South Korea



About South Korea

South Korea has the fourth-largest economy in Asia and the 12th largest in the world. Following the Korean War, South Korea was one of the world’s poorest nations, but strong technological advancements brought about by its skilled labour force propelled it to become one of the most developed economies in the world within a generation. South Korea has been identified as one of the “Next Eleven” countries (those with the potential to become important players in the world economy in the 21st century).

The South Korean economy is characterised by its heavy reliance on exports, which account for 50% of GDP. Key exports include machinery, electronics and automobiles. Countries with which South Korea has free trade agreements together make up three-quarters of the world's economy, making South Korea a world leader in international trade.

Along with its neighbours China and Japan, respectively the world’s second- and third-largest economies, South Korea is a vital member of the East Asian economic region, which accounts for a quarter of world GDP. China is also South Korea's largest trading partner.

With its competitive regulatory framework and culture of innovation, entrepreneurial activities can be carried out in South Korea with relative ease. Moreover, South Korea boasts one of the most literate workforces in the world, with relatively competitive wages compared with most other developed nations. The South Korean financial services sector has become increasingly stable and competitive as further regulatory reforms have improved FDI inflow.


South Korea Market Profile Infographic_Small

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Corporate Treasury in South Korea

South Korea is one of the world's most dynamic economies. Its high level of foreign trade and continued deregulation make it an attractive market. Here, we highlight some of the key benefits relevant to treasury and cash management in South Korea.


Financial Market Development

  • The World Economic Forum (WEF) ranks South Korea 18th in the world for its financial systems in the Global Competitiveness Report 2019.
  • The WEF ranks South Korea 62nd in the world for the soundness of its banks, although it comes third for non-performing loans and 14th for domestic credit to the private sector.
  • South Korea has world-class business infrastructure, a highly skilled workforce, and an efficient legal system, although the region's geopolitical situation creates uncertainty. 
  • South Korea has some foreign exchange controls in place, but the majority of foreign exchange transactions do not require approval or reporting under the Foreign Exchange Transactions Act. Companies can receive foriegn exchange from outside of Korea and there is no regulation governing payments to foreign companies. They are, however, required to report most capital transactions, such as foreign currency loans, in advance. Remittance of profits from a Korean branch to a head office must be reported to a designated foreign exchange bank.


Sophisitcation of Banking Systems

  • The domestic banking sector in South Korea can be divided into two categories: commercial, which is further subdivided into nationwide and regional banks; and specialised (as structured in the Banking Act). As per the government’s Financial Supervisory Services listing, there are 13 nationwide and regional banks, and five specialised banks.
  • There are 37 branches of foreign banks operating in the country.
  • South Korea also supports thousands of ‘nonbank financial institutions’ that provide limited and/or specialised banking and credit services. For supervisory purposes, each institution is classified as one of the following: a mutual savings bank; specialised credit finance company; or mutual credit cooperative.
  • South Korea's foreign-exchange market has an average daily turnover of USD55 billion, accounting for 0.7% of global turnover (Bank for International Settlements Triennial Central Bank Survey 2019).
  • South Korea has one of the largest bond markets in Asia, with both government and corporate bonds available. The local currency bond market was valued at KRW2,476.2 trillion at the end of March 2020.


Regulatory Bodies

  • The banking sector in South Korea is regulated by the Financial Services Commission, which is responsible for rule making and licensing, and the Financial Supervisory Service, which conducts prudential supervision. The central bank, the Bank of Korea (BoK), also carries out some supervisory functions, including overseeing foreign-exchange controls, which it manages with the Ministry of Strategy and Finance (MOSF).



