased to KRW 200,000 per child per month.
3. Education expenses tax credit expanded for the expenses paid to the private institution
   Taxpayer can claim education expense tax credit for the expenses paid to the private art and sports institutions for the child who is the 1st of 2nd grader of elementary school (under the age of 9) as of the end of tax year. It is not an allowed education expenses for the tax credit under the current tax regulation.
4. Education expenses tax credit expanded by expanding the eligible dependent
   Currently, the taxpayer can claim education expense tax credit only when the dependent earns annual income of less than KRW 1 million or less than KRW 5 million if wage & salary income is the only income source. This dependent annual income criteria are abolished and the taxpayer can claim education expense tax credit for the dependent regardless of the dependent’s annual income level.

If this proposed tax law amendment bill is approved by National Assemble by end this year, these incentives will be effective from January 1st, 2026.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Danielle Suh 
Partner

Na Young Hwang 
Director

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