Corporations that have lost more than one-fifth of their business assets due to wildfires can receive partial tax relief through disaster loss tax credits. On March 31, the National Tax Service advised corporations in the recently wildfire-affected regions of Ulsan, Gyeongbuk, and Gyeongnam on the applicability of disaster loss tax credits.
Tax credits apply in cases where more than 20% of business assets are lost due to natural disasters or fires. The credit is calculated based on the “disaster loss ratio,” which is determined by dividing the value of the lost assets by the total asset value (excluding land). Corporate tax can be credited proportionally to this ratio and cannot exceed the actual value of the lost assets.
The applicable assets are evaluated based on the book value as of the disaster occurrence date. If books are lost, the amount determined by the competent tax office chief will be used instead. Land is excluded from asset value calculations, but assets owned by others for which the company has compensation responsibility are included. Even if the lost assets are insured and compensation is received, insurance proceeds are not deducted from asset values in the tax credit calculation.
The tax amount eligible for credit includes unpaid or assessed corporate tax at the time of the disaster and corporate tax for the fiscal year during which the disaster occurred. The credit amount is calculated by multiplying the disaster loss ratio, and it is recognized only up to the actual asset loss amount. Penalties related to poor book-keeping, non-filing, underreporting, or payment delays are also credit-eligible.
Applications must be made within three months from the disaster occurrence date via mail or the National Tax Service’s Homtax online platform at the relevant tax office. If the tax filing deadline has not passed, submissions can be made until that deadline. If the period from the disaster date to the filing deadline is less than three months, applications must still be submitted within three months.
For example, an agricultural corporation ☆☆ that lost part of its factory in a March 22, 2025 wildfire found its asset loss ratio to be 60%. This corporation had 200 million won in unpaid and 300 million won in delinquent corporate taxes, and the corporate tax for the disaster year was 100 million won. The National Tax Service presented this as a case where the corporation could receive up to 330 million won in tax credits.
The National Tax Service explained that if the affected companies apply within the deadline according to tax law requirements, they can reduce their corporate tax burden.