(1) Where a domestic corporation (excluding indirect investment companies, etc. referred to in Article 57-2 (1)) has a foreign subsidiary [referring to a foreign corporation in which the domestic corporation has invested by holding at least 10/100 of the total number of its outstanding voting stocks or the total amount of investment (5/100 in the case of a foreign corporation conducting an overseas resources development project under Article 22 of the Act on Restriction on Special Cases concerning Taxation), and which meets the requirements prescribed by Presidential Decree; hereafter in this Article and Article 41 the same shall apply], an amount equivalent to 95/100 of the dividend or distribution of surplus received from such foreign subsidiary or an amount deemed to be dividend or distribution pursuant to Article 16 (hereafter in this Article referred to as "dividend income") shall not be included in gross income for the purpose of calculating the amount of income for each business year.
(2) Where a domestic corporation receives dividend income from a foreign corporation (excluding foreign subsidiaries) in which the relevant domestic corporation has invested after reducing its capital reserve, which is of a nature equivalent to the dividend not included in gross income under subparagraph 8 of Article 18, the amount equivalent to 95/100 of such amount shall not be included in gross income for the purpose of calculating the amount of income for each business year.
(3) Paragraph (1) shall not apply to the amount deemed to have been distributed to a domestic corporation with respect to retained earnings of a specific foreign corporation under Articles 27 (1) and 29 (1) and (2) of the Adjustment of International Taxes Act and to the amount of dividend income when such retained earnings are actually distributed.
(4) Notwithstanding paragraph (1), the amount falling under any of the following shall be included in gross income for the purpose of calculating the amount of income for each business year:
1. Dividend income received from a specific foreign corporation that meets all the requirements prescribed in the subparagraphs of Article 27 (1) of the Adjustment of International Taxes Act, as dividend income prescribed by Presidential Decree;
2. Dividend income paid to a domestic corporation following the transaction of hybrid financial instruments (referring to financial instruments that have the characteristics of both equity and liabilities, as prescribed by Presidential Decree);
3. Dividend income, similar to those provided for in subparagraphs 1 and 2, prescribed by Presidential Decree.
(5) A domestic corporation that intends to be governed by paragraph (1) shall submit a detailed statement of dividend income received from its foreign subsidiary to the head of the tax office having jurisdiction over the place of tax payment.
(6) In applying paragraphs (1) through (5), matters necessary for the method for calculating the ratio of investment made by a domestic corporation in a foreign subsidiary, the method for calculating the amount excluded from gross income, the submission of a detailed statement of dividend income from a foreign subsidiary, etc. shall be prescribed by Presidential Decree.[This Article Added on Dec. 31, 2022]