  • Corporate income tax (CIT) is charged at:
    • 10% on the first KRW200 million of taxable income (plus surcharge of 1%);
    • 20% on the taxable income between KRW200 million and KRW20 billion (plus surcharge of 2%);
    • 22% on taxable income between KRW20 billion and KRW300 billion (plus surcharge of 2.2%); and
    • 25% on taxable income above KRW300 billion (plus surcharge of 2.5%).
  • Resident companies are taxed on their worldwide income whilst non-resident companies with permanent establishments in South Korea are taxed on Korea-sourced income.
  • Companies are charged an additional tax of 20% if their net assets exceed KRW50 billion (excluding small- and medium-sized enterprises) and companies belonging to business groups subject to restrictions on cross-shareholding under the Act on Monopoly Regulation and Fair Trade. This tax is scheduled to expire in December 2020.
  • Companies are liable for a minimum tax, which is the greater of 10%, 12% or 17% (depending on the size of their tax base) of their taxable income before certain tax deductions or credits, or the actual CIT liability after deductions and credits.
  • There is no branch-profit remittance tax on the remittance of profits to the head office by a branch of a foreign company. However, if the tax treaty between Korea and the respective country allows for Korea to impose branch-profit remittance tax, the branch-remittance tax will be 20% on the adjusted taxable income.
  • The standard rate for Value Added Tax (VAT) is 10%, with certain goods and services being zero-rated whilst others are exempted.
  • A securities transaction tax of 0.25% (for shares of Korean-listed companies) or 0.45% is charged on the transfer of shares or interest.
  • Interest income is typically included in taxable income and subject to CIT.
  • Interest expenses that are used for business purposes are generally tax-deductible subject to thin capitalisation rules.
  • Companies are allowed to recognise unrealised gains and losses on foreign currency transactions.
  • There is no withholding tax (WHT) on dividends for resident companies but WHT of 14% or 25% is charged on interest. For non-resident companies where no tax treaty is in place, WHT of 20% is charged on dividends and 14% or 20% is charged on interest. Where tax treaties are in place and the non-resident company can provide a Certificate of Residence, rates range from 5% to 25% for dividends and 0% to 15% on interest.
  • Tax credits are available for the funding of R&D activities as well as qualified investment in facilities or companies that increase productivity or safety, boost environmental protection or create jobs.
  • South Korea has tax treaties with more than 90 countries and territories.
  • South Korea is a signatory to the Organisation for Economic Co-operation and Development’s Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises.


Benefits for Regional Treasury Centres

  • South Korea is a leading financial services hub in Asia.
  • It has one of the largest bond markets in Asia.
  • South Korea has an extensive tax-treaty network.
  • Cash concentration is permitted amongst participating accounts that belong to the same entity, and zero-balancing is more commonly used. Notional pooling is generally not permitted.
  • South Korea has a real-time gross settlement system, the Bank of Korea Financial Wire Network, which is used for high-value and urgent electronic payments.
  • South Korea is a member of the Asian Payment Network.
  • Foreign banks have a significant presence in South Korea and offer the widest range of cash-management services.



Banking System

  • The domestic banking sector in South Korea can be divided into two categories: commercial, which is further subdivided into national and regional banks; and specialised (as structured in the Banking Act). Under the government’s Financial Supervisory Services (FSS) listing, there are eight national banks – including two online-only banks – six regional and five specialised banks.
  • While national banks operate nationwide, regional bank operations are subject to certain geographical restrictions.
  • Specialised banks were established as niche providers under a different banking act and include the Korea Development Bank, the Export-Import Bank of Korea, Industrial Bank of Korea, Nonghyup Bank and Suhyup Bank.
  • There are 36 branches of foreign banks operating in the country.
  • South Korea also supports thousands of ‘nonbank financial institutions’ that provide limited and/or specialised banking and credit services. For FSS supervisory purposes, each institution is classified as one of the following: mutual savings bank, specialised credit finance company or mutual credit cooperative.
  • Since the widespread domestic banking reforms of the 1990s, South Korea has been working towards becoming a leading Asian and global financial hub by developing its financial infrastructure, instituting deregulation, fine-tuning government supervision and improving the sector’s overall efficiency.
  • Historically, the government has had controlling stakes in many of its financial institutions, however, it is scaling back and working towards greater privatisation of its financial sector.


