Article 12 (Income Exempt from Taxation)

Income falling under any of the following categories shall not be subject to income tax. <Amended by Act No. 10424, Dec. 27, 2010; Act No. 10890, July 25, 2011; Act No. 10991, Sept. 15, 2011; Act No. 11213, Feb. 1, 2012; Act No. 11607, Jan. 1, 2013; Act No. 11684, Mar. 22, 2013; Act No. 12246, Jan. 1, 2014; Act No. 12440, Mar. 18, 2014; Act No. 12902, Dec. 23, 2014; Act No. 13556, Dec. 15, 2015; Act No. 14179, Dec. 20, 2016; Act No. 15480, Mar. 20, 2018; Act No. 15985, Dec. 31, 2018; Act No. 16770, Dec. 10, 2019; Act No. 16841, Dec. 31, 2019; Act No. 17371, June 9, 2020; Act No. 17777, Dec. 29, 2020; Act No. 18507, Aug. 12, 2022; Act No. 18597, Dec. 31, 2022; Act No. 19631, Aug. 8, 2023; Act No. 19715, Dec. 31, 2023; Act No. 19808, Dec. 31, 2024; Act No. 20514, Oct. 1, 2025; Act No. 20585, Dec. 23, 2025> 1. Profit of a public trust under the 「Public Trust Act」. 2. Income from business income, falling under any of the following categories: a. Income arising from the use of paddy fields or dry fields for crop production. b. Income from the lease of a house by a person who owns one house (excluding income from the lease of a house whose standard market price under Article 99 exceeds 1.2 billion won or a house located overseas) or income from the lease of a house by a person whose total sum of gross receipts prescribed by Presidential Decree for the relevant taxable period is 20 million won or less (limited to income arising from taxable periods ending on or before December 31, 2018). In this case, matters necessary for the calculation of the number of houses and the calculation of house lease income shall be prescribed by Presidential Decree. c. Income from side business of farming and fishing households prescribed by Presidential Decree. d. Income arising from the manufacturing of traditional liquors prescribed by Presidential Decree. e. Income arising from the felling or transfer of timber from forest land with a forestation period of 5 years or more, not exceeding 30 million won per year. In this case, matters necessary for the calculation of the forestation period and tax amount shall be prescribed by Presidential Decree. f. Income from crop cultivation business prescribed by Presidential Decree. g. Income arising from fishing operations or aquaculture prescribed by Presidential Decree. 3. Income from earned income and retirement income, falling under any of the following categories: a. Pay received by soldiers in service prescribed by Presidential Decree. b. Pay received by a person mobilized by law at their mobilization workplace. c. Medical benefits, suspension of work benefits, disability benefits, nursing benefits, survivor benefits, special survivor benefits, special disability benefits, funeral expenses received by a beneficiary under the 「Industrial Accident Compensation Insurance Act」, or benefits of a compensatory or consolatory nature received by workers or their survivors in relation to injuries, illnesses, or deaths resulting from the provision of labor. d. Medical compensation, suspension of work compensation, sickness and injury compensation, lump-sum compensation, disability compensation, survivor compensation, missing person compensation, lost property compensation, funeral expenses, and burial expenses received by workers, seamen, and their survivors under the 「Labor Standards Act」 or the 「Seamen's Act」. e. Unemployment benefits, parental leave benefits, reduced working hours benefits during childcare leave, maternity leave benefits, etc. received under the 「Employment Insurance Act」; re-employment support funds received under the 「Act on Support for Military Personnel Who Have Completed Their Service」; childcare leave allowances received by public officials under the 「State Public Officials Act」 or the 「Local Public Officials Act」 or persons to whom the 「Act on the Retirement Pension for Salaried Employees of Private Schools」 or the 「Act on Special Post Offices」 applies, in accordance with relevant laws (including childcare leave allowances paid according to the articles of association or rules of the affiliated institution by office workers appointed under Article 70-2 of the 「Act on the Establishment and Operation of Educational Institutions」 and persons deemed as faculty under Article 60-4 of the 「Act on the Retirement Pension for Salaried Employees of Private Schools」, up to the amount prescribed by Presidential Decree). f. Lump-sum return payments (only those received due to death) and death lump-sum payments received under the 「National Pension Act」. g. Public service medical expenses, medical benefits, disability lump-sum payments, non-service disability lump-sum payments, non-duty disability lump-sum payments, disability compensation, death condolence payments, death compensation, survivor lump-sum payments, survivor retirement lump-sum payments, survivor pension lump-sum payments, survivor retirement pension lump-sum payments, veteran survivor pension lump-sum payments, combatant survivor pension lump-sum payments, survivor pension additional