ARTICLE 2 (DEFINITIONS)

The terms used in this Act shall be defined as follows. <Amended by Dec. 31, 2019, Dec. 31, 2024, Dec. 23, 2025> 1. "Resident individual" means a resident under the Income Tax Act and a domestic corporation under the Corporate Tax Act. 2. "Taxable year" means a taxable period under the Income Tax Act or a business year under the Corporate Tax Act. 3. "Tax base return" means a final tax base confirmation return under Articles 70, 71, 74, and 110 of the Income Tax Act, and a tax base return under Article 60 of the Corporate Tax Act. 4. "Gross income" means gross receipts 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. "Deferred taxation" means that when an individual transfers business-use fixed assets, etc. (hereinafter referred to as "former business-use fixed assets, etc." in this subparagraph) used in the business to a corporation through contribution in kind, etc., the income tax on capital gains under Article 94 of the Income Tax Act (hereinafter referred to as "capital gains tax") shall not be levied on the individual transferring them. Instead, when the corporation that acquired them transfers the business-use fixed assets, etc., the corporate tax equivalent to the amount of capital gains tax calculated under Article 104 of the same Act, as if there were no other assets transferred in the taxable period to which the date of transfer of the former business-use fixed assets, etc. to the corporation belongs, shall be paid by the corporation. 7. "Tax deferral" means that when an individual transfers business-use fixed assets, etc. (hereinafter referred to as "former business-use fixed assets, etc." in this subparagraph) used in the business for purposes such as factory relocation and acquires other business-use fixed assets, etc. (hereinafter referred to as "new business-use fixed assets, etc." in this subparagraph) in substitution thereof, the capital gains tax shall not be levied on the amount calculated according to the following formula among the capital gains arising from the transfer of the former business-use fixed assets, etc. (if the acquisition cost of the new business-use fixed assets, etc. exceeds the transfer price of the former business-use fixed assets, etc., the capital gains arising from the transfer of the former business-use fixed assets, etc. shall be the limit. Hereinafter referred to as "deferred tax amount" in this subparagraph). However, when the new business-use fixed assets, etc. are transferred, the capital gains tax shall be levied by treating the amount obtained by subtracting the deferred tax amount from the acquisition cost of the new business-use fixed assets, etc. as the acquisition cost. Capital gains from the transfer of former business-use fixed assets, etc. × (Acquisition cost of new business-use fixed assets, etc. / Transfer price of former business-use fixed assets, etc.) 8. "Tax incentive" means tax reduction and exemption, tax credit, income deduction, and reserve deduction (損金算入) in cases where special tax rates apply to certain conditions, and increased taxation (重課稅) such as inclusion in gross income or non-deduction of expenses (損金不算入) for specific purposes. 9. "Metropolitan area" means the metropolitan area as defined in Article 2 (1) of the Metropolitan Area Readjustment Planning Act. 10. "Metropolitan area concentrated regulation zone" means the concentrated regulation zone as defined in Article 6 (1) 1 of the Metropolitan Area Readjustment Planning Act. 10 of 2. "Population decrease area" means a population decrease area as defined in Article 2 (12) of the Special Act on Decentralization of Local Autonomy and Balanced Development of Regions. 10 of 3. "Crisis area" means an area falling under any of the following subparagraphs: a. Areas designated by Presidential Decree as areas eligible for support under Article 32 (1) of the Basic Employment Policy Act b. Employment disaster areas declared under Article 32-2 (2) of the Basic Employment Policy Act c. Special areas for responding to industrial crises designated under Article 10 (1) of the Special Act on Responding to Industrial Crises and Recovering Regional Economies. 11. "Research and development" means systematic and creative activities for scientific and technological advancement or the development of 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 employed by a resident individual.

The classification of industries used in this Act shall, except where specially provided for in this Act, be based on the Korean Standard Industrial Classification notified by the head of the Statistics Korea under Article 22 of the Statistics Act. However, if the Korean Standard Industrial Classification is changed and an industry can no longer receive tax incentives under this Act, tax incentives shall be applied according to the industry under the pre-change Korean Standard Industrial Classification for the taxable year of change and the following taxable year. <Amended by Oct. 1, 2025>