How to Read Korea’s 2026 Dividend Tax Cut From Abroad

Korea cut its tax on dividends from January 1, 2026. The question a foreign shareholder should ask is who the cut is for. Article 104-27 of the Restriction of Special Taxation Act applies to a “resident” who holds shares in a qualifying high-dividend company. If you’re a foreign investor living outside Korea, your Korean withholding on dividends is the same as it was in 2025: 22% by default, or your treaty rate. The cut can still reach you, though not through your tax bill. It changes what Korean companies have a reason to pay out. This post explains what the law does, why it leaves your withholding alone, and where its effect shows up in your returns. For the whole dividend chain, see the pillar guide to Korean dividends.

Key Takeaways

• The cut is written for residents. Article 104-27, added on December 23, 2025, and in force from January 1, 2026, lets a Korean resident keep dividends from a qualifying company out of comprehensive income tax.
• Residents get separate rates of 14% to 30%. The statute’s table runs from 14% on the first 20 million won (about $15,000) to 30% above 5 billion won, all national rates.
• Your withholding doesn’t change. A non-resident without a Korean business base is already taxed separately on each type of Korean income. The default is 22% on a dividend; a treaty can lower it.
• The effect on you runs through payouts. To qualify, a company needs a payout ratio of at least 40%, or at least 25% with 10% dividend growth, and it can’t pay less than it did for fiscal 2024.
• It’s temporary. The rule covers dividends arising in fiscal years up to the one that includes December 31, 2028.

Contents

1. What the law does
2. Why it matters to Korean residents
3. Why it doesn’t change your withholding
4. Where it does reach foreign shareholders
5. What to watch
6. Frequently asked questions

1. What the law does

Article 104-27 of the Restriction of Special Taxation Act creates a separate tax track for dividends from “high-dividend companies.” A resident who holds shares in one can keep those dividends out of comprehensive income taxation, as long as the dividends arise in fiscal years up to the one that includes December 31, 2028. The resident has to apply for the treatment.

A company qualifies only if all three conditions hold:

Condition	What the statute requires
Listing	Listed on KOSPI or KOSDAQ at the fiscal year-end (KONEX and investment companies excluded)
No cut	Dividends for the prior fiscal year are no lower than for the fiscal year that includes December 31, 2024.
Payout	Prior fiscal year’s payout ratio of at least 40%, or at least 25% with total dividends up 10% or more on the year before that

The payout ratio is total dividends divided by net income under Korean accounting standards. The company has to disclose that it meets the conditions by the day after its annual meeting approves the dividend. The Financial Services Commission said on February 24, 2026, that companies make that disclosure through their corporate value enhancement plan filings, the same Value-Up disclosures covered in our post on reading them.

The rates come from a table in the statute itself:

Qualifying dividends in the year	National rate
Up to 20 million won (about $15,000)	14%
Above 20 million won, up to 300 million won	20% on the excess
Above 300 million won, up to 5 billion won	25% on the excess
Above 5 billion won	30% on the excess

Conversions use $1 = 1,325 won (October 24, 2026). The law took effect on January 1, 2026, and its addendum applies the rule to dividends a resident receives from that date. For dividends arising in fiscal 2025, it tests the payout conditions on that same year rather than the year before.

2. Why it matters to Korean residents

Korea withholds 14% national tax on a resident’s dividends under Article 129 of the Income Tax Act. For most people, that’s the end of it. Article 14 keeps interest and dividends out of comprehensive income as long as the year’s total, already withheld, stays at or below 20 million won.

Above that line, the income gets added to the rest of the resident’s income and taxed at progressive rates, which reach 45% on taxable income above 1 billion won (about $755,000). That’s the bill the new rule caps. A wealthy Korean resident with large dividends from a qualifying company can now pay 14% to 30% on that income instead of up to 45%.

Read that as a domestic incentive. The lower rates only matter to someone whose dividends would otherwise be added to a Korean comprehensive income bill.

3. Why it doesn’t change your withholding

The statute uses the word “resident,” and the addendum repeats it: the rule applies to dividends “a resident receives.” A non-resident isn’t in it.