payments, survivor retirement pension additional payments, veteran survivor pension additional payments, survivor pension special additional payments, survivor retirement pension special additional payments, veteran survivor pension special additional payments, combatant survivor compensation, duty-related survivor compensation, dangerous duty combatant survivor compensation, disaster relief funds, calamity relief funds, or benefits received during a leave of absence due to physical or mental disability or illness, received under the 「Public Officials Pension Act」, 「Act on Compensation for Public Officials' Industrial Accidents」, 「Military Pensions Act」, 「Act on Compensation for Military Personnel's Industrial Accidents」, 「Act on the Retirement Pension for Salaried Employees of Private Schools」, or the 「Act on Special Post Offices」. h. Academic scholarships prescribed by Presidential Decree. i. Benefits of a reimbursement nature prescribed by Presidential Decree. j. Remuneration received by persons working for foreign governments (including local governments of foreign countries and local governments of federated foreign countries; hereinafter the same shall apply) or international organizations prescribed by Presidential Decree. However, this shall apply only if the foreign government does not impose income tax on the remuneration of our public officials working in that country. k. Pension benefits and study support allowances received under the 「Act on the Honorable Treatment and Support of National Meritorious Persons」 or the 「Act on Support for Persons Eligible for National Merit Compensation」. t. Pensions received under the 「Act on the Honorable Treatment of Former Presidents」. p. Remuneration received by soldiers and civilian military personnel stationed overseas to perform operational missions. h. Remuneration received by soldiers and civilian military personnel who died in action (including death due to battle wounds; hereinafter the same shall apply) for the taxable period to which the date of death belongs. g. Remuneration prescribed by Presidential Decree, received for labor provided overseas or in North Korean regions under the 「Act on Inter-Korean Exchange and Cooperation」. n. Insurance premiums borne by the state, local governments, or employers under the 「National Health Insurance Act」, 「Employment Insurance Act」, or 「Long-Term Care Insurance for the Elderly Act」. d. Remuneration received by workers engaged in production and related occupations, who are prescribed by Presidential Decree, considering their pay level and job type, for overtime work, night work, or holiday work, as prescribed by Presidential Decree. r. Meals or other food items provided by the company to workers through in-house meals or similar means, or meal allowances of 200,000 won or less per month received by workers (limited to those who do not receive meals or other food items). m. Benefits paid by the employer in relation to the birth of a worker's child or childcare for the worker or their spouse: 1) The entire amount of benefits paid by the employer within two years after the child's birth, in accordance with Presidential Decree, up to two times (including benefits received between January 1, 2024, and December 31, 2024, for children born on or after January 1, 2021) to a worker (excluding those with a special relationship with the employer as prescribed by Presidential Decree) or their spouse in relation to the birth of a child. 2) The amount paid by the employer in relation to the childcare of a child aged 6 or under (meaning the day they turn 6 and the period prior to it; hereinafter the same shall apply in this Article and Article 59-4) as of the beginning of the relevant taxable period, per child, not exceeding 200,000 won per month. b. Remuneration and retirement lump-sum payments received by captured soldiers under the 「Act on the Repatriation and Treatment of Captured Soldiers」. s. Scholarships received under Article 28 (1) of the 「Elementary Education Act」, which are paid to university students in return for labor (limited to university students attending universities referred to in subparagraphs 1 through 4 of Article 2 of the 「Higher Education Act」). e. Compensation amounts prescribed by Presidential Decree, received for job inventions under subparagraph 2 of Article 2 of the 「Act on the Promotion of Inventive Activities」 (hereinafter referred to as "job invention compensation"). 1) Compensation received by employees, etc. under subparagraph 2 of Article 2 of the 「Act on the Promotion of Inventive Activities」 (hereinafter referred to as "employees, etc." in this Article, Article 20, and Article 21) from employers, etc. under the same subparagraph (hereinafter referred to as "employers, etc." in this Article). However, compensation received by persons with a special relationship with the employer, etc. who paid the compensation shall be excluded. 