Foreign workers who earned income in Korea last year must file their year-end tax settlement regardless of nationality, length of stay or country of residence.
The National Tax Service (NTS) on Jan. 26 said all workers who earned income last year in the country must complete their year-end tax settlements before receiving their income next month.
The year-end tax settlement has the withholding agent (employer) calculating the amount of income tax to pay for an employee’s earned income during the taxable period. The income tax for a year’s salary is finalized after the employee submits to the employer an income tax deduction report and evidential documents.
The employee receives a tax refund if the tax paid earlier exceeds the final income tax but must pay the difference if the latter figure exceeds the former.
The methods and schedule of a foreign worker’s year-end tax settlement are quite similar to those of Korean workers. Certain regulations, however, apply only to foreign nationals such as the flat 19% tax rate or income tax breaks for foreign engineers.
Foreign workers can choose between a general tax or the 19% flat rate for five years from the day they start work in Korea. This does not apply to those working at private businesses run by their families or in companies where they hold 30% or more of the stake.
Foreign engineers can qualify for income tax breaks if they supply technology under an engineering technology adoption contract or if they work at a domestically affiliated think tank after attaining a bachelor’s degree or higher in science and engineering.
Native speaking teachers from countries with tax redemption provisions with Korea for teachers and professors are exempt from income tax for teaching or research for a designated period. The conclusion of tax treaties differs by country, so foreign workers need to check carefully according to nationality.
Foreign workers who lived in Korea for 183 days or more are subject to the same categories and schedule for general year-end tax settlement as Korean workers. They are ineligible, however, for deductions for long-term savings for housing as they do not meet the qualifications for head of a household under the Resident Registration Act.
Non-residents, who stayed for under 183 days, are eligible for only certain deductions such as a basic deduction and those for pension and insurance premiums. They are ineligible for most income and tax deductions including those for medical and educational expenses.
Foreign workers who do not speak Korean can call the NTS’ English-language call center (1588-0560) or visit its English-language website (www.nts.go.kr/english/main.do), which offers guides and an automatic computing program for year-end tax settlement.
The NTS also offers short instructional videos on the topic on its YouTube channel (www.youtube.com/@ntskorea/featured), with subtitles in English, Chinese and Vietnamese.