Daily Busan
Understanding the '13th month salary' for foreign employees
February marks the Year-End Tax Settlement that finalizes each employee's income tax liability for the previous year. During this process, taxes already withheld from salaries are compared with the actual amount owed. Any overpayment is refunded, while underpayment requires an additional contribution. Most salaried workers receive a refund, which is commonly referred to as the "13th month salary."
Foreign employees are fully covered by this system. Those who have a registered address in Korea or who have lived in the country for at least 183 days are generally classified as tax residents and follow the same settlement procedures and deadlines as Korean nationals. Employers usually gather the necessary documentation in January.
Settlement results are typically reflected in February paychecks or shortly thereafter. Careful review of settlement statements is essential, as some deductions or tax credits may be omitted or incorrectly applied. If issues are identified, foreign workers may file a Global Income Tax Return in May or submit a Claim for Rectification starting in June.
Foreign nationals should also be aware of the tax benefits available specifically to them. From this year, eligible foreign residents can claim an income deduction for housing savings. To qualify, the individual must earn no more than 70 million won annually, belong to a household that does not own a home and hold a designated housing savings account. The deduction allows up to 40 percent of 2025 deposits to be deducted, with a maximum deduction of 3 million won.
Additional incentives exist for certain professionals, such as engineers and technical specialists, who meet eligibility requirements. Foreign employees may also opt for a simplified 19 percent flat tax rate, though this excludes most deductions, while teachers and professors may qualify for treaty-based tax exemptions.
This article is by no means a complete accounting of deductions and benefits available to foreign taxpayers. For more information, visit the National Tax Service website, which provides tax settlement information in English, Chinese and Vietnamese. The NTS also offers personalized assistance via its taxpayer helpline (82-1588-0560) or email service. (www.nts.go.kr)
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