Looking into South Korea's tax system, you will find concepts used in Japan as well, such as income tax, corporate tax, value-added tax, and residents versus non-residents. For business owners familiar with Japanese taxation, it can be said to be a country where it is easy to find an entry point for understanding. However, having common terminology and arriving at the same conclusions are two different things.

The similar background involves a historical connection with Japanese law in the formulation of income tax and corporate tax systems. This is compounded by South Korea's own post-war reforms, which together have formed the current tax system. This paper organizes the shared framework and differences in the current system based on official documents verified on September 17, 2026, and analyses by tax law researchers.

What is similar is the framework for taxing income separately.

Treating the company and the individual as separate taxable entities, with individual taxation determined by the nature of the income and residency status. This framework is an area where practical experience in Japan can be applied to understanding South Korea's system. On the other hand, many other countries have income and corporate taxes, and focusing only on commonalities cannot prove the influence unique to Japan.

Residency determination has significant differences among similar terms.

The National Tax Service of Korea defines a resident as a person who has a domicile in Korea or has a place of residence there for 183 days or more. Regarding domicile, objective facts regarding living relationships, such as family members sharing a livelihood and domestic assets, are examined. Therefore, the understanding that "Korea only needs to count 183 days" is also not accurate.National Tax Service of Korea: Withholding Tax on Non-Residents and Classification of Residents

Japan also uses the concepts of domicile and residence, but the standard for residence under the Income Tax Act has continued to be one year or more to this day. Domicile is determined based on objective facts regarding the center of one's life. What is similar is how the determination is structured, not the requirements themselves, which include time periods. While entry and exit record tables created in Japan can be used, Japan's determination formula cannot be transferred as is to South Korea.National Tax Agency: Classification of Residents and Non-Residents

For example, consider a case where an owner runs a company in South Korea while keeping a residence in Japan. It is necessary to examine not only the number of days spent traveling back and forth between the two countries, but also which residence is actually used, where the family lives, and where daily work is conducted. Since there is a possibility of becoming a resident under the domestic laws of both countries simultaneously, the treatment under tax treaties should be examined after determining residency under domestic law.

Adoption of systems via Japan and postwar reconstruction

Nam-Seok Hwang, a South Korean tax law researcher, explains that South Korea's income tax system has its roots in the Chosen Income Tax Ordinance from the Japanese colonial period, and its origins can be traced back to the amended Japanese Income Tax Act of 1899. He also cites the structure for calculating corporate income by subtracting expenses from profits as an example of a shared framework.Hwang Nam-sok, "A Study on the Amendment of Japan's 1899 Income Tax Law" (Author's Abstract)

The study points out that Japan's Income Tax Act itself was influenced by both Britain and Prussia. It can be summarized that behind the similarities between Japan and South Korea lies a tax system that was adopted via Japan. This is an analysis of institutional formation by researchers, and does not mean that current tax rates or deductions share the same origins or content.

The National Archives of Korea's commentary describes multiple stages: taking colonial-era systems as one of the starting points, reorganization by the US military government after liberation, reforms after the establishment of the South Korean government, securing financial resources during the Korean War, and post-war reconstruction and economic development. It also features recommendations by the US tax advisory group in 1959. To explain the modern system, in addition to the relationship with Japan, it is necessary to consider these policy objectives and external influences together. This organization is based on official historical commentary and does not determine the direct origins of individual current provisions.National Archives of Korea "Taxation"

The history of the National Tax Service of Korea in the 1970s mentions the full-scale introduction of comprehensive income taxation and the enactment of the Framework Act on National Taxes regarding the tax reform of 1975. It goes on to state that value-added tax and special consumption tax were introduced on July 1, 1977. What can be confirmed from this record is that post-war South Korea has continuously restructured its tax items and tax collection mechanisms.National Tax Service of Korea "History of the 1970s"

The implementation of Japan's consumption tax was on April 1, 1989. The chronological fact that South Korea's value-added tax was introduced earlier demonstrates that the explanation "the current South Korean tax system merely adopted Japan's system later" is insufficient. However, simply because the introduction timing was earlier, it cannot be said that there was an influence in the reverse direction either.Ministry of Finance, "Heisei Fiscal History," Consumption Tax-Related Statistics

Thus, while there is historical continuity in the framework of income taxation, consumption taxation and tax collection systems were reconstituted in response to postwar policy challenges. Looking at the inherited and changed parts together, one can understand why the impression of being "similar to Japan" and the practical differences exist at the same time.

Common economic challenges sometimes lead to similar institutional designs.

How to measure corporate profits, how to collect taxes from salaries, and how to adjust for double taxation on cross-border transactions—these challenges are not limited to Japan and South Korea. OECD consumption tax comparisons also confirm that VAT is widely adopted among member countries. A distinction must be made between the common use of widely utilized tax technologies and reception from a specific country.OECD "Consumption Tax Trends 2024"

This does not mean that history is unimportant. History provides a clue to understanding the purpose for which institutions were created. However, the requirements to be applied to current transactions are confirmed through current laws and interpretive materials. Historical explanations and tax return filing decisions require different evidence.

When expanding into South Korea, verify the "differences" from Japan for each transaction.

In actual practice, placing the same transaction side by side makes comparison easier. A local subsidiary sells products, pays executive compensation, and distributes the remaining profit as dividends. At each stage, confirm in both countries who files the tax return, what constitutes income, whether there is withholding tax on the payer's side, and what the consumption tax documentation is.

This method allows you to use accounting materials common to Japan while identifying the documents and judgments that need to be added in South Korea. Conversely, if you process things based solely on the experience that something was deductible as an expense in Japan or did not require a tax return in Japan, the more similar the systems are, the easier it is to overlook the differences.

The tax systems of Japan and South Korea share some common ground that can serve as a foundation for understanding. Using that foundation to quickly grasp the overall picture, one can then verify residency determinations, income classifications, and local procedures step by step. For owner-executives, rather than making a binary choice about whether the systems are similar or not, the truly useful approach is to discern to what extent Japanese experience applies and from what point local verification is necessary.

This paper is a general commentary for comparison purposes and does not represent the full history of the Korean tax system or tax judgments on individual transactions.