Filing your taxes in Korea for Foreigners - A Complete Guide for 2021

Whether you are starting a company in Korea, teaching English in Korea, or a freelancer, filing your taxes in Korea for foreigners can be complicated, especially if you can’t speak Korean. I have over 20 years of Korean tax accounting and management experience. In addition, I have worked closely with Seoul Global Center doing monthly tax seminars for foreigners in Korea through the OASIS (Overall Assistance for Startup Immigration System program). My clients not only include some of the biggest multinational companies in Korea, but also SMEs and startups, freelancers, foreign English teachers, foreign YouTubers, and influencers. I am eager to help foreigners who find it difficult to file their taxes in Korea. 

Due to the pandemic, there were some government grants and relief programs in 2020 (and will continue in 2021), where people weren’t sure whether they are eligible or not, and whether they need to include them on their tax return or not.

I have helped many foreigners in Korea with their taxes, accounting, and finance. Through working with government startup associations I was able to help many foreigners to extend their visas through my tax return because, as you would already know, tax documents are critical when extending a visa. Currently, I lead the International Taxation Team at Hana Tax Management Corporation which is one of the largest tax and accounting firms in Korea. In addition, I manage taxinkorea.com which is in English. The biggest issue most foreigners have is finding the right tax accountant who is well versed in English as well as a site that lays out how to file your taxes in Korea. 

Filing Taxes in Korea

Over 20 years experience in:

  • Tax Management & other legal compliance
  • Business Setup in a most tax-efficient manner
  • Tax Planning and Strategy 
  • Accounting
  • Filing & Reporting 
  • Prepare the company-specific monthly financial reports (with the template provided by the client)
  • International Tax Advisory 
  • Bookkeeping using an international software program (ERP)
  • Payroll administration & Korean social insurance management
  • Advice on labor laws directly related to tax issues (ex. overtime pay/severance pay) or Review of employment agreement from the standpoint of taxes. 
  • Cash Management (Performing treasury work for the client company)
  • Perform bank reconciliation
  • Provide assistance in the year-end audit process

5 Tips for Filing your Taxes in Korea for Foreigners

1. Find out whether you even have to file your taxes in Korea.

If you are a salaried employee for a company in Korea, most likely your company will file your taxes on your behalf. Therefore you need to find out if you are a salaried worker or a freelancer (independent contractor). There have been many cases where Korean English teachers who thought they were salary employees ended up being independent contractors. As they have a set working time, and they work under certain instructions, it is very likely that they consider themselves as employees. After 2 years, the Korean government contacted them with a huge bill for unpaid taxes. The tax office can impose 5 years of past taxes as the statute of limitations for taxes are 5 years in Korea. Therefore find out if you are an independent contractor. What are some clues that you are an independent contractor in Korea? 

Clues you are an independent contractor in Korea

  1. You are paying only 3.3% in taxes. 
  2. No health insurance coverage. 
  3. You don’t get severance pay.

If you want to know for sure, please send me an email and I will let you know whether you are an independent contractor.

2. Collect all your payslips.

Now that you know you are an independent contractor or have a company in Korea, the next step is to make sure you keep all your payslips. If you didn’t, don’t worry too much because Korea has a tax platform called HomeTax. There you will find a section called MyNTS which will have all your payslips. If you are an English teacher in Korea, ask your school to give you a Wage Earner Income Statement (근로소득원천징수영수증). This is your end-of-the-year pay stub that will show your gross income and withheld taxes. This document will also show how much money was taken out of your pay for pension and health insurance. Or you can go to a local tax office and request a Certificate of Income (소득금액증명원).

3. Did you make under 15 million won last year?

If you made under 15 million won the tax process is very easy. Filing your taxes in Korea is very simple and easy. Just take your ARC card to any tax office in Korea and they will guide you through your tax process via their stationed computer. There is no reason for you to hire a tax accountant. However, if you made over 15 million won, check out the next steps below. 

