What Is the South Korea Income Tax Rate?
Understand how your residency status in South Korea dictates the scope of your taxable income and the calculation of your final tax liability.
South Korea’s income tax system applies to individuals based on their residency status and income sources. The country uses a progressive tax rate system, and taxes are administered at both a national and local level.
Defining Tax Residency Status
An individual’s tax obligations in South Korea are determined by their classification as either a resident or a non-resident. An individual is considered a tax resident if they have a domicile in South Korea or have maintained a place of residence in the country for 183 days or more within a single tax year. The 183-day count is cumulative and does not need to be consecutive.
The concept of a “domicile” refers to the center of an individual’s living relationships, considering factors like family and financial ties. For instance, having family members living in Korea or holding significant assets can point toward a domicile, even if the 183-day threshold is not met.
A foreign resident who has lived in South Korea for five years or less within the last decade is taxed on their worldwide income, but only if their foreign-source income is paid by a Korean entity or is remitted into South Korea. Once a foreign national has resided in the country for more than five years in a ten-year period, they become subject to tax on their entire worldwide income.
Scope of Taxable Income
A tax resident is liable for income tax on their worldwide income, which encompasses earnings from sources both inside and outside of Korea. In contrast, a non-resident is taxed only on income derived from sources within South Korea. For example, salary received by a non-resident for services performed in Korea is considered Korean-sourced income and is taxable, even if the payment is made from outside the country.
Common types of income subject to tax for both residents and non-residents (if Korean-sourced) include:
- Employment income, including salaries, wages, and bonuses
- Business income for self-employed individuals
- Interest and dividend income from investments
- Capital gains from the sale of property
- Certain retirement benefits
South Korea’s Income Tax Rates and Calculation
South Korea employs a progressive national income tax system with rates that increase across eight distinct income brackets. For income earned from January 1, 2023, the rates begin at 6% for taxable income up to KRW 14 million and reach a top rate of 45% for income exceeding KRW 1 billion.
National Income Tax Rates
| Annual Taxable Income (KRW) | Tax Rate |
| :— | :— |
| Up to 14,000,000 | 6% |
| 14,000,001 – 50,000,000 | 15% |
| 50,000,001 – 88,000,000 | 24% |
| 88,000,001 – 150,000,000 | 35% |
| 150,000,001 – 300,000,000 | 38% |
| 300,000,001 – 500,000,000 | 40% |
| 500,000,001 – 1,000,000,000 | 42% |
| Over 1,000,000,000 | 45% |
In addition to the national tax, a separate local income tax is levied, calculated as a flat 10% of the national income tax liability. For example, an individual with a national tax bill of KRW 10 million would owe an additional KRW 1 million in local income tax.
The calculation of an individual’s final tax liability begins with their total income, from which non-taxable items are subtracted. From this amount, various deductions are applied to arrive at the final taxable income. Deductions include a basic personal deduction for the taxpayer and their dependents and an earned income deduction for those with wage or salary income. Foreign workers may elect a flat tax rate of 19% (20.9% including the local tax) on their Korean-sourced employment income instead of using the progressive rates.
Tax Filing and Payment Obligations
The standard tax year in South Korea aligns with the calendar year, from January 1 to December 31. For individuals required to file an annual tax return, such as the self-employed or those with multiple income sources, the filing period is from May 1 to May 31 of the following year. This return must be filed even if there is no final tax due or if the individual has a deficit for the year.
The primary method for submitting tax returns is through the National Tax Service’s (NTS) online portal, known as “Hometax.” Individuals can also opt for a paper filing by submitting documents in person at a local tax office. Failure to file or pay on time can result in penalties and interest charges.
For most salaried employees, the tax process is handled by their employer through a “year-end tax settlement,” meaning they are not required to file a separate annual return. Employers withhold income taxes from monthly paychecks and finalize the employee’s annual tax liability between January and February of the following year. The employer submits this final settlement to the tax authorities by March 10.