Estimate the Korean corporate-tax effect when a domestic corporation transfers an asset or provides an asset, service, or loan to a related party below fair value, or purchases, receives, or borrows above fair value. The dedicated calculator applies Corporate Tax Act Article 52, Enforcement Decree Articles 88 and 89, the KRW 300 million or 5% price-gap threshold (with the listed-share exception), the weighted-average borrowing-rate rule and conditional 4.6% overdraft-loan rate, and the 2026 corporate tax brackets of 10/20/22/25% plus standard local rates of 1/2/2.2/2.5%.
Load a 5% price-gap, interest-free loan, or KRW 300 million threshold example.
Choose an asset/service transaction or a money lending/borrowing transaction.
Use a defensible third-party price, appraisal, or statutory supplementary value.
Enter the consideration recorded in the contract and accounting records.
These are substantive Article 52 conditions, not formal checkboxes.
Enter the ordinary domestic corporation tax base after other adjustments and loss deductions.
Estimated 2026 result
The inputs satisfy the related-party, tax-burden reduction, and statutory price-gap tests.
Estimated income adjustment
KRW 100,000,000
Corporate + local tax increase
KRW 16,500,000
The test is met at KRW 300 million or 5% of fair consideration.
Progressive ordinary domestic-corporation rates and standard local rates are applied by bracket.
| Item | Before | After | Increase |
|---|---|---|---|
| Tax base | KRW 150,000,000 | KRW 250,000,000 | KRW 100,000,000 |
| Corporate tax | KRW 15,000,000 | KRW 30,000,000 | KRW 15,000,000 |
| Corporate local income tax | KRW 1,500,000 | KRW 3,000,000 | KRW 1,500,000 |
This calculator applies the Republic of Korea Corporate Tax Act to an ordinary Korean domestic corporation.
It uses the law in force on July 23, 2026, amounts in KRW, the 2026 corporate tax brackets, and Korea’s standard corporate local income tax rates.
It is not a transfer-pricing opinion, valuation report, tax return, or determination that a transaction lacks commercial reasonableness.
Corporate Tax Act Article 52 allows the Korean tax authority to recompute a domestic corporation’s taxable income when a transaction with a related party improperly reduces the corporation’s tax burden.
The contract may remain legally valid, but the tax calculation may replace the contract price, rate, interest rate, rent, or exchange ratio with a defensible arm’s-length fair value.
This tool covers common transactions whose price gap can be measured consistently: a low-price asset transfer, a high-price asset purchase, a low-price provision of an asset or service, a high-price receipt of an asset or service, a low-interest loan to a related party, and high-interest borrowing from a related party.
It then tests the Corporate Tax Act Enforcement Decree Article 88(3) threshold of at least KRW 300 million or at least 5% of fair consideration and estimates the additional national and local corporate tax caused by the income adjustment.
Enforcement Decree Article 2(8) covers more than close family.
It includes persons who exercise de facto influence over management, non-minority shareholders and relatives, certain officers, employees and economically dependent persons, controlled corporations, qualifying 30% ownership chains, and companies or officers in the same business group.
The relationship is tested at the time of the transaction.
A price difference alone does not decide the case.
Commercial purpose, allocation of risk, business necessity, ordinary trade practice, and the terms that independent parties would have accepted all matter.
The calculator asks the user to confirm this condition because it cannot infer commercial reasonableness from two prices.
Enforcement Decree Article 89(1) first looks for a price continuously charged by the corporation to unrelated customers in similar circumstances or a price generally traded between independent third parties.
If fair value remains unclear, Article 89(2) applies appraisal value and then supplementary valuation under the Inheritance and Gift Tax Act in statutory order, subject to asset-specific exceptions.
For Article 88(1) items 1, 3, 6, 7, and comparable item 9 transactions, the price gap must be at least KRW 300 million or at least 5% of fair value.
The tests are alternatives, not cumulative requirements, and equality at KRW 300 million or 5% qualifies.
The threshold is only one element of the Article 52 analysis.
The related-party relationship, improper tax reduction, reliable fair value, transaction category, exceptions, and commercial facts must still be established.
Conversely, a transaction below this threshold may still require review under a different Article 88 category or another Korean tax rule.
The selected transaction type determines the direction of the adjustment.
