Cabinet approves bill to raise tax on corporate income by 1 percentage point

President Lee Jae Myung, second from left, presides over a Cabinet meeting at the Government Complex Sejong, Tuesday. Yonhap

The Cabinet on Tuesday approved a bill raising tax rates on corporate income by one percentage point across all taxable income brackets starting next year, as the government seeks an expansionary fiscal policy.

Under the revised scheme, companies with taxable income above 300 billion won ($203.2 million) will be subject to a 25 percent, rate while income between 20 billion won and 300 billion won will be taxed at 22 percent.

The top corporate tax rate was last lowered to 24 percent under the previous Yoon Suk Yeol administration in 2022 in an effort to help local firms boost investment.

The main opposition People Power Party has largely opposed the tax hike, arguing it would dampen corporate investment and burden companies.

The bill was passed by the National Assembly earlier this month.

The Cabinet also approved a bill that creates a new bracket for dividend income subject to separate taxation.

Under the revision, a separate tax rate of 14 percent will apply to dividend income of up to 20 million won, 20 percent for amounts over 20 million won and up to 300 million won, and 25 percent for amounts over 300 million won and up to 5 billion won. Amounts exceeding 5 billion won would be taxed at 30 percent.

Financial income is currently taxed at 15.4 percent for amounts up to 20 million won per year, while income above that threshold is subject to comprehensive taxation, with rates reaching up to 49.5 percent.

Also approved at the meeting was a bill mandating medical students admitted through a special "regional doctor" track to provide ten years of compulsory medical service after graduation in designated regions as part of efforts to address a shortage of medical services outside the capital region.

The measure will take effect two months after its promulgation.