2) Compensation received by faculty members of universities or students with an employment relationship with universities from industry-academia cooperation units established in their affiliated universities under Article 25 of the 「Act on the Promotion of Industrial Education and Cooperation between Industry, Academia, and Research Institutions」 (hereinafter referred to as "industry-academia cooperation units" in this Article) in accordance with subparagraph 4 of Article 32 (1) of the same Act. j. Benefits of a welfare nature prescribed by Presidential Decree. c. Income under subparagraph 6 of Article 20 (1) that meets all of the following requirements and does not exceed the amount prescribed by Presidential Decree: 1) Goods or services provided or purchased with support for the purpose of consumption by the executive or employee (hereinafter referred to as "executives, etc." in this Article, Article 20, and Article 164-5) themselves, which are not allowed to be resold during the period prescribed by Presidential Decree. 2) There is a standard that applies to all executives, etc. in common in relation to the provision of such goods or services. 4. Income from pension income, falling under any of the following categories: a. Survivor pensions, retirement survivor pensions, veteran survivor pensions, disability survivor pensions, injured survivor pensions, combatant survivor pensions, duty-related survivor pensions, dangerous duty combatant survivor pensions, disability pensions, non-service disability pensions, non-duty disability pensions, injured pensions, linked old-age survivor pensions, or linked retirement survivor pensions received under the 「National Pension Act」, 「Public Officials Pension Act」 or 「Act on Compensation for Public Officials' Industrial Accidents」, 「Military Pensions Act」 or 「Act on Compensation for Military Personnel's Industrial Accidents」, 「Act on the Retirement Pension for Salaried Employees of Private Schools」, the 「Act on Special Post Offices」, or the 「Act on the Linkage of National Pension and Occupational Pension」 (hereinafter referred to as "Public Pension-Related Acts"). b. Deleted <Jan. 1, 2013>. c. Various pensions received under the 「Industrial Accident Compensation Insurance Act」. d. Pensions received by captured soldiers under the 「Act on the Repatriation and Treatment of Captured Soldiers」. e. Deleted <Jan. 1, 2013>. 5. Income from other income, falling under any of the following categories: a. Pension benefits, study support allowances received under the 「Act on the Honorable Treatment and Support of National Meritorious Persons」 or the 「Act on Support for Persons Eligible for National Merit Compensation」, and settlement funds, reward money (報勞金), and other cash and goods received under the 「Act on the Protection and Settlement Support of North Korean Defectors」. b. Prizes and reward money received under the 「State Security Act」. c. Supplementary prizes related to decorations under the 「Act on Decorations」, or other prizes and supplementary prizes prescribed by Presidential Decree. d. Job invention compensation received by employees, etc. or faculty members of universities after retirement from employers, etc. or industry-academia cooperation units, or received by students of universities from industry-academia cooperation units established in their affiliated universities, up to the amount prescribed by Presidential Decree. However, job invention compensation received by persons with a special relationship with the employer, etc. or the industry-academia cooperation unit that paid the job invention compensation shall be excluded. e. Consolation support funds and other cash and goods received by captured soldiers under the 「Act on the Repatriation and Treatment of Captured Soldiers」. f. Income arising from the transfer of calligraphy, paintings, and antiques designated as national cultural heritage under the 「Act on the Preservation and Utilization of Cultural Heritage」. g. Income arising from the transfer of calligraphy, paintings, and antiques to museums or art galleries. h. Income falling under any of the following categories among religious income under subparagraph 26 of Article 21 (1): 1) Academic scholarships prescribed by Presidential Decree, received by religious workers (hereinafter referred to as "religious workers") according to the Korean Standard Occupational Classification notified by the head of the National Statistical Office under Article 22 of the 「Statistics Act」. 2) Meals or meal allowances prescribed by Presidential Decree, received by religious workers. 3) Payments of a reimbursement nature prescribed by Presidential Decree, received by religious workers. 4) Amounts received from religious organizations by religious workers or their spouses in relation to childbirth or childcare of children aged 6 or under (judged as of the beginning of the relevant taxable period), not exceeding 200,000 won per month per child. 5) Benefits derived from receiving a residence prescribed by the Minister of Economy and Finance, received by religious workers. j. Allowances received by committee members who do not receive remuneration, etc. (including members of the Academy of Sciences and the Academy of Arts) under laws and ordinances.