Corporate tax

Corporate tax (법인세), or corporate income tax, is the tax imposed on the profits earned by a corporation. In accounting terms, it is a charge levied on a firm's taxable income, which represents the earnings remaining after deducting all allowable expenses from total sales. Different countries have different corporate tax systems. The Republic of Korea has a graduated tax system, in which corporations with higher profits pay corporate tax at higher rates. On the other hand, the United States of America applies a flat 21% rate under the 2017 Tax Cuts and Jobs Act, enacted during the first Trump Administration. This means that all corporate income is taxed at the same rate regardless of its level.

Tax Rates

The marginal tax rate is the rate applied to the next dollar of income. On the other hand, the average tax rate is calculated as total taxes divided by total taxable income. For example, suppose a corporation in Korea has a taxable income of 30 billion KRW. Its corporate tax is calculated as follows:

Example: Corporate Tax

Taxable Income	Tax Rate	Corporate Tax
From 0 to 200 million	9%	$200,000,000\times 0.09=18,000,000$
From 200 million to 20 billion	19%	$(20,000,000,000-200,000,000)\times 0.19=3,762,000,000$
From 20 billion to 30 billion	19%	$(30,000,000,000-20,000,000,000)\times 0.21=2,100,000,000$
Total		$5,880,000,000$

In this example, the marginal tax rate is 19%. However, the average tax rate is 5,880,000,000 / 30,000,000,000 = 19.6%.