Sole Proprietor Incorporation Rollover and Acquisition Tax Calculator

1. Decide how to incorporate and fund the transfer

Moving a Korean sole proprietorship into a company can create personal capital-gains tax, company acquisition tax, VAT funding and appraisal or registration costs.
This calculator compares contribution in kind, statutory business transfer and ordinary asset sale at the moment of conversion.
It separates immediate cash from deferred income tax so that postponing a tax payment is not presented as a permanent saving.

It is useful for an owner of a manufacturing or wholesale business, a proprietor who owns the business premises, or a family planning a company before succession.
Discovering insufficient capital or missing the business-transfer deadline after signing a contract can change the immediate funding requirement substantially.
Use the saved assumptions and results to arrange appraisals and obtain tax and legal review before committing to a method.

2. Enter market values, tax basis and net assets

Other asset value includes inventory and equipment for the net-asset calculation.
Enter the VAT-exclusive taxable portion separately and exclude exempt land or assets from that portion.
The model does not automatically calculate business-income or other-income tax on equipment, inventory or goodwill disposal; include separately verified additional taxes in the other-cost quote where necessary.

3. Rollover requirements for the two conversion methods

Restriction of Special Taxation Act (RSTA) Article 32 permits rollover for a resident converting qualifying business fixed assets into a company through contribution in kind or the statutory business-transfer method.
Housing and rights to acquire housing are excluded, as are statutorily defined consumer-service companies.
Check the actual hotel, inn or entertainment-bar classification and applicable tourism exceptions rather than relying on an industry label alone.

For net assets of KRW 600,000,000, capital of KRW 599,999,999 fails even though the shortfall is only one won.
A statutory business transfer also fails the contribution test when the proprietor contributes less than net assets, even if total company capital is sufficient.
Incorporation on 2026-10-06 gives a three-month review deadline of 2027-01-06; transaction inputs remain limited to the verified 2026 rule year.
The business-transfer three-month condition is not automatically imposed on contribution in kind.

4. Reference capital-gains tax and deferred tax

Rollover is not a permanent exemption.
Under RSTA Article 2(1)(6), the company later disposing of the asset bears the amount corresponding to the proprietor’s original capital-gains calculated tax as corporate tax.
When the requirements are assumed satisfied and a joint application is planned, national and local amounts move from immediate cash to the deferred columns.
Without an application plan, the model includes the income taxes immediately even for a potentially qualifying conversion.

Restriction of Special Local Taxation Act Article 120 and its Enforcement Decree Article 73 provide the local-income-tax rollover basis.
The proviso to Article 73(3) deems the national rollover application to include the local application.
A separate repeat application is therefore not always required, but actual submission, receipt and local processing still need verification.
Displayed whole-won rounding is for budgeting; payment rounding, credits and prior payments are excluded.

5. The 50% acquisition reduction and ancillary taxes

Local-tax relief Act Article 57-2(4) grants a 50% acquisition-tax reduction for qualifying business fixed assets acquired through the Article 32 conversion methods by 2027-12-31.
Real-estate rental and supply businesses are excluded; the verified current reduction is 50%, not 75%.
The model uses the ordinary non-farmland acquisition principal rate of 4%.
Metropolitan or factory surcharges and differing local ordinance rates are outside scope and keep the final acquisition budget pending until the standard-rate scope is confirmed.

A KRW 1 billion property without relief incurs KRW 40,000,000 principal, 4,000,000 education tax and 2,000,000 ordinary rural tax: KRW 46,000,000 in total.
With 50% relief, the figures are KRW 20,000,000 principal, 2,000,000 education tax, 1,000,000 ordinary rural tax and 4,000,000 rural tax on the relief, totaling KRW 27,000,000.
The principal reduction is KRW 20,000,000, while the ancillary-inclusive reduction is KRW 19,000,000.
Special rural-tax exemptions are not automatically assumed for this ordinary non-housing case.

A rental/supply industry selection removes acquisition relief without automatically removing national income-tax rollover.
The acquisition conversion requirements are also distinct from the income-tax application-plan checkbox.
Opting out of that application does not by itself make the acquisition reduction disappear.

