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Q&A / FAQ
FAQ
  • Employee
  • Individual
  • Others

1. What is the concept of Wage and Salary income?

An employee's wage and salary income subject to Korean income taxation is the amount received as payment for labor performed in Korea. It has two types, Class A income and Class B income.

Class A :

ⅰ) Wage, salary, remuneration, allowance, bonus, and any other allowance of a similar nature received in return for services

ⅱ) Income received as a bonus by a resolution of the stockholders or partners’ general meeting of a corporation, or a similar deliberative organ

ⅲ) Amount treated as bonus under the Corporation Tax Law

ⅳ) Income, other than retirement income, received due to retirement

Class B :

ⅰ) Wages and salaries received from a foreign agency or from the U.N. Forces in Korea (excluding the U.S. Armed Forces)

ⅱ) Wages and salaries received from a foreigner or foreign corporation outside Korea, excluding those claimed as a deductible expense for a Korean place of business of a non-resident or a foreign corporation

ⅲ) Income incurred from exercise of stock options granted by foreign associated company

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2.When is my income tax liability for the year settled and finalized?

Your income tax liability for the year is settled and finalized in January next year through year-end exact computation by your employer. Then, the total of monthly deduction(the amount withheld) taken off your earnings is treated as a credit against the overall amount of tax payable by you for the tax year in question.
Your employer must calculate the tax amount for the year at the time of first payment of wage and salary income the next year, and collect or refund the balance between the tax amount payable calculated by applying the tax rates and the tax amount withheld according to the Simplified Tax Withholding Table.

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3.Would you please briefly explain year-end tax settlement for Class A?

Basic income tax rate is from 8 to 35% but monthly withholding tax amount is calculated by the "Simplified Tax Withholding Table" presented on Tax Publications of our website. Withholding agent(employer) should withhold and pay monthly income tax to the district tax office and file year-end tax settlement which will finalize your tax liability in Korea by the end of January or the month you retire. Once that is done, withholding agent should issue to you the Receipt for Withholding Taxes that show your income and taxes paid.

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4.How taxable income is calculated for a wage and salary income earner?

The taxable income is the total amount of wage and salary income remaining after the deduction of the following amount (\80,000 per day for a daily worker).

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Wages and Salary income Deductions
Less than \5,000,000
Total amount
\5,000,000 ~ \15,000,000
\5,000,000 + 50% of the amount over \5,000,000
\15,000,000 ~ \30,000,000
\10,000,000 + 15% of the amount over \15,000,000
\30,000,000 ~ \45,000,000
\12,250,000 + 10% of the amount over \30,000,000
Over \45,000,000
\13,750,000 + 5% of the amount over \45,000,000

5.What dependents can I claim as personal deduction?

You are entitled to claim annual deduction for an amount calculated by multiplying the number of family members falling under any of the following sub-paragraphs by \1,000,000 per capita.

ⅰ) Yourself

ⅱ) Your spouse

ⅲ) dependents living in the same household with you. A dependent means a lineal family member or a brother/sister who is under 20 years or over 60 years (55 years for woman) supported by you

However, you cannot take a deduction for your spouse and dependents if these persons had gross income of \1,000,000 or more for tax year

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6.What is the tax credit for my wage and salary income?

The following amount shall be credited against your income tax on wage and salary income. Where the amount of credit exceeds \500,000, the credit is limited to \500,000.

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Tax Amount Amount of Tax Credit
Up to \500,000
55% of total tax
More than \500,000
\275,000 + 30% of amount over \500,000

7. Are there additional tax credits for Class B wage and salary income?

In the case of Class A income, it is subject to withholding tax by the employer. However, as the employer paying Class B income does not reside in Korea, the employee him/herself is responsible for his/her personal income tax. A Class B income earner may either join a Taxpayer Association to pay monthly taxes, thereby enjoying 10% tax credit, or may wait and file an annual tax return by the end of May of the following year with no benefit of credit. If an employee has only Class B income, and has paid his/her taxes through a Taxpayer Association, or if he/she has both Class A income and Class B income on which income tax is withheld monthly through Taxpayers Association, he/she is not required to file an annual tax return.

However, if a Class B income earner choose separate taxation with 17% flat rate under Article 18-2 ② under the Restriction of Special Taxation Act, this tax credit will be applied.

For the Class B Taxpayer Association, please refer to the list of the Class B Taxpayer Association presented on Additional Tax Info of our website.

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8.What is the concept and functions of Taxpayer Associations for Class B?

Class B wage and salary income earners may organize taxpayer associations through which they may pay taxes. A taxpayer association shall collect income tax from the members each month. Income tax for each month collected by a taxpayer association will be paid to the government by the 10th day of the following month.
▶ Tax credit for payment of tax by taxpayer association : 10%
▶ Penalty tax for non-payment of tax by taxpayer association : 5%

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9. Is there a way we can get a refund for last year's income tax on my paycheck?

The tax amount taken off your wage is treated as a credit against the overall amount of tax payable by you for the tax year in question. In January of the following year or at the time of the last payment of income in the year, your tax liability is settled and finalized through exact calculation by applying the related tax rates.

Then, the balance between the sum of the amount of tax withheld monthly and final tax due to be paid is collected or refunded to you, which means you have to check your tax settlement with your employer, not NTS.

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10.When do I receive my tax receipt for wages and is it possible to get a monthly tax receipt?

The withholding agent, normally who pays wages to you (with the exception of tax association), shall deliver the withholding receipt specifying the employment income and other necessary matters, not later than the end of February in the year following the year concerned.
However, your employer is not obligated to issue a monthly tax receipt.

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11.Please give me information on overseas allowance for expatriates?

In general, overseas allowances that are paid to resident and non-resident expatriate employees in Korea are subject to Korean income tax. This includes cost-of-living differentials, housing costs, home leave, and education allowances.
However, you may be applied to the special taxation treatment to compensate for foreign employees who may incur additional expenses for working abroad. From 2004, foreign employees may choose either (ⅰ) or (ⅱ) when he files year-end tax settlement.

ⅰ) Separate taxation of wage and salary income applying 17% flat rate

- In this case, exemption, deduction and reduction will not be allowed and foreign employees must submit application form to be applied 17% flat rate

ⅱ) Exemption of 30% of wage and salary income on income tax

- Monthly withholding after subtracting the above amount

- Exemption, deduction and reduction will be allowed at the year-end tax settlement after subtracting above amount

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12. What are penalty taxes to my employer on failures to withhold and pay tax?

Where tax withholders have failed to withhold tax at the source or have failed to pay the withheld tax to the government within the payment period, the penalty tax applied is the large of

ⅰ) An amount that multiplies 0.03% by the number of unpaid days(limited to 10% of unpaid tax)
ⅱ) An amount equivalent to 5% of unpaid tax

Also, where a corporation has failed to submit a payment statement or where the details of transactions submitted by the company are found to be unclear, an amount equivalent to 2% of the amount of the transactions in the reports not submitted or unclear is assessed as penalty tax.

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