Bank Accounts

  • Residents may hold foreign-exchange accounts domestically and overseas, although the Ministry of Strategy and Finance must be notified before the opening of an overseas foreign-exchange account. Domestic currency accounts are not permitted overseas.
  • Non-residents may hold foreign and domestic currency accounts, and domestic currency accounts are freely convertible into foreign currency. Non-residents may hold two types of domestic currency accounts: a non-resident won (KRW) account (whereby overseas remittances may be made without supporting documents but local transactions are restricted) or a non-resident won account (whereby local transactions can be carried out freely but overseas remittances are restricted).
  • Interest: Interest-bearing currency accounts are not available.


Legal and Regulatory

  • The Financial Services Commission (FSC), under which the FSS operates, oversees the banking sector, while the Bank of Korea (BoK) enacts various other supervisory functions in accordance with the Banking Act.
  • A resident company is one in which its headquarters, main office or central management operate as a domestic company.
  • Transactions between residents and non-residents have to be carried out at foreign-exchange banks in South Korea.
  • South Korea has anti-money laundering and counter-terrorism financing regulations in place.
  • Foreign exchange is managed by the Bank of Korea and the Ministry of Strategy and Finance.
  • South Korea has set up a financial intelligence unit, the Korea Financial Intelligence Unit, which is operated through the FSC and is a member of the Egmont Group.




Payment Systems


Korea's Real-time Gross Settlement (RTGS) system

  • Operated by the BoK as the country’s LVPS (large-value payment system).
  • Processes high-value and urgent KRW interbank transfers. No value threshold except for third-party transfer of funds with a minimum threshold of KRW 1 billion.
  • Transactions settled in real time using SWIFT messages.
  • Final settlement done across participant banks' correspondent accounts at the BoK.
  • Also provides a hybrid settlement system, BOK-Wire+, for general and call funds transfers and DvP settlements, with option to settle in real time or upon instruction.
  • Also processes JPY- and USD-denominated interbank payments for banks with a foreign currency deposit
  • 125 participants: 56 are banks and 69 are non-banks.
  • Operating hours are expected to be extended in 2019 and in 2020 the net settlement cycle will be reduced from 30 minutes to 5 minutes.


(Korea Financial Telecommunications & Clearings Institute)


Multilateral net settlement system

  • Operated as a non-profit incorporated association.
  • Ten general participant members, ten associate member participants and 72 special member participants.
  • Final settlement done through BOK-Wire+ across the participants' accounts held at the BoK.
  • Operates the B2C and B2B Electronic Commerce Payment systems, which use e-commerce.
  • Operates nine other retail payment systems, explained below:

Cheque Clearing System


Cheque and paper-based truncation system

  • Operated by KFTC.
  • Comprises of 50 regional clearing houses.
  • Has 27 direct bank participants and 1,504 indirect participants.
  • Settles KRW-denominated current account cheques, cashier's cheques, bills of exchange and promissory notes.
  • No value threshold.
  • Final settlement done across participants' accounts at the BoK through BOKWire+ next day.

Bank Giro System


Korea's giro system

  • Operated by KFTC.
  • Giros can be paper-based, electronic or internet giros.
  • No value threshold.
  • Final settlement done across participants' accounts at BoK through BOKWire+, available to recipients in two/three business days.
  • Has 25 participants



(Interbank Funds Transfer Network)


  • Operated by KFTC.
  • Maximum threshold of KRW 100 million per transaction.
  • Settlement done next day.
  • Instant debit and credit when payment is made.
  • Final settlement done across participants' accounts at the BoK through BOK-Wire+, with funds available to recipients next day.
  • 17 domestic participants and 13 special participants



(Housing Finance Information Network)


Electronic banking/firm banking system

  • Operated by KFTC.
  • Maximum threshold of KRW 1 billion per transaction.
  • Processes KRW payments made through firm banking (mobile, internet and phone banking).
  • Payments settled usually within two-to-three business days.
  • 24 participants, 18 of which are domestic direct participants, two are foreign banks and four are specialist institutions.
  • Final settlement done across participants'accounts at the BoK through BOKWire+, with funds available to recipients within three working days.