This year, it seems like the tax office (and other government departments) are not welcoming visitors due to the coronavirus. Therefore we are not sure if the tax offices will be open or not. Below is an example of a picture I took from one of the biggest tax offices (Seocho, Samsung, Yeoksam tax office) where there was a sign that the VAT helpdesk was not ready.

Taxes in Seoul4. Did you make over 15 million won last year?

Those that made over 15 million won. Ask yourself, do I have any deductibles? What qualifies as deductibles? Are you single? Do you have dependents? All these will factor into how much taxes you will end up paying. It is up to the employee to provide their own deductions to maximize their refund. Hometax offers a tax refund calculator that shows you how much you will get back on your tax return.

Deductibles could include:

  • Travel expenses
  • vehicle maintenance and fuel cost
  • Supplies 
  • Political donations
  • Meal and beverage

3.3% is taken from your gross income. However, in around 70% of the cases, based on a person’s deductibles, they will get some money back from the tax office. Most English teachers in Korea get money back from the tax office.

5. Do you want to hire a tax accountant or file your own taxes in Korea?

If you want to hire a tax accountant in Korea, do your research. Find a tax accountant that will handle the paperwork for you. Then all you need to do is provide the documents and information and the tax accountant will take care of the rest. Prices can vary but if they are asking for over 1 million won for filing your single income taxes in Korea, you are paying too much.

If you are looking to file your own taxes you will need to go to your nearest NTS (National Tax Service) office with your paystubs from your employer or the tax office. Remember to bring your ARC card. The public official there will take your ARC card and your paystubs and input the information into a computer. They will then let you know how much you owe in taxes. You will be able to pay the amount there.

Special Package for Korean startups! 300,000 won per month

Filing your taxes in KoreaFor companies with under 50 million won in annual sales can buy this package. I take care of the startup’s quarterly VAT filing, yearly income tax return, payroll, and 2 hours of consultation per month. This is the perfect package for a Korean startup with a solo founder or a small team. 

For larger Businesses and Enterprises please check out our site for a detailed description here

For companies, SMEs, and startups in Korea, the tax process works much the same way. However, companies in Korea are required to do 4 VAT returns per year, a monthly payroll return, and an Annual Corporation Income Tax Return.

FREE Annual Tax Return Seminar in Seoul

Taxes in KoreaI will be a part of the “Online Living Seoul Talk Series” which is launched by the Itaewon Global Village Center. The Itaewon Global Village Center is a government agency under the management of the Yongsan District Office and the Seoul Metropolitan Government. During the “Online Living Seoul Talk Series” I will be doing a free annual tax return seminar from 7 pm to 9 pm (Korea time), Feb 17th (Wednesday). The seminar will focus on annual tax returns to help foreigners, especially those who are self-employed to file their taxes. Those that are interested can join the FREE tax seminar and learn the ins and outs of taxes in Korea.

The online seminar will actively engage the audience through a Q&A session where you can ask any questions you have regarding taxes in Korea in English! For you to register, please send your name, nationality, and phone number in Korea to kapcorteza@yongsan.go.kr

Please note that spots are limited and the webinar is almost full so please sign up now.

Doing your Taxes in Korea – Frequently Asked Questions

Can you do your taxes yourself?

Yes! The South Korean National Tax Service offers you to file your tax return online. You will be able to download documents and forms, along with detailed instructions. You can also call them and they will have an English speaker to help you. 

What is the special tax rate for foreign employees working in Korea?

The FLAT TAX rate is 19% and has been extended to the year 2021. 

If you are a foreign employee, you have an option for a progressive tax rate (6-42%) plan or a flat tax rate (19%) plan.

This is applicable when you are a foreign employee, and this treatment is only allowed for 5 years. 19% Flat tax rate treatment is favorable when your yearly salary is over KRW 150,000,000 (Around $120,000 USD). 19% tax rate is applied with no deductions.

When is the last day you can file your taxes without getting a penalty? 

