Separate Taxation of Dividends from High-Dividend Companies in Korea: Eligibility, 14–30% Rates and Who Benefits

What changed

In Korea, dividends have 15.4% withheld when paid, and if combined interest and dividend income exceeds 20 million won in a year, the excess is taxed together with other income such as wages and business income. The top comprehensive income tax rate is 45% (49.5% with local income tax), so the more dividends someone received, the heavier the burden. Article 104-27 of the Restriction of Special Taxation Act, passed by the National Assembly in December 2025, allows dividends from qualifying 'high-dividend companies' to be taxed at separate rates rather than combined with other income. It applies to dividends received from 2026 and is a temporary measure covering dividends arising in fiscal years up to the one containing 31 December 2028. It was introduced as part of the corporate value-up policy to encourage companies to pay more.

Conditions for a high-dividend company

The law treats a Korean company as a high-dividend company if it meets all of the following. First, it must be listed on KOSPI or KOSDAQ at the end of the fiscal year; KONEX companies and certain entities such as investment companies are excluded. Second, its dividends for the previous fiscal year must not be lower than for fiscal 2024. Third, its payout ratio for the previous fiscal year (the share of net profit paid as dividends) must be 40% or more, or 25% or more with dividends up at least 10% on the year before. In addition, the company must disclose whether it meets these conditions by the day after its annual general meeting resolves the dividend. Detailed calculations of the payout ratio and growth rate are set by the enforcement decree.

• Listed on KOSPI or KOSDAQ (KONEX, investment companies and others excluded)
• Previous year's dividends not lower than fiscal 2024
• Payout ratio 40%+, or 25%+ with dividends up 10%+ year on year
• Company discloses compliance by the day after the AGM resolution

Rate brackets

Dividends taxed separately under the rule (special dividend income) face progressive bracket rates: 14% up to 20 million won, 20% on the portion above 20 million up to 300 million, 25% on the portion above 300 million up to 5 billion, and 30% on the portion above 5 billion. Each rate applies only to the amount within its bracket. For example, special dividends of 100 million won mean 2.8 million won on the first 20 million plus 20% of the remaining 80 million (16 million), for 18.8 million won in total, with local income tax (10% of the income tax) added separately. The government's proposal had a top rate of 35%, lowered to 30% during parliamentary review.

• Up to 20 million won: 14%
• Over 20 million to 300 million: 2.8 million + 20% of the excess
• Over 300 million to 5 billion: 58.8 million + 25% of the excess
• Over 5 billion: 1,233.8 million + 30% of the excess

Who benefits

For people whose financial income is 20 million won or less a year, tax already ends with 14% withholding (15.4% with local income tax), so the rule changes little. The difference is large for people whose financial income exceeds 20 million won and is taxed comprehensively, and whose combined bracket including wages or business income is high, at 35 to 45%. For them, carving out high-dividend company dividends at 20 to 30% reduces tax. Conversely, someone with little other income and a low comprehensive bracket may find separate taxation worse, since 20% applies above 20 million won. Comprehensive taxation also involves features such as the dividend tax credit, so for large amounts it is safer to calculate both ways and consult a tax professional.

How to apply

When dividends are paid, 15.4% is withheld first, as with any dividend. Separate taxation applies only if the resident applies to exclude the income from aggregation through the prescribed procedure; the timing and method follow the enforcement decree and National Tax Service guidance. In practice, it is often worked out when organising financial income for the comprehensive income tax return the following May. Whether a dividend qualifies is confirmed by the company's disclosure of compliance, so it helps to watch filings around the annual general meetings of the stocks you hold. Also check whether your broker's annual dividend statement flags qualifying dividends.

Commonly missed points

The conditions are tested on the company's figures for the previous fiscal year, so they change every year; a high-dividend company this year is not guaranteed to be one next year. A payout ratio also rises automatically when net profit falls sharply, so meeting the conditions does not mean the company is performing well. The law refers to dividends a resident receives directly from the high-dividend company whose shares they hold, so whether distributions received through funds or ETFs qualify must be checked separately in the decree and tax authority guidance. Finally, buying just before the ex-dividend date to collect the dividend and selling straight after rarely pays as hoped, because prices tend to adjust by the dividend and trading costs add up.

• Conditions are retested each year on the previous fiscal year
• A high payout ratio is not the same as strong results
• Check separately whether fund and ETF distributions qualify
• Short-term trades around the ex-dividend date are costly

Checking with this site's tools

Enter your shares and dividend per share in the Dividend Calculator to see annual dividends before and after tax; changing the tax rate field between 15.4% and the separate rates (14%, 20% and so on plus 10% local income tax) gives a rough sense of the difference by bracket. The Dividend History & Growth tool shows a stock's annual dividend totals and growth rates, which helps check whether dividends have stayed at or above 2024 levels and how fast they have grown recently. Final confirmation of whether a company qualifies must come from its own disclosure.

Limits and disclaimer

This guide explains the structure based on the text of Article 104-27 of the Restriction of Special Taxation Act as of October 2026. Details such as the payout ratio calculation, the application procedure and the treatment of fund distributions follow the enforcement decree and the National Tax Service's interpretation, and the content or deadline may change through parliamentary debate. The example figures are assumptions to show the calculation. This guide does not recommend any stock and is not tax or investment advice.