If you are an expat living in South Korea, you might have questions regarding the country's taxation system. First of all, note that you will have to pay tax if you are a resident of South Korea for more than a year. Make sure to seek related information with the Korean taxation authorities before travelling to Korea.
There are different types of taxes in South Korea: income tax, corporate tax, and value-added tax.
Good to know:
South Korea has signed a tax treaty with several countries to avoid double taxation. Find more information about the National Tax Service website.
Income tax
Residents of South Korea are taxed on their income, whether the income was earned in the country or abroad. Non-residents, on the other hand, are taxed on the income received in South Korea only. Moreover, income tax is deducted at source, and you must file a tax return at the end of each year.
A special tax regime applies to expatriates in South Korea. Their income is taxed at an overall rate of 20.9% made up of 19% income tax and 1.9% local income tax. Certain foreign nationals in South Korea can choose between the flat rate at 20.9% without any deductions or progressive rates between 6.6% and 44% after deductions.
Regarding Korean residents and citizens, the tax rate varies as follows:
Income Tax rate
0-12000000 KRW 6%
12-46000000 KRW 15%
46-88000000 KRW 24%
88-300000000 KRW 35%
More than 300 million KRW 38%
Good to know:
You could benefit from deductions or credits on taxes. These apply to tuition, insurance, medical expenses, etc..
Corporate tax
Tax on foreign companies is based on the firm's annual income generated by its permanent establishment. Moreover, a company is taxable on the revenue generated by the transfer of its assets or profits.
The tax rate varies as follows:
Income Tax rate
0 to 200,000,000 KRW 10%
200 million - KRW 20 billion 20%
Over 20 billion KRW 22%
Certain companies, such as farming and fishing cooperatives and investment companies, may be exempt from tax. However, you may be required to pay other forms of taxes such as urban planning tax, office tax, and more.
VAT
Value-added tax (VAT) is applied at a standard rate of 10%. However, export products are exempt from tax. There is also a special excise tax on products containing alcohol and tobacco, as well as on energy, transportation and automotive.
Tax-free system
It is also possible to shop tax-free in South Korea. For example, people with a permanent residence outside South Korea, foreign visitors who do not stay in South Korea longer than six months, as well as South Korean nationals living overseas for more than two years and visit South Korea for under three months, are eligible for tax-free shopping. For more information on duty-free and the tax-free system in South Korea, visit this website.
Useful links:
National Service Taxes
Ministry of Strategy and Finance of South Korea
Official Site of Korea Tourism Organisation
We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