(Interbank Cash Dispenser/ATM) system



  • Operated by KFTC.
  • Processes payments made through cash dispensers (CDs)/ATMs.
  • There is a maximum threshold of KRW 6 million.
  • Participants include all Korean domestic banks (except the Export-Import Bank of Korea), Post Office, cooperative members of the National Agricultural Cooperative Foundation and the National Federation of Fisheries Cooperatives, Korean Federation of Community Credit Cooperatives, National Union Federation of Korea, Korea Federation of Savings Banks and domestic branches of HSBC, in addition to eight special participants.
  • Final settlement done across participants' accounts at the BoK through BOK-Wire+ next day.
  • Maximum threshold of KRW 10 million per fund transfer.


(Electronic Funds Transfer at the Point of Sale)



  • Operated by KFTC.
  • Minimum threshold of KRW 1000 per transaction.
  • 17 direct participants
  • Processes all transactions made at POS terminals.



(Cash Management Service)


  • Operated by KFTC.
  • Consolidates funds from payee's accounts into one selected account.
  • Has 15 domestic bank participants, as well as 11 asset management companies. 
  • Processes all credit and debit transfers (no threshold).
  • Consolidates funds from payee's accounts into one account held in customer's main bank.
  • Final settlement done across participants' accounts at the BoK through BOK-Wire+.



Local Bank Information Network

  • Operated by KFTC.
  • Allows local banks without a nationwide network to carry out transactions with other participating local banks.
  • No value threshold
  • Has six local bank participants


Online credit-transfer system

  • Operated by KFTC.
  • Enables transactions by credit transfer between customers and institutions, activated online or by smartphone.
  • Used by government websites and many retailers.
  • Has 21 participants



E-money card system

  • Operated by KFTC.
  • Processes interbank credit and debit transfers.
  • For registered cards, maximum rechargeable value of KRW 500,000 and for unregistered cards, maximum of KRW 50,000.

B2C system

Business-to-customer system

  • Operated by KFTC.
  • Uses e-commerce supported by KFTC.
  • Processes customer-to-seller transactions and enquiries in real time.
  • Has 15 participants

B2B system

Business-to-business system

  • Operated by KFTC.
  • Uses e-commerce supported by KFTC.
  • Payment system for the online registered bill (ORB), the most common payment facility for B2B, using a cheque as a bill with credit.
  • Has 15 participants
  • Issues and processes ORBs and interbank fund transfers, based on contract information between businesses.


(Asian Payment Network)

Asia-wide retail payment settlement system
  • Operated in South Korea by KFTC.
  • Member countries are: Australia, China, Japan, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam.
  • Allows ATM withdrawals at participant banks of all APN member countries via linked ATM network.


Payment Instruments


Credit Transfers

  • The most popular form of cashless payment, in terms of value.
  • Credit transfers may be paper-based or automated, although automated is by far the most common.
  • High-value and urgent interbank transfers settled through BOK-Wire+ same day.
  • Low-value, non-urgent and bulk transfers processed through any of the nine retail payment systems operated through the KFTC next day.


Direct Debits (auto debits)

  • Another popular form of payment.
  • There are two types of direct debit systems: bank giro system direct debit for low-value transactions and CMS debit transfer for high-value commercial transactions.
  • Processed through the Bank Giro System, with final settlement done using BOK-Wire+.


Card Payments

  • By volume, credit cards are the most popular form of cashless payment in South Korea, with 110.98 million in circulation from 35 domestic card-issuing companies as well as Visa and Mastercard, all EMV-compliant.
  • With most consumers using debit and credit cards for daily expenses such as dining and transportation, South Korea’s rate of cash payments now ranks as one of the lowest in the world.
  • Credit card transaction value increased year-on-year by 6.6% in 2019 to KRW806.19 trillion, while debit card transactions decreased by 42%.
  • In 2019, electronic-based payments made up 90% of total private spending, of which 71.7% were made with credit cards.
  • Shinhan card is one of the largest credit card companies in Korea. There are 21.5 million Shinhan debit or credit cards in circulation.
  • The LG Pay White Card can be used as a credit card as well as for ATM withdrawals and for payments in shops.
  • There is no credit card interbank-settlement system, therefore, each bank determines what settlement system it uses. Visa and Mastercard use their own international bank schemes.
  • E-money cards are a minor player in the cashless payment industry in part due to the ubiquity of credit cards. There are many stored-value e-money cards available, which are reloadable online, by credit card, bank transfer or at selected outlets.
  • The brands Cashbee and T-money currently dominate the pre-payment market and are used throughout South Korea for small payments such as at shops and on transportation networks.


