Working and Business > Income Taxes

Claimable Deductions


Claimable Deductions

For specific information on Year-end settelement for 2016 see Easy Guide for 2016 in English on NTS website (see left of page with green highlighted heading)

Foreign taxpayers opting for the flat rate (17.5% + 10% local resident tax = 18.5%) do not claim deductions. The following information applies to foreign nationals opting for the progressive tax (6% to 35%).

Following are some of the deductions that can be claimed through the simplified year-end tax settlement:

1. Insurance Premiums: (total of premiums for some, up to W1million for others)
- Life and illness insurance
- Damage and accident insurance
- Fire and burglary insurance
- Insurance premiums of insurance policies exclusively offered to the handicapped
- National Health Insurance, Employment Insurance, Longer-term nursing insurance - total paid for premiums
- others

2. Medical Expenses:  (up to W7million if exceed 3% of income - seniors/disabled higher)
-Medical expenses paid to medical institutions.
-Medical expenses of medicine and medical suplies including herbal medicine purchased in pharmacies and oreintal medical clinics.
-Partial expenses covered by the Long-term Care Insurance Law for the elderly.

3. Educational Expenses:
- Kindergarten expenses  - partial deduction - up to W3million/person
- Elementary schools, secondary schools, high schools in Korea- up to W3million/person 
- Colleges, universities - up to W9million/person (can be outside Korea sometimes)
- Postgraduate schools expenses of taxpayer (not spouse or dependents usually)
- Vocational training expenses.

4. Credit/Debit Card Use:
- Credit cards, debit cards, name-inscribed prepaid cards - domestic expenses only.
- Amount of cash receipts.

5. Housing Funds (only for Korean nationals)*:
-  Principal and interest payment of home rental loans. Interest payment of loans for long-term housing mortgage.
- Home purchase savings. Housing-subscription savings. Workers house-purchasing savings. Long-term savings for housing purchase.
- Housing-subscription comprehensive savings.
*Re the 2013 Guide to Year-end Settlement - English: Foreign employees are unable to claim deductions for housing fund, interest payment of loans for long-term housing mortgage, monthly rent and home purchase savings. A foreigner is not deemed a foreigner re NTS - (Tax News 2016-12)

6. Pension Contributions:
-  Private pension plans, pension savings, retirement savings.

7. Others
- Membership fees for small enterprises/small and micro businessmen association, long-term equity type savings.
- Donations - partial deduction (15-1000% depending on the nature of the donation)

Plus:

8. Personnal Deductions (based on situation as of 31 December)
- Basic deduction: calculated by multiplying the number of dependent family members with incomes of less than W1million (including spouse and/or lineal family members or siblings under 20 or over 60 y-o-a, handicapped spouse of handicapped linear relataive and foster children under 18 y-o-a). Dependents do not necessarily have to be living with the taxpayer or be in Korea - proof that one is supporting them will be required.
- Additional deduction for caring for elderly or handicapped relative
- Additional Deduction for households with multiple children

9. Cash Purchases if Registered on the Cash Receipt System
If, as a taxpayer in Korea, you have registered with the National Tax Service's Tax Receipt System and have requested cash receipts when paying purchases in cash you can receive a deduction on your year-end income tax settlement of up to 5 million won. The deduction works out to 20% of the total cash you've spent that exceeds 20% of the yearly income you have reported. A taxpayer's rent can also be included on the Cash Recipt System.  For more details, go to the Cash Receipt Info Page.

Additional NTS Information: More information available in Income Taxes Overview on this site.
For more details on deductions, go to the NTS website and in the English section, click on Easy Guide for Foreigners' Year-end Tax Settlement.

For answers to questions, you can contact the NTS via:
- International Tax Resource Management Office of the NTS at (82-2-397-1444).
- Foreign taxpayer advocate service - questions asked online
- English 'helpline' - 1588-0560 (82-2-1588-0560)

Tax Accountants:  See the K4E Directory for English-speaking accounts. They can help you with your filings both in and out of korea for either a flat fee or a percentage of your return. 

K4E Note: The above is based on information on the National Tax Service website. It is intended as general information only. For more details, readers should visit the NTS website.
Amendments to the tax laws/rules are often adopted in January of the year in which they will take effect. We do our best at K4E to ensure that the information we provide is accurate and up-to-date.  Should you note any errors or ommissions, please let us know at info@korea4expats.com
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Last Updated on 2017-01-17


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