Article 156 (Special Rules for Withholding Tax on Domestic Source Income of Nonresidents)

Any person who pays to a nonresident income that is domestic source income under Article 119 (1), (2), (4) through (6), and (9) through (12), and which is not substantially connected with a permanent establishment in Korea or is not attributable to such permanent establishment (including payments made to a nonresident who has no permanent establishment in Korea), shall, notwithstanding Article 127, withhold the following amounts as income tax on the domestic source income of the nonresident at the time of payment, and pay it to the district tax office, the Bank of Korea, or the postal office having jurisdiction over withholding, by the 10th of the month following the month in which the withholding date falls, in accordance with Presidential decrees: <Amended by Act No. 12217, Jan. 1, 2013; Act No. 14458, Dec. 20, 2016; Act No. 15890, Dec. 31, 2018; Act No. 16837, Dec. 31, 2019; Act No. 17758, Dec. 29, 2020> 1. Domestic source interest income under Article 119 (1): The amount determined by the following classifications: a. Interest income arising from bonds issued by the State, local governments, and domestic corporations: 14 percent of the payment amount. b. Interest income other than that referred to in item a: 20 percent of the payment amount. 2. Domestic source dividend income under Article 119 (2): 20 percent of the payment amount. 3. Domestic source income from lease of ships, etc. under Article 119 (4) and domestic source business income under Article 119 (5) (excluding income taxable as domestic source business income under a tax treaty): 2 percent of the payment amount. 4. Domestic source income from personal services under Article 119 (6): 20 percent of the payment amount. However, for income arising from the provision of services designated by Presidential decree among personal services provided abroad, which is deemed to arise in Korea under a tax treaty, it shall be 3 percent of the payment amount. 5. Domestic source income from the transfer of real estate, etc. under Article 119 (9): 10 percent of the payment amount. Provided, that where the acquisition cost and transfer expenses of the transferred asset are confirmed, it shall be the lesser of 10 percent of the payment amount and 20 percent of the capital gains from the transfer of such asset. 6. Domestic source royalty income under Article 119 (10): 20 percent of the payment amount. 7. Domestic source income from the transfer of securities under Article 119 (11): 10 percent of the payment amount (in cases falling under Article 126 (6), it refers to the arm's length price under the same paragraph. Hereinafter the same applies in this item). Provided, that where the acquisition cost and transfer expenses of the relevant securities are confirmed under Article 126 (1) (1), it shall be the lesser of 10 percent of the payment amount and 20 percent of the amount calculated under the same subparagraph. 8. Domestic source other income under Article 119 (12): The amount determined by the following classifications. a. Income under Article 119 (12) (c): 15 percent of the payment amount. b. Income under Article 119 (12) (t): The amount determined by the following classifications. However, when exchanging or withdrawing virtual assets, it shall be the amount expressed in units of virtual assets and determined by Presidential decree, corresponding to the following classifications. 1) Where the necessary expenses of virtual assets are confirmed under Article 126 (1) (3): The lesser of the amount equivalent to 10 percent of the payment amount and the amount equivalent to 20 percent of the amount calculated under the same subparagraph. 2) Where the necessary expenses of virtual assets are not confirmed under Article 126 (1) (3): 10 percent of the payment amount. c. Other income under item a and b: 20 percent of the payment amount (for prizes, awards, etc. under Article 126 (1) (2), it shall be the amount calculated under the same subparagraph).

If domestic source income prescribed in paragraph (1) is paid outside Korea, and the payer has a domicile, residence, head office, main office, or a permanent establishment in Korea (including a permanent establishment prescribed in Article 94 of the 「Corporate Tax Act」), such payment shall be deemed to be made in Korea, and paragraph (1) shall apply. <Amended by Act No. 10407, Dec. 27, 2010>

When an agent in Korea of a nonresident operating ships or aircraft navigating foreign countries, who does not fall under Article 120 (3), pays income generated by such ships or aircraft navigating foreign countries to the nonresident, the agent shall withhold tax on the amount of the nonresident's domestic source income in accordance with paragraph (1). <Amended by Act No. 10407, Dec. 27, 2010>

A person who pays to a nonresident domestic source income arising from the provision of services related to construction, assembly of machinery, etc., or other work, or supervision or control of such work, or domestic source income from providing personal services under Article 119 (6) (including cases classified as business income under a tax treaty), shall withhold tax in accordance with paragraph (1), even if the nonresident has a permanent establishment in Korea. Provided, that this shall not apply if the nonresident has registered as a business operator under Article 168. <Amended by Act No. 10407, Dec. 27, 2010; Act No. 12217, Jan. 1, 2013; Act No. 12974, Jan. 1, 2014>

Where a nonresident receives domestic source income under Article 119 due to auction or public sale under the 「Civil Execution Act」 or the 「National Tax Collection Act」, the person distributing the auction proceeds or allocating the public sale proceeds shall withhold tax in accordance with paragraph (1) to the extent of the amount actually paid to the nonresident. <Newly added by Act No. 10407, Dec. 27, 2010; Act No. 12974, Jan. 1, 2014>

Where financial institutions, etc. underwrite, trade, broker, or act as an agent for bills, debt certificates, stocks, or collective investment securities issued by domestic entities, the relationship of agency or delegation shall be deemed to exist between the financial institution, etc. and the domestic entity, and paragraph (10) shall apply. <Newly added by Act No. 10407, Dec. 27, 2010>

Domestic source income under Article 119 (12) (j) shall be withheld by the domestic corporation that issued the stocks or equity interests, at the time prescribed by Presidential decree, from the special related party abroad holding such stocks or equity interests. <Amended by Act No. 10407, Dec. 27, 2010; Act No. 11601, Jan. 1, 2012>

When applying paragraph (1), if a nonresident with domestic source income from the transfer of real estate, etc. under Article 119 (9) has paid income tax on such income in advance, or proves that such income is exempt from tax or not subject to taxation, income tax shall not be withheld on such income. <Amended by Act No. 10407, Dec. 27, 2010; Act No. 15890, Dec. 31, 2018>

When applying paragraph (16), the method by which virtual asset service providers, etc. confirm whether a person who transfers, lends, or withdraws virtual assets is subject to withholding tax under paragraph (1) (8) b shall be prescribed by Presidential decree. <Newly added by Act No. 17758, Dec. 29, 2020>