An Introduction to Korean Income Taxes

Category : Visa/Legal Issues/Tax
Nov 26, 2014

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There is nothing that makes my eyes droop faster than the words, “It’s tax season!” The phrase is barely spoken before I am tuned out. Although this article might not be the most captivating it’s useful (a.k.a. boring). On the plus side, it’s nice to be informed about where your hard-earned won is going and once you’re done learning you’re bound to get a great night’s sleep!

 

Korean tax law and procedure, set out by the National Tax Service (NTS), is complicated. The process of paying taxes and receiving tax deductions is long and requires diligence. In most cases, it won’t be necessary to calculate your own taxes. However, you may find that it will be beneficial to you, especially if you are living in Korea in the long term, to file your own taxes and apply the appropriate deductibles. The article is a brief introduction to the taxation system in Korea. Let it serve to inform you first, and then contact the official authorities and professionals to help you file your taxes correctly. Contact information and useful tax related resources are listed at the bottom.

 

 

 

Tax Payers

If you’ve got a working visa and a residence in Korea you’re a tax payer. With that said, Korea has tax exemption treaties with many countries. Namely Australia, Germany, Ireland, New Zealand, South Africa, the UK, and the US and all signed tax exemption treaties with Korea. However tax exemptions only apply to engineers, students, professors and teachers during their first two years in Korea and different rules apply to different nationalities. Check with the Korean embassy in your country for exact qualifications. After the two years, you will be required to pay taxes like everyone else.

 

 

 

Paying Taxes

 

 

 

Process of Deduction

In Korea, your employer is responsible for deducting your taxes from your monthly salary. Your employer will then send the money to the government. You can request a receipt from your workplace to ensure the money is going when it should be.

 

Instead of paying one lump sum at tax season, you’ll pay a smaller percentage of the total owed in monthly payments over the course of the year. The percentage paid monthly differs depending on your income and deductible qualifications. The great part about this system is that you won’t even notice the difference in spending power since your total take home pay already has the money deducted.

 

 

 

Tax Rates for 2012

 

This chart shows the total yearly percentage charged depending on your income bracket.

 

Income Bracket (KRW per year)

 

Tax Rate

Up to 12,000,000 KRW

6%

12 million KRW - 46 million KRW

720,000KRW + 15% of the excess of 12 million KRW

46 million KRW - 88 million KRW

5.82 million KRW +24% of the excess of 46 million KRW

Over 88 million KRW

15.9 million KRW + 33% of the excess of 88 million KRW

 

 

 

Options for Foreigners

Foreigners have the option to choose a flat rate taxation rate or go with the progressive tax rate as listed above. Currently the flat tax rate is 15%. However, starting in 2013 the flat tax rate will increase to 17%. Including residency tax, the rate is 18.7%. You need to let your employer know which option you choose when you start work. He/she will apply the proper rate you choose.

 

 

Global Income vs. Separate Taxation

If you live in Korea for more than five years within a period of ten years, your global income will be taxed. Your global income is all your total earnings in Korea and out of Korea. For those here in the short-term, you’re taxed separately from your other earnings and only the money earned within Korea is counted.

 

 

 

Tax Season

Tax season is in March or May. For all employees taxes are due on 10 March, filed by your employer. For all companies and freelancers taxes are to be paid by 10 May. As well, if you file your own taxes you have until 10 May to submit your form. Taxes should be calculated in January and February. If you want to do your own taxes, January is the time to start adding your sums and if you need help (most likely) contact a tax specialist at this time.

 

 

Filing your Own Taxes / The Year-End Tax Settlement

If you’re worried about how much money your employer is deducting from your salary or if you just want as much cash back as possible, you can file your own taxes. This is called the year-end tax settlement. It’s also necessary to file your own taxes if you have additional income, aside from your regular salary. Have a look at the deductibles and the list of non-taxable income to see if it’s worth it for you. Please download The Year-End Tax Settlement Guide for Foreigners a list of the deductibles, the filing procedure and more specific information. All the forms required for filing taxes can be found on the NTS website here.

 

 Note: Keep in mind that if you want to file taxes and claim deductibles you are not able to apply the flat tax rate for foreigners. You need to abide by the same tax rates as Korean nationals.

 

 

Services and Contact Information Provided by the National Tax Service (NTS)

 

 

 

  •   Foreign Taxpayer Advocate Service

The NTS operates a Foreign Tax Advocate Service

. Contact them for help doing your taxes or if you have questions. The process requires that you fill out a form online and then a couselor will contact you.

 

 

  •   Helpline for Foreigners: 1588-0560 (English)

If you have quick questions about Korean tax law, give the hotline a buzz. It’s also useful if you get stuck on a specific part while filing. If you need a wide range of advice, it’s better to use the Foreign Tax Advocate Service.

 

 

 

  •   1-on-1 Email Service

If you’ve got a question, send the NTS an email. This service is for quick, easy questions only. Use the advocate service for thorough help.

 

 

  •   FAQ Page

The FAQ page of the NTS website is helpful for general information. You can start your tax research here and then use other resources when things get more specific.

