Korean Taxes Explained – Complete Guide for Foreign Workers in Korea (2025)

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Understanding Korean Taxes for Foreign Workers in Korea

※ This article is based on official information as of July 20, 2025.

Summary at a Glance

  • Korean taxes apply to both residents and non-residents, including foreign workers.
  • The two main taxes are Income Tax and Resident Tax, with possible deductions and exemptions.
  • Korea follows a progressive income tax system, which means higher income = higher tax rate.
  • Foreigners may be eligible for special tax benefits under Korea’s tax treaties.
  • Filing taxes is essential to avoid penalties and ensure compliance.
  • We will explain everything — from tax rates to real application steps — in this complete guide.

What Is the Korean Tax System?

The Korean tax system is a dual taxation model consisting of National and Local taxes.
Foreigners working in Korea are subject to both depending on their residency status.

National Taxes

  • Income Tax: Paid on personal income including salary, bonus, and allowances.
  • Corporate Tax: If self-employed or running a business.
  • VAT: If selling goods or services.

Local Taxes

  • Resident (Local Income) Tax: A surcharge based on income tax (typically 10%).
  • Property Tax: If you own property in Korea.

Who Is a Taxpayer in Korea?

Your tax obligation depends on your residency status:

1️⃣ Resident (183-Day Rule)

If you stay in Korea for 183 days or more within a tax year, you are considered a resident and taxed on global income.

2️⃣ Non-Resident

If you stay less than 183 days, you are taxed only on Korea-sourced income.

Case Example:

Maria, a Filipino software engineer, stayed in Korea for 7 months on a work visa. She’s considered a resident and must report her global income, but can apply for double taxation relief.

Understanding Income Tax for Foreign Workers

How Much Tax Will You Pay?

Korea uses a progressive tax system:

Annual Income (KRW)Tax Rate
0 – 14 million6%
14M – 50M15%
50M – 88M24%
88M – 150M35%
150M – 300M38%
300M – 500M40%
500M – 1B42%
Over 1B45%

Example:
John from Canada earns KRW 55 million annually. His marginal tax rate is 24%, but actual payable tax is adjusted after deductions.

What Deductions and Credits Can You Claim?

Korea offers several deductions even for foreign workers:

  • Basic Deduction: For taxpayer and dependents.
  • Insurance Premium Deduction: Including health, employment, and pension insurance.
  • Standard Deduction: Automatically applied if no detailed deduction is filed.
  • Tax Credit for Wage Earners: Applied based on salary range.

Important:

  • Some deductions may require proof or certified documents.
  • Deductions are reviewed by the National Tax Service (NTS).

Special Tax Benefits for Foreign Workers

Flat Taxation Rule (For Certain Foreign Professionals)

  • Eligible for 19% flat tax instead of progressive rates.
  • Applies for up to 5 years.
  • Requires application with your local tax office.

Case Example:

Luis, a Spanish IT consultant, applied for the flat tax rate and saved on his annual tax bill during his first 5 years.

Double Taxation Avoidance Agreements (DTAAs)

Korea has signed tax treaties with over 90 countries to prevent double taxation.
If your country has a DTAA with Korea, you can benefit by:

  • Reducing withholding tax on income.
  • Claiming tax credits in your home country.
  • Applying for tax exemptions on certain types of income.

Check your country’s agreement here:
👉 National Tax Service DTAA List (English)

How Do You File Taxes in Korea?

1️⃣ Year-End Tax Settlement (for Employees)

  • Done by employer, usually in January–February.
  • Submit necessary documents such as insurance, deductions.
  • Final adjustment done through salary.

2️⃣ Self-Declaration (for Freelancers & Business Owners)

3️⃣ Tax Payment

  • Pay online or at designated banks.
  • Installment plans available if eligible.

What Happens If You Don’t Pay Taxes?

  • Penalties: Up to 40% surcharge for non-reporting.
  • Legal Actions: Including salary seizure or account freeze.
  • Visa Impact: Outstanding taxes may affect visa renewals.

Real-Life Case: Alex’s Tax Mistake

Alex from Australia didn’t know his freelance income required a separate tax filing.
He received a penalty notice and had to pay 20% extra.
Lesson: Always check your income type and file accordingly.

How to Avoid Tax Troubles — Step-by-Step

✅ Step 1: Know Your Status

Check if you’re a resident or non-resident.

✅ Step 2: Check Your Tax Withholding

Make sure your employer deducts correct taxes.

✅ Step 3: Collect Documents

Insurance, dependents, donations, education, etc.

✅ Step 4: Use Hometax or Ask Your Company

File through the online portal or HR department.

✅ Step 5: Pay on Time

Avoid late fees and protect your visa status.

Are There Regional Tax Differences?

In Korea, local taxes are generally uniform across regions, but:

  • Seoul & Major Cities have higher local income collection due to higher salaries.
  • Local Tax Rates: Normally pegged at 10% of income tax.

Useful Tips for Foreign Workers

  • 💡 Use a Tax Agent: Especially for business or freelance income.
  • 💡 Keep All Receipts: Proof of payments, deductions.
  • 💡 Plan Before Year-End: Adjust your deductions early.
  • 💡 Check DTAA Benefits: Could save you thousands.
  • 💡 Don’t Ignore Hometax Notices: They’re real and important.

Official Links You Should Bookmark

FAQ: Korean Taxes for Foreign Workers

Q1. Do I need to file taxes if my employer does year-end settlement?

Not usually, unless you have other income like rental or freelance income.

Q2. Can unpaid taxes affect my visa extension?

Yes. Unpaid taxes are checked during immigration processes.

Q3. Is tax refund possible?

Yes, if overpaid. You can apply via your employer or directly on Hometax.

A Last Line to Keep in Mind

💬 “Paying taxes may feel heavy, but it also unlocks your freedom to work and stay in Korea worry-free.”

One Thing Worth Sharing

💡 “If you’re working in Korea, understanding taxes is not just a duty — it’s your best way to protect your rights.”

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