Article 2 (Definitions)

The meanings of terms used in this Act are as follows. <Amended by Dec. 31, 2019, Dec. 31, 2024, Dec. 23, 2025> 1. "Resident" means a resident as defined in the Income Tax Act and a domestic corporation as defined in the Corporate Tax Act. 2. "Taxable year" means a taxable period as defined in the Income Tax Act or a business year as defined in the Corporate Tax Act. 3. "Tax base reporting" means the tax base confirmation report under Articles 70, 71, 74, and 110 of the Income Tax Act and the reporting of the tax base under Article 60 of the Corporate Tax Act. 4. "Gross income" means gross revenue under Article 24 of the Income Tax Act or gross income under Article 14 of the Corporate Tax Act. 5. "Deductible expenses" means necessary expenses under Article 27 of the Income Tax Act or deductible expenses under Article 14 of the Corporate Tax Act. 6. "Carryover taxation" refers to a case where an individual transfers business fixed assets used in the business, etc. (hereinafter referred to as "previous business fixed assets, etc." in this subparagraph) to a corporation through capital contribution in kind, etc. In such a case, income tax on capital gains under Article 94 of the Income Tax Act (hereinafter referred to as "capital gains tax") is not imposed on the individual transferring such assets. Instead, when the corporation that acquired the assets transfers the business fixed assets, etc., the corporation shall pay corporate tax equivalent to the amount of capital gains tax calculated as if there were no other transferred assets in the taxable period to which the date of transfer of the previous business fixed assets, etc. to the corporation belongs, based on Article 104 of the same Act. 7. "Tax deferral" means a case where an individual transfers business fixed assets, etc. used in the business (hereinafter referred to as "previous business fixed assets, etc." in this subparagraph) for factory relocation, etc., and acquires other business fixed assets, etc. (hereinafter referred to as "new business fixed assets, etc." in this subparagraph) as a substitute for the transfer price. In this case, the capital gains arising from the transfer of the previous business fixed assets, etc., up to the amount calculated by the following formula (if the acquisition price of the new business fixed assets, etc. exceeds the transfer price of the previous business fixed assets, etc., the capital gains arising from the transfer of the previous business fixed assets, etc. shall be the limit. Hereinafter referred to as "deferred tax amount" in this subparagraph) shall not be subject to capital gains tax. However, when the new business fixed assets, etc. are transferred, the capital gains tax shall be levied with an acquisition price calculated by subtracting the deferred tax amount from the acquisition price of the new business fixed assets, etc. Capital gains from the transfer of previous business fixed assets, etc. × (Acquisition price of new business fixed assets, etc. / Transfer price of previous business fixed assets, etc.) 8. "Tax special treatment" means tax reduction and exemption such as the application of special tax rates, tax credits, income deductions, and the deduction of reserves, as well as surtaxes such as the inclusion of income for a specific purpose and the non-deduction of expenses. 9. "Metropolitan area" means the metropolitan area as defined in Article 2 (1) of the 「Metropolitan Area Readjustment Planning Act」. 10. "Metropolitan area overpopulation control zone" means the overpopulation control zone as defined in Article 6 (1) 1 of the 「Metropolitan Area Readjustment Planning Act」. 10-2. "Population decreasing region" means a population decreasing region as defined in Article 2 (12) of the 「Act on Decentralization, Balanced Development, and Promotion of Local Autonomy」. 10-3. "Crisis region" means a region falling under any of the following categories: a. Regions that can be supported under Article 32 (1) of the 「Basic Act on Employment Policy」 and are prescribed by Presidential Decree. b. Employment disaster regions declared under Article 32-2 (2) of the 「Basic Act on Employment Policy」. c. Special regions for industrial crisis response designated under Article 10 (1) of the 「Special Act on Response to Regional Industrial Crises and Recovery of Regional Economy」. 11. "Research and development" means systematic and creative activities to achieve scientific and technological advancement or to develop new services and service delivery systems, excluding activities prescribed by Presidential Decree. 12. "Human resource development" means the education and training of executives or employees hired by residents.

The classification of industries used in this Act shall follow the Korean Standard Industrial Classification announced by the head of the national data processing agency under Article 22 of the Statistics Act, unless otherwise specifically provided for in this Act. However, for industries that can no longer receive tax special treatment under this Act due to changes in the Korean Standard Industrial Classification, tax special treatment shall be applied according to the industry under the previous Korean Standard Industrial Classification for the taxable year in which the Korean Standard Industrial Classification was changed and the following taxable year. <Amended by Oct. 1, 2025>