 

 

 

  • The Income Tax Calculator

Check out the income tax calculator to figure out how much you will pay in taxes. Keep in mind that the sums may differ depending on deduction, your income and the way your employer files. The tool is great to use as an approximate guide but don’t rely strictly on it.

 

 

  •   Overseas Tax Evasion Report Center

This center deals with tax evasion. You can file a report and remain anonymous. To report tax evasion and fraud, file a report on the NTS webpage for overseas tax evasion.

 

 

  •   Forms Download Page

All the forms you need to file taxes are on this page of the NTS website. Download and print the forms before you get started.

 

 

  •   Korean Tax Office (International Taxation Division): 02-1588-0560 / 02-2076-5711

This number is for you if you have questions about foreign income and foreign business taxation.

 

 

 

Regional NTS Head Quarters in Korea

The regional headquarters have English speakers. You can visit in person to get answers directly if you’re having problems with the other services.

 

 

 

  • Seoul: Seoul Regional Tax Office

Address: Susong-dong 104 Jongno-gu Seoul(110-788)

Phone: 02-397-2200

Google maps: https://maps.google.co.kr/maps?q=Susong-dong+104+Jongno-gu+Seoul&hl=en&ll=37.573852,126.976569&spn=0.009813,0.021136&sll=37.575399,126.999893&sspn=0.039251,0.084543&hnear=104+Susong-dong,+Jongno-gu,+Seoul+(86+Jong-ro+5-gil)&t=m&z=16

 

  • Gyeonggi-do: Jungbu Regional Tax Office

Address: Ingye-dong 1124 Paldal-gu, Suwon-si Gyeonggi-do(442-775)

Phone: 031-229-4200

Google maps: https://maps.google.co.kr/maps?q=Ingye-dong+1124+Paldal-gu,+Suwon-si+Gyeonggi-do&hl=en&ll=37.267496,127.053022&spn=0.039412,0.084543&sll=37.573852,126.976569&sspn=0.009813,0.021136&hnear=1124+Ingye-dong,+Paldal-gu,+Suwon,+Gyeonggi-do+(178+Gwongwang-ro)&t=m&z=14

 

  • Daegu: Daegu Regional Tax Office

Address: Chimsan 3-dong 402-1 Buk-gu Daegu(702-053)

Phone: 053-350-1200

Google maps: https://maps.google.co.kr/maps?q=Chimsan+3-dong+402-1+Buk-gu+Daegu&hl=en&ll=35.88759,128.581967&spn=0.020062,0.042272&sll=37.267496,127.053022&sspn=0.039412,0.084543&hnear=402-1+Chimsan+3(sam)-dong,+Buk-gu,+Daegu+(118+Won-daero)&t=m&z=15

 

  • Busan: Busan Regional Tax Office

Address: Yeonsan 9-dong 243-13 Yeonje-gu Busan(611-738)

Phone: 051-750-7200

Google maps: https://maps.google.co.kr/maps?q=Yeonsan+9-dong+243-13+Yeonje-gu+Busan&hl=en&ll=35.186313,129.103196&spn=0.010119,0.021136&sll=35.88759,128.581967&sspn=0.020062,0.042272&hnear=243-13+Yeonsan+9(gu)-dong,+Yeonje-gu,+Busan+(20+Togok-ro)&t=m&z=16

 

  • Gwangju: Gwangju Regional Tax Office

Address: Ssangchon-dong 627-7 Seo-gu Gwangju(502-706)

Phone: 062-370-5200

Google maps: https://maps.google.co.kr/maps?q=Ssangchon-dong+627-7+Seo-gu+Gwangju&hl=en&ll=35.152793,126.85662&spn=0.010123,0.021136&sll=35.186313,129.103196&sspn=0.010119,0.021136&hnear=627-7+Ssangchon-dong,+Seo-gu,+Kwangju+(31+Sangmuminju-ro+6beon-gil)&t=m&z=16

 

  • Daejeon: Daejeon Regional Tax Office

Address: Beop dong 282-1 Daedeok-gu Daejeon(306-704)

Phone: 042-620-3200

Google maps: https://maps.google.co.kr/maps?q=Beop+dong+282-1+Daedeok-gu+Daejeon&hl=en&ll=36.371868,127.428832&spn=0.009969,0.021136&sll=35.152793,126.85662&sspn=0.010123,0.021136&hnear=282-1+Beop-dong,+Daedeok-gu,+Daejeon+(677+Gyejok-ro)&t=m&z=16

Tags : Korea. Work. Income. Taxes.

Lindsey lived and worked in Seoul, South Korea for over 5 years. While there, she dabbled in different areas of work and explored the culture. She spent time teaching elementary students, business English to adults and high school students about college preparation. She also studied Korean, wrote blogs and tasted as many foods as she possibly could including fermented skate fish. Over the years, Lindsey developed a love for Korea and the culture. She is keen to share her knowledge of Korea with others and she will always consider Korea a second home.

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