A Quick Introduction to Taxes
Regardless of if you are dealing with them from your home country or overseas, taxes can be confusing. Understanding how taxes work in Korea can help you avoid legal issues and optimize your financial situation. This brief introduction provides an overview of the key tax obligations for foreigners living and working in Korea.
Residency Status and Taxation
Korea distinguishes between resident and non-resident foreigners for tax purposes:
- Resident Foreigners: If you have lived in Korea for more than 183 days in a tax year, you are considered a resident. This means you must pay taxes on your worldwide income.
- Non-Resident Foreigners: If you stay in Korea for less than 183 days in a tax year, you are classified as a non-resident and only pay taxes on income earned within Korea.
Income Tax for Foreign Workers
Foreign employees in Korea typically pay earned income tax, which is deducted from their salary through withholding tax by their employer. The tax rates are progressive, ranging from 6% to 45%, depending on income levels. The 2024 tax brackets are as follows:
| Taxable Income (KRW) | Tax Rate |
|---|---|
| 0 - 14 million | 6% |
| 14 - 50 million | 15% |
| 50 - 88 million | 24% |
| 88 - 150 million | 35% |
| 150 - 300 million | 38% |
| 300 - 500 million | 40% |
| 500 million+ | 45% |
Additionally, a flat tax rate option of 19% is available for eligible foreign workers instead of the progressive system, depending on their visa type.
National Taxes and Deductions
Social Security Contributions
Foreign employees must contribute to Korea’s social security system, which includes:
- National Pension (4.5%) – Some countries have agreements with Korea, allowing foreigners to get a refund upon departure.
- National Health Insurance (NHIS) (6.99%) – Required for all workers, including expatriates.
- Employment Insurance (0.90%) – Employers contribute a larger portion.
Tax Deductions & Credits
Foreigners can benefit from certain tax deductions, including:
- Standard deductions for dependents, insurance, and pension contributions.
- Tax credits for education, medical expenses, and charitable donations.
Filing Taxes in Korea
Annual Tax Filing
Most salaried employees do not need to file a tax return because their employer withholds taxes. However, if you have multiple income sources or want deductions, you should file a year-end tax settlement or an income tax return by May 31st of the following year.
How to File Taxes
- Use Hometax (hometax.go.kr), the National Tax Service (NTS) online platform.
- Visit a local tax office or hire a tax consultant for complex cases.
Tax Treaties and Avoiding Double Taxation
Korea has tax treaties with over 90 countries to prevent double taxation. If your home country has an agreement with Korea, you may be eligible for exemptions or credits. To claim treaty benefits, submit the necessary forms to your employer or tax office.
Final Thoughts
Navigating taxes as a foreigner in Korea may seem overwhelming, but understanding the basics can help you stay compliant and optimize your finances. If you have complex tax situations, consulting a tax expert can provide valuable insights.