Annual Income Tax Payment    

Employees' income tax payments are due on 10 March - this is referred to as the Year-end Tax Settlement. The final calculation is done in February with the total of monthly withholdings (the amount taken out each pay period for income taxes) deducted from the total amount owed.

The employer (or the withholding agent) must calculate the tax amount for the year and collect or refund the balance between what was withheld and what is due. For this reason, February salary payments can end up being less if not enough was withheld during the course of the year.

If a taxpayer has wage & salary income only, he/she is not subject to final global income tax return(self-assessment). However, if he/she has other incomes in or out of Korea, the tax return on those must be completed and submitted by 10 May.

For workers who are retiring (or in the case of foreign workers leaving the country) the year-end settlement should be completed in the same month as the employee receives her/his last payment. In this situation, the employee should receive her/his year-end settlement receipt the month following receipt of her/his final salary payment.

For workers taking a break between jobs, the year-end settlement occurs in February, just as it does for those still working.

Should an employee be entitled to a refund, the employer is required to pay the refund once the year-end settlement is calculated. The employee does not have to apply for the refund. 

If an employee has worked in two places during the tax year, the wage and salary incomes of the previous employment are included in the year-end tax settlement. The employee must submit to the new employer the tax withholding receipts from her/his previous employer. If this is not possible or if the employee cannot provide the necessary documentation on time, s/he will have to file a global income tax return for both incomes at the appropriate district tax office by the end of May of the following year.

If a taxpayer has income from both Korea and another country, s/he must report the income from all sources, including those outside Korea, if s/he has spent a total of 5 years or more in Korea over the past 10 years. The taxpayer is entitled to foreign tax credit for the taxes paid outside Korea.

Completion of the Year-end Tax Settlement can be done by one's employer, oneself (online filings available for foreign nationals) or by paid a tax professional. Should the taxpayer wish to submit a detailed report (all deductions entitlements) rather than pay the flat fee, s/he may have to complete the process on her/his own or pay for the services of a tax service provider.

Finding out the outcome of one's Year-end Tax Settlement can be done through the NTS' Hometax Service as of May of the filing year or by obtaining a receipt for wage and salary income tax withholding from one's employer or tax accountant. The receipt should be available by the end of February. Whoever prepares your year-end tax settlement is required by law to make 3 copies of the receipt for wage & salary income tax withholding and to give a copy to each of the following: tax office, employee while keeping one copy for her/his files.
For the Hometax service: (note that the site is currently in Korean only). However, here you can view your tax return via your statement of wage and salary income payment.

If claiming deductions, employees must submit the following documents to prove the expenses on which the deductions, tax exemptions and tax credits are being claimed:
1. Report of Exemption & Deduction from Wage & Salary Income (the official form)
2. Certificate of Alien Registration - should reflect any changes in dependents
3. Copy of receipt of insurance payment - issued by the insurance company (life, property loss and accident insurance policies)
4. Medical Expense Receipts - if expenses exceed 3% of annual gross salary
5. Education Expense Receipts - issued by school or vocational training facilities (self or dependents)
6. Donation Receipts - issued by receiving organisations
7. Credit Card Payments receipts - credit or debit or prepaid card statements/receipts
8. Application Report of Flat Tax Rate - 16.5% flat rate for foreign employees only
9. Tax Credit Report of Foreign Employee's Income - must meet the requirements of the relevant laws
10.Exemption Report - for qualified foreign employees dispatched to Korea via agreement between Korean and her/his government
11. Foreign Tax Credit Report - proof of tax payments in foreign countries.

Receipts  of your expenditures for the year are available through the Simplified Year-end Tax Settlement website. This is an Internet-based service that shows the allowable amount of deduction each taxpayer is allowed. A print-out of the screen displaying the records is a valid support document. Note that the taxpayer must register her/his dependents for their deductability records to show. At the moment, the site is in Korea only, although if you click on IRS, you will find an English option with some general information available in English (and Chinese). The NTS has indicated that it plans on making the site more available to foreign workers for the 2010 tax year.

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 omissions, please let us know at info@korea4expats.com