You also didn’t have the problem it fixes. Article 121(3) of the Income Tax Act taxes a non-resident with no business base in Korea separately on each type of Korean income. Your dividends were never added to a Korean comprehensive income bill, so a rule that lets residents keep dividends out of one has nothing to act on. Korea withholds 20% national tax on a dividend paid to a non-resident under Article 156, and the local surtax brings it to 22%, as Clearstream’s Korea treaty table shows.

	Korean resident	Foreign investor living abroad
Standard withholding	14% national	20% national, 22% with local tax
Above 20 million won a year	Added to income, up to 45% national	Still a flat withholding
Under the 2026 rule	14% to 30% on qualifying dividends	No change
Treaty relief	Not applicable	16.5% for US residents, 15% for Canadian residents, with proof of residence

The treaty rates come from KB Financial’s 2026 annual report for the US and the Korea-Canada treaty for Canada. If you hold through an omnibus account, the payer withholds 22% first, and you claim the treaty rate back. Our posts on withholding claims and the omnibus account cover both steps.

One caveat runs the other way. If you’ve moved to Korea and become a tax resident, the rule may apply to you. Residency has its own tests, covered in our post on the 183-day rule.

4. Where it does reach foreign shareholders

The conditions in Article 104-27 are conditions on the company, and every shareholder sees what the company does to meet them. A board that wants its resident shareholders to get the lower rates has a reason to keep the dividend above the fiscal 2024 level and to push the payout ratio to 40%, or to 25% with 10% growth.

KB Financial Group’s board made that link explicit. When it declared its fiscal 2025 dividend on February 5, 2026, it gave the chief executive authority, if net income changed during the year-end close, to adjust the final per-share amount so the company would meet the high-dividend tests under the Restriction of Special Taxation Act. That’s one company, and it doesn’t show how many others behave the same way. It does show that the thresholds can shape a payout figure, and a foreign shareholder receives that figure too, minus the same 22% or treaty withholding as before.

What that means in practice: the tax cut may lift some payouts, and you’d share in that through the dividend itself. The disclosure each qualifying company files after its annual meeting tells you whether it met the conditions, which says something about how the board is managing its payout.

5. What to watch

The 2026 tax bills. The government published its 2026 tax revision proposal on August 3, 2026. The detailed proposal touches Article 104-27 in one narrow way: for a company that started business on or after January 1, 2025, the no-cut test would use its first fiscal year instead of fiscal 2024 for dividends received from January 1, 2027. It leaves the rates, the payout tests, and the resident-only scope alone, and nothing in the proposal changes the withholding on dividends paid to non-residents. Korea Economic Daily noted in an August 5 column that the package left out further tax relief for dividend investors. As of October 24, 2026, the National Assembly hadn’t voted on the bills, so check the final text.

The sunset. The rule covers dividends arising in fiscal years up to the one that includes December 31, 2028. A company’s incentive to stay above the thresholds could fade as that date approaches, unless the law is extended.

The fiscal 2024 floor. A company can’t qualify if its dividends fall below the fiscal 2024 level. Under current law, that condition doesn’t expire before the rule does.

6. Frequently asked questions

Does Korea’s 2026 dividend tax cut lower my withholding as a foreign investor?

No. The rule in Article 104-27 applies to residents. Non-residents pay 22% by default, or a treaty rate with proof of residence.

What rates do Korean residents pay under the new rule?

14% on the first 20 million won of qualifying dividends, then 20%, 25%, and 30% in higher brackets, all national rates.

Which companies qualify?

KOSPI and KOSDAQ companies that haven’t cut their dividend below the fiscal 2024 level and have a payout ratio of at least 40%, or at least 25% with 10% dividend growth.

How long does the rule last?

For dividends arising in fiscal years up to the one that includes December 31, 2028.

Can the rule still help me?

Indirectly. Companies may set payouts to meet the conditions, and you receive the same dividend per share as resident shareholders.

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Disclaimer: This article is for general informational purposes only and does not constitute investment, legal, or tax advice. It describes Korean statutes, regulator announcements, and company filings as published on the dates cited, as of October 24, 2026. Tax treatment depends on your residency and circumstances and can change. Confirm your position with a qualified tax professional before you act.

Last updated: October 30, 2026