Samsung Electronics, a cornerstone of South Korea’s economy and historically the country’s top corporate taxpayer, has found itself in a rare financial position this year—paying no corporate tax. The unexpected turn stems from substantial operational losses recorded last year, casting a shadow over the nation’s tax revenue forecasts.
In 2023, Samsung Electronics reported an unusual financial setback, recording an 11.5 trillion won operating loss on its separate financial statements. While the company’s consolidated operating profit, which includes international subsidiaries, reached about 6.6 trillion won, the steep domestic losses left it with no corporate tax obligations this March. Since corporate tax in South Korea applies only to profitable entities, Samsung’s substantial losses meant it wasn’t required to make a payment.
This is the first instance since 1972 that Samsung Electronics has skipped its corporate tax payment. A source familiar with Samsung’s financial history highlighted, “Samsung Electronics recorded losses from its founding in 1969 until 1971, but then consistently posted profits until two years ago.” This year, however, breaks a 52-year streak of tax contributions.
Despite the lack of tax obligations this year, Samsung may benefit from corporate tax deductions in the future. Companies in South Korea can apply previous losses against future profits, effectively lowering their tax burden when they regain profitability. According to Samsung’s financial reports, last year’s corporate tax expense is estimated at around -7.9 trillion won, reflecting potential offsets in upcoming tax periods. However, a Ministry of Economy and Finance official cautioned, “The 7.9 trillion won is an accounting figure, and the actual offset amount may vary,” signaling some uncertainty in the exact future tax impact.
This development also contributes to a broader national revenue shortfall. Samsung’s absence from this year’s tax contributions and sluggish economic performance across other sectors have impacted South Korea’s projected corporate tax income. The government anticipates collecting 77.7 trillion won in corporate taxes for 2023, a substantial 26% decrease compared to last year’s figures.
Other revenue sources face similar challenges. Income tax revenue, for instance, has dropped by 300 billion won compared to last year, partly due to reduced bonuses from major corporations in light of unfavorable financial results.
Additionally, a government decision to extend the fuel tax cut by two months, originally scheduled to end this April, may further reduce tax revenue. These combined factors present a challenging fiscal year ahead for South Korea’s budget.