A price movement in the opposite direction produces a zero gap for that selected category; it does not mean that every other tax rule is satisfied.
| Transaction | Article 88 category | Directional gap | Threshold |
|---|---|---|---|
| Low-price asset transfer | Article 88(1)3 | Fair value minus actual transfer price | KRW 300M or 5% |
| High-price asset purchase | Article 88(1)1 | Actual purchase price minus fair value | KRW 300M or 5% |
| Low-price asset or service provision | Article 88(1)6 | Fair consideration minus actual consideration received | KRW 300M or 5% |
| High-price asset or service receipt | Article 88(1)7 | Actual consideration paid minus fair consideration | KRW 300M or 5% |
| Low-interest lending or high-interest borrowing | Article 88(1)6 or 7 | Directional gap between fair and actual interest | KRW 300M or 5% |
Unfair mergers or divisions, non-proportional capital increases or reductions, convertible instruments, other capital transactions, non-income-producing assets, bad debts, substituted contributions, and broad residual categories may use different benefit-allocation rules.
Do not force a confirmed capital-transaction benefit into the ordinary asset-price fields because Article 88(3) may not be the correct threshold for that category.
A price gap of at least KRW 300,000,000 qualifies even when the gap is less than 5% of fair value.
A low-price transfer of a KRW 10 billion asset for KRW 9.7 billion has a KRW 300 million gap, equal to only 3% of fair value, but it passes the amount test.
A gap of at least 5% of fair value qualifies even when it is below KRW 300 million.
A KRW 1 billion asset transferred for KRW 950 million has a KRW 50 million gap, exactly 5%, so it qualifies.
A price of KRW 950,000,001 leaves a KRW 49,999,999 gap, one won below the 5% boundary, and does not pass either test.
Article 88(4) says the quantitative threshold does not apply to a transaction in shares issued by a listed company.
The fair-value gap, related-party condition, and improper tax-reduction condition remain.
Article 89(1) generally uses the exchange closing price and may add 20% when a transfer effectively moves management control, subject to the statutory exclusions.
Enforcement Decree Article 89(3) treats the lender’s weighted-average borrowing rate as the primary fair interest rate for lending or borrowing money.
Enforcement Rule Article 43(1) calculates that rate from non-related-party borrowing balances and their original borrowing rates at the lending date.
The relevant rate generally belongs to the corporation lending the funds, not automatically to the borrower.
Related-party debt is excluded from the Rule Article 43 weighted average, and special limitations apply when the borrower’s own weighted rate is lower.
Retain the loan balances, lender statements, rate terms, and calculation worksheet used on the lending date.
Enforcement Rule Article 43(2) sets the 2026 overdraft-loan rate at 4.6% annually.
It is used only for a statutory fallback, a loan exceeding five years, or a valid election filed with the return, as applicable.
An election can bind the selected fiscal year and the following two fiscal years, so 4.6% is not a freely selectable convenience rate.
Fair interest = principal × fair annual rate × days ÷ 365
Actual interest = principal × actual annual rate × days ÷ 365
Low-interest lending gap = max(0, fair interest − actual interest)
High-interest borrowing gap = max(0, actual interest − fair interest)
The calculator accepts 1 to 365 days in one fiscal year and drops fractions below one won.
Multiple advances, repayments, changing principal, contract day-count conventions, leap-year treatment, and fiscal-year attribution must be reconciled in the official interest-adjustment schedule.
Enforcement Decree Article 89(5) includes the fair-value difference and related amounts in taxable income when the unfair transaction rule applies.
The calculator adds the estimated adjustment to the entered pre-adjustment tax base, applies each progressive bracket to its own slice, and subtracts the before-tax amount from the after-tax amount.
| Tax base | Corporate tax | Standard local tax | Progressive application |
|---|---|---|---|
| Up to KRW 200 million | 10% | 1% | Applied to the first bracket |
| Over KRW 200 million to KRW 20 billion | 20% | 2% | Applied only above KRW 200 million |
| Over KRW 20 billion to KRW 300 billion | 22% | 2.2% | Applied only above KRW 20 billion |
| Over KRW 300 billion | 25% | 2.5% | Applied only above KRW 300 billion |
Suppose the tax base before adjustment is KRW 190 million and the income adjustment is KRW 20 million.
Of the adjustment, KRW 10 million remains in the 10% corporate bracket and KRW 10 million enters the 20% bracket, producing KRW 3 million of additional corporate tax.
The local rates of 1% and 2% add KRW 300,000, for a combined increase of KRW 3.3 million.
Applying 20% to the entire KRW 20 million would overstate the result.
