Get the treaty rate right and you're done? From 2026, one step has quietly been added to withholding
If your company pays interest, dividends, royalties, or similar income abroad and has been withholding at the treaty-reduced rate, from 2026 there is now one more document to file with the tax office. The rate has not changed, but the procedure has.
A finance manager at a Korean subsidiary that remits monthly software royalties to its U.S. parent called us not long ago. She had heard that a change in the law now requires the company to file a withholding-related document with the tax office for the first time next February, but had no idea which document that was. "We've withheld at the treaty rate without any trouble for years, so what else do they want us to file now?"
The short answer: the rate has not changed. One step has been added. Until now, the company only had to collect the application from the beneficial owner and keep it on file. From 2026, it must file that application directly with the tax office. For amounts paid during 2026, the first filing falls due on the last day of February 2027.
What has changed
When a foreign corporation or non-resident wants the treaty-reduced rate to apply to Korean-source income such as interest, dividends, and royalties, the beneficial owner gives the withholding agent an application for the reduced rate together with documents proving beneficial ownership. Having to collect that application before you can withhold at the lower treaty rate is nothing new; that part works exactly as before.
What has changed is how the company handles those documents. Previously, the company collected the application, kept it on file, and produced it when the tax office asked for it. From 2026, on top of keeping it, the company must file it with the competent tax office on a regular basis. For the same application, "collect and keep" has become "collect, keep, and file."
Who, when, what
The party that bears this duty is the withholding agent: the one paying the income. In the example above, that is the subsidiary sending royalties to its parent. But it is not limited to dealings with a parent. It does not matter whether the recipient is your group's headquarters or an overseas counterparty with no capital ties to you, and it does not matter whether a related-party relationship exists. Any Korean company that pays this kind of income to a non-resident or foreign corporation and withholds at the treaty-reduced rate bears this duty.
The filing deadline is the last day of February of the year following the year in which the Korean-source income is paid. Because the procedure applies to reduced-rate applications made on or after 1 January 2026, the first filing falls due on the last day of February 2027.
This deadline has nothing to do with the company's fiscal year-end. Unlike the corporate tax return, this is a procedure attached to withholding, so it is keyed to the calendar year in which the income was paid, due the last day of February of the following year. Whether you close your books in March or December, if you paid during 2026 the filing date is the same: the last day of February 2027.
The documents to file are the reduced-rate application and the documents proving beneficial ownership, both received from the beneficial owner, and where the income is paid through an offshore investment vehicle, you also file the offshore investment vehicle report. Once collected, an application need not be obtained again for a set period as long as its contents do not change, but the periodic filing with the tax office recurs for every year in which a payment was made.
Legal basis
Corporate Income Tax Act art. 98-6; Income Tax Act art. 156-6: special withholding procedure for applying tax-treaty reduced rates
Enforcement Decree of the Corporate Income Tax Act art. 138-7; Enforcement Decree of the Income Tax Act art. 207-8: filing method, three-year re-submission relief, five-year retention
Effective for tax-treaty reduced-rate applications made on or after 1 January 2026
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By JH Kim, Korean CPA (KICPA) · July 2026
This article is for general information only and is not tax or legal advice on any specific matter. Tax outcomes depend on the particular facts of each case. Accounting Corporation YOON accepts no liability for any action taken in reliance on this article. Always obtain individual professional review before acting. Based on Korean law in force as of July 2026; subsequent amendments may affect its accuracy.