6. Review comprehensive business-transfer VAT separately

VAT Act Article 10(9)(2) and Enforcement Decree Article 23 treat a qualifying comprehensive transfer of a site’s business rights and obligations as not constituting a supply of goods.
Certain legally permitted exclusions, including receivables and payables, mean this is a separate analysis from RSTA rollover.
A contract described as comprehensive business transfer is not enough to establish zero VAT.

For taxable supply, add VAT-exclusive taxable building and other asset values and multiply by 10%, leaving exempt land out.
A taxable building value of KRW 300,000,000 gives company VAT funding of KRW 30,000,000.
This is neither the seller’s final return liability nor the company’s permanent cost after input credits.
Check purchaser payment arrangements, tax invoices, credit eligibility and the timing of any refund separately.

7. Interpret fee quotes and the immediate cash total

Appraisal procedures, tax filings, legal work and registration schedules can differ by conversion method.
Enter written appraisal, professional and other-cost quotes including VAT.
The initial fees are fictional examples, not market averages or statutory fixed professional charges.
An entered zero means the quote is zero; it does not establish that the service is free.

Cash reduction versus ordinary sale combines deferred tax, acquisition-tax differences, VAT funding differences and differences in quotes.
Do not treat the full reduction as a lifetime tax saving.
Deferred tax can become payable later, and VAT credit eligibility or refund timing can change the eventual net cost.

8. Worked example: a KRW 1 billion factory

Assume a factory acquired on 2016-10-06 is converted on 2026-10-06 at KRW 1 billion market value with a KRW 400,000,000 adjusted tax basis and no additional transfer expenses.
Liabilities are KRW 400,000,000; net assets, capital and proprietor contribution are each KRW 600,000,000, with no other assets.
The taxable building value is KRW 300,000,000, and both conversion methods satisfy the separate statutory VAT business-transfer rules.

The KRW 10,000,000 in-kind quote assumes 5,000,000 appraisal, 3,000,000 tax/legal work and 2,000,000 other costs.
Statutory transfer assumes 2,000,000 + 3,000,000 + 2,000,000; ordinary sale assumes 0 + 2,000,000 + 2,000,000.
Choose a method only after checking your real quotes, statutory requirements and asset/liability transfer agreement together.

9. Use the calculator and save the review

1. Compare the unverified and assumed-eligible examples, then replace property values, adjusted tax basis and acquisition date with real records.
   
2. Verify other assets and liabilities including provisions, then examine the capital and proprietor contribution shortfalls.
   
3. Review industry, founder participation, complete rights-and-obligations transfer and the three-month window before recording the application plan.
   
4. Confirm the standard acquisition-rate scope and independently review each method’s VAT business-transfer status and taxable allocation.
   
5. Enter real quotes and five-year disposal, rental or closure plans; compare immediate cash, deferred taxes and risks.
   
6. Download TXT or print the assumptions, results and verification date, then agree the timetable with qualified appraisal, tax and legal professionals.
   

Pending review is not zero tax.
Unverified net assets, conversion eligibility, acquisition-rate scope or VAT facts keep the affected total pending.
A known failed requirement instead gives zero deferred tax and moves the relevant ordinary income-tax reference into immediate cash.
Saving the review does not submit a rollover application, request acquisition relief or complete company registration.

10. Five-year monitoring and recapture risks

A share-disposal plan of 49.99% differs from 50% under the ordinary rollover threshold.
Review the statutory scope of transfers, including gifts and relevant capital reductions, not just cash sales.
Death, bankruptcy, qualifying mergers, rehabilitation or special succession arrangements can create exceptions that require case-specific verification.
The warnings are review signals under the ordinary rules, not final recapture assessments.

The base national/local rollover recapture payment deadline is two months after the end of the month in which the triggering event occurs.
Amounts already paid by the company must be excluded when determining the actual balance.
Displayed three-month and five-year boundaries do not adjust for holidays, extensions, exceptions or actual filing receipt.

11. Frequently asked questions

12. Official sources, verification date and next action