Local Tax Act Article 103-20 establishes standard rates of 1%, 2%, 2.2%, and 2.5%.
A local government may adjust a standard rate within 50% by ordinance.
This calculator uses only the statutory standard schedule and does not infer the applicable municipality or ordinance.
The directional gap is KRW 100 million, equal to 10% of fair value.
It is below KRW 300 million but passes the 5% test.
If the pre-adjustment tax base is KRW 150 million, the adjusted base is KRW 250 million.
Corporate tax increases by KRW 15 million and corporate local income tax increases by KRW 1.5 million, for a combined KRW 16.5 million.
A KRW 10 billion asset sold for KRW 9.7 billion has a gap of exactly KRW 300 million.
The 3% ratio is below 5%, but equality at the amount test qualifies.
From a zero pre-adjustment base, corporate tax is KRW 40 million and standard local tax is KRW 4 million, for KRW 44 million combined.
Assume the 4.6% overdraft-loan rate is legally available and the loan is outstanding for 365 days.
Fair interest is KRW 46 million and actual interest is zero, so the gap is 100% of fair interest and passes the 5% test.
From a zero tax base, national corporate tax rises by KRW 4.6 million and standard local tax by KRW 460,000, totaling KRW 5.06 million.
A transaction with a truly unrelated independent party does not satisfy the Article 52 related-party condition.
The calculator continues to show the price-gap and threshold math but sets the estimated income adjustment and added tax to zero.
Other Korean rules on donations, entertainment expenses, transfer pricing, or valuation may still require review.
A transfer between a shareholder, family member, and corporation may require both independent comparable prices and the supplementary unlisted-share valuation under Korean inheritance and gift tax rules.
The valuation date, real-estate-heavy-company weighting, and any largest-shareholder premium can materially change fair value.
Imputed interest may be only one adjustment.
Korea’s non-business provisional-payment rules can also disallow borrowing expense, and the income adjustment may be disposed of as salary, dividend, other outflow, or retained adjustment.
Check the weighted-average rate and prior 4.6% election before using the default.
Office rent, management support, trademarks, or group services may require comparable uncontrolled prices, allocation keys, cost records, and evidence of actual benefit.
When the ordinary fair-value hierarchy cannot be used, Article 89(4) contains supplementary rules for assets and services that are not fully modeled here.
Estimate each transaction’s adjustment and add it to the correct fiscal year tax base to understand principal-tax exposure.
Non-filing, under-reporting, fraud, and late-payment penalties are outside this tool and should be modeled separately after the principal tax is established.
The combined figure therefore estimates only the incremental national corporate tax and standard corporate local income tax caused by this income adjustment.
It is a useful principal-tax starting point, not the final assessment or cash amount payable.
No.
A gap below KRW 300 million still qualifies when it is at least 5% of fair value.
Article 88(3) uses an either-or test.
Yes.
The Decree says an amount equal to or greater than 5% of fair value, not greater than 5%.
Equality at KRW 300 million also qualifies.
No.
Article 88(3) names specific transaction categories and comparable residual conduct.
Mergers, divisions, capital increases, reductions, and convertible instruments can use separate benefit calculations and should not be forced into this model.
No.
The lender’s weighted-average borrowing rate is the primary benchmark.
The 4.6% overdraft-loan rate requires a statutory fallback, a loan longer than five years, or a valid election as applicable, and an election can affect later fiscal years.
No.
Article 88(4) removes only the quantitative threshold.
The related-party and improper tax-reduction tests remain, and fair value generally uses the exchange closing price with a possible 20% management control premium under Article 89(1).
The tool compares tax before and after one estimated income adjustment.
Losses, credits, reductions, minimum tax, special schedules, income disposition, withholding, municipal rates, and penalties can change the return or assessment.
Recalculate after the full fiscal-year tax reconciliation is available.
The current-law identifiers checked through Korea’s National Law Information OPEN API were Corporate Tax Act MST 280349, Enforcement Decree MST 283635, Enforcement Rule MST 287787, and Local Tax Act MST 282559.
Maintainers should update the constants, deterministic tests, requirements, and both language bodies together if Article 55 rates, Article 88 thresholds, Rule Article 43 interest rates, or local tax brackets change.
Enter fair consideration, actual consideration, and the pre-adjustment tax base to see the statutory threshold and progressive tax effect.
Preserve transaction-date valuation evidence and obtain Korean tax advice for capital transactions, income disposition, or material audit exposure.