Life
Don't forget to settle your taxes!
February means tax season is here. Foreign employees, regardless of nationality, duration of stay, or the amount earned, who collected wage and salary income in Korea in 2023 must complete the year-end tax settlement before their February payday. If no payday is set, then the deadline is Feb. 29. Day laborers are exempt.
The year-end tax settlement process finalizes the income tax amount the withholding agent (employer) should pay on an employee's wage and salary income for the relevant taxable period. All workers must submit income and tax deduction reports and supporting documents to the company responsible for tax withholding.
When the finalized amount of tax payable is determined, the withholding agent (employer) compares the amount to the sum of taxes withheld every month. Subsequently, if the total withheld amount is more than the tax payable, the surplus amount is refunded to the employee (added to the salary); in cases where the amount is short, the employee will need to pay additional income tax (deducted from the salary).
Foreign employees have two options for settling their taxes: Through the basic tax rate and itemized deductions or via a flat tax rate. The amount of tax payable may differ, so it is reasonable to calculate the expected tax payable under each option and choose the more advantageous method.
First, foreign residents, classified as individuals who have maintained residence in Korea for at least 183 days, may apply for general deductions for which they are eligible. For example, they may claim deductions on dependents, insurance premiums, and investments, among others.
On the other hand, residents and non-residents can alternatively apply a flat tax rate of 19% if their company allows it. If the flat tax rate is used, regulations on non-taxable, tax exemptions or credits, and income deductions do not apply. In addition, any health or employment insurances borne by the employer are included in the tax base.
Furthermore, special tax reductions and exemptions may be applied to foreign engineers and foreign instructors. Be sure to check with the National Tax Service regarding your situation.
The NTS provides easy-to-follow manuals and videos in multiple languages to guide foreign employees through the tax process. Call 1588-0560, visit the official NTS website (nts.go.kr/english/main.do), or use the QR codes here for more information on year-end tax settlement.
YouTube(English): click to watch
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year-end tax settlement: 연말정산
relevant: 관련있는
deduction: 공제
withheld: 보류됨
Subsequently: 이후에
surplus: 초과된, 잉여의
eligible: 적격한