May 31st. This does not include salary employees since the company will take care of your yearly salary income tax settlement. However, if you had salaries from more than two companies (e.g. you moved from one to another), or if you had freelancer income besides your regular salary, then you need to file May’s tax return. 

Do you need to know how to speak Korean when visiting the National Tax Service office in Korea? 

From May 8 to May 31, each tax office has a help desk to assist taxpayers to file their own tax returns. You may bring your ARC card to any tax office in Korea and they will guide you through your tax process via their stationed computer. However, the public tax official does not factor in your business expense, which can reduce your taxes. If you have business expenses to claim or wish to find the most tax-efficient manner to file the return, it is best to get advice from tax experts.

If I filed my tax return for my business in May [Global Tax Report:종합소득세신고] last year for my business income. What about this year’s Feb’s tax return, should I be worried about that?

The simple answer is no, you need to file your business income in May. For employees, Feb’s tax return (연말정산 handled by the company) is meaningful. If you are employed by a company (or School), the previous year’s Salary income tax reconciliation is done every year in February. After the year-end (February), 12-month employee’s taxes are re-calculated based on his/her expenses such as credit card, medical expense, insurance payment, donation, tuition fee, etc. In case you had salary income from two places, or if you had freelancer income (independent contractor income) on top of your regular salary, you need to file a Global Tax report in May. Also, if you run a sole-proprietorship company(and have business income), then you need to file tax in May.

Do I have to pay taxes when I leave Korea permanently?

Many might not know this but when foreigners leave Korea permanently must file a final tax return before they depart from Korea. This needs to be based upon the tax year starting from January 1st to the departure date. They can still come back to Korea as a tourist. There will be no tax obligation unless the trip is related to work.

What is considered taxable earned income in Korea?

Here is a basic list of items that can be taxed for foreigners in Korea.

  • Salaries
  • Some allowances
  • Bonuses
  • Severance payments
  • Some reimbursements
  • insurance premiums

Here is a basic list of items that cannot be taxed (tax-exempt).

  • Meal allowance (up to 100,000 per month)
  • Reimbursement of vehicle operating expenses ( up to 200,000 per month)
  • Cost of work clothes
  • Reimbursement for social memberships
  • Entertainment expenses incurred for business purposes

I am an American living in Korea, can I get the second round of stimulus payment?

Yes. Overseas Americans are eligible for the stimulus payment (also known as an economic impact payment) and the IRS automatically sends it to your bank account details as submitted on your 2019 tax return. If you did not enclose your bank account information, the IRS will send a check to your home address (also as written on your 2019 tax return).

The first round stimulus payment was $1,200 and the second round is coming soon. According to the IRS site, the second round payment may be in the form of a check or debit card, but there is not much information on this debit card as no American ex-pats in Korea have gotten anything in the mail yet.

As the IRS is sending out the second stimulus payment to your 2019 tax return address on file, you do not need to send any tax return (or any other form) to request the second payment. You cannot adjust or edit the address on file with the IRS site. At the site below, you can only see the status of your payment (date mailed). You cannot add a bank account either. In fact, the IRS site has a lot of information, but there is no one there you can call to ask anything or get additional information. It is best to check the site and simply wait.

What if I did not receive my Stimulus Payment?

In case you did not receive either payment by mail or deposit, you can claim a Recovery Rebate Credit on your 2020 tax return and it will be given as a refund then. When owed a refund on your tax filing, you can enter your bank account information for direct deposit. Overseas Americans have until June 15th, 2021 to file for the tax year 2020.


Christie

Christie Lee is a contributor at Seoulz and is a US certified public accountant and Korean tax expert with over 19 years of experience. She leads the International Taxation Team at Hana Tax Management Corporation, one of the largest tax and accounting firms in Korea. She has consulted with over 90 multinational corporations and done over 80 seminars regarding accounting and tax-related issues at Seoul Global Center (part of Seoul City), KTVF Technology Venture Foundation), KENCA (Korea Engineering and Consulting Association) and many Embassies. Email her at christie@hanatax.net for a consultation.

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