Online Payments

  • The Financial Services Commission has adopted a ‘sandbox’ approach to financial technology (fintech) companies, giving a two-year exemption from regulations if technology is shown to be ‘innovative’. Other fintech regulations are due to be introduced.  
  • The government has set a target to phase out the use of coins by 2020, which, after an initially slow uptake, has now been expanded to give customers the option to receive change from cash purchases directly in their bank accounts at certain convenience store chains.
  • Korea is one of the biggest e-commerce markets in Asia, with an annual e-commerce growth rate of 16% and revenue of KRW71 trillion in 2019. This is due largely to high internet and smartphone penetration – by some estimates the highest in the world – and a developed electronic payment infrastructure.
  • Mobile transactions are the dominant driver of e-commerce, with 60.8% of transactions being mobile commerce in 2019. Two in three Koreans have used mobile apps to shop for goods and services (McKinsey), and the recent development of simplified payment systems has only increased usage in the sector. Popular digital wallets are Samsung Pay, Naver Pay and Kakao Pay. Local retailers have also launched their own mobile apps.
  • Similarly, mobile banking is very common, with 47% of banking customers conducting banking transactions using a mobile banking app one or more times a week (2017; RFi Group).
  • As of Q3 2018, there were 17.3 million payment cards in circulation with e-money function.
  • With the highest digital-banking penetration in Asia-Pacific region, South Korea welcomed two online-only banks to its banking sector in 2017 - the first new arrivals in banking in over two decades. 
  • The response to internet specialists K-bank and Kakaobank has been significant, with hundreds of thousands of new accounts opened within the first few days of launching.


Digital Currencies

  • There has been a very active market in cryptocurrencies in Korea. However, in the wake of several high-profile heists on Korean exchanges, the government continues to tighten rules and formulate regulations for greater oversight of cryptocurrency activity.
  • Cryptocurrencies are not legal tender.


Cash, Cheques and Money Orders

  • The use of cash and cheques is in significant decline, overtaken by alternative electronic forms of payment. Cash transactions currently account for no more than 20% of all transactions. Cheques saw a year-on-year decrease in volume and value of 23.8% and 13.9% respectively in 2018.
  • Cheques are truncated and cleared through the KFTC Cheque Clearing system, with final settlement done next day through BOK-Wire+. There are two types of cheque: cashier's cheque and current account cheque (corporate cheque).
  • Cashier's cheques (similar to bearer-form bank drafts) do not require a preset value to be issued and can be issued by ATMs. May be used as an alternative for cash transactions.
  • Current account cheques are used for high-value commercial transactions.
  • Domestic and international money orders can be purchased in South Korea through well-known vendors Western Union and MoneyGram.

South Korea Market Profile Infographic


1 (Progressive) max rate on taxable income over KRW300 billion

2 (Progressive) max rate for incomes over KRW500 million



This Market Profile is brought to you by DBS. Get in touch with us for further insights on doing treasury in South Korea and take advantage of our innovative solutions to empower your business. Click here to find out more.


Sources: IMF, World Bank, World Economic Forum, PwC, US Department of Commerce, Korean Federation of Banks, The Korean Herald, Financial Times, Bank for International Settlements, Bank of Korea, Financial Supervisory Services, McKinsey, Asian Development Bank, OECD, Financial Statistics Information Service, The Association for Financial Professionals

The information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only. The information is assembled based on information available and accurate as at Oct 2019.

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