South Korea Tax Rates for Expats: A Comprehensive Guide
- Overview of South Koreas Tax System
- Tax Liability in South Korea
- South Korea Tax Residency
- Income Tax Rates in South Korea
- Other Taxes in South Korea
- South Korea Tax Filing Requirements
- Filing Taxes in South Korea
- Impact of US-South Korea Tax Treaty
- South Korea Tax Rate FAQs
- Greenback Can Help You File Your Expat Taxes in South Korea
South Korea is known for its safety, quality healthcare, and efficient public transportation system, making it an ideal place to settle down. But what are taxes like for Americans living in South Korea? Here’s what you need to know about the South Korean tax rate.
Overview of South Korea’s Tax System
- Tax Year: January 1–December 31
- Tax Deadline: May 31
- Currency: South Korean Won (KRW)
- Tax Treaty: Yes
- Totalization Agreement: Yes
Tax Liability in South Korea
In South Korea, your tax liability will depend on whether you qualify as a tax resident or not.
- If you are considered a resident of South Korea, you will have to report your worldwide income.
- If you are considered a non-resident of South Korea, you will only have to report income that came from a South Korean source.
There is a third category as well: short-term residency. If you have only lived in South Korea five years out of the past ten, you will only be taxed on foreign-source (non-South Korean) income that has been remitted to or paid in South Korea.
South Korea Tax Residency
Generally, you will be considered a resident of South Korea if:
- You are physically present in South Korea for at least 183 days in a single year.
- You have a domicile in Korea for at least 183 days in a single year.
- You have an occupation that would reasonably require you to reside in South Korea for at least 183 days in a single year.
You may also be considered a resident if you have close family members or substantial assets in South Korea, even if you are not in the country for 183 days in a single year.
If you do not meet the standards for residency in South Korea, you will be considered a non-resident for tax purposes.
Income Tax Rates in South Korea
In South Korea, income is taxed at progressive rates. The same rates apply to residents and non-residents. The only difference is that residents are taxed on their worldwide income, while non-residents are taxed on only their South Korea-source income.
| Earnings in KRW | Rate Applicable to Income Level (%) |
| up to ₩12,000,000 | 6% |
| ₩12,000,000.01 to ₩46,000,000 | 15% |
| ₩46,000,000.01 to ₩88,000,000 | 24% |
| ₩88,000,000.01 to ₩150,000,000 | 35% |
| ₩150,000,000.01 to ₩300,000,000 | 38% |
| ₩300,000,000.01 to ₩500,000,000 | 40% |
| ₩500,000,000.01 to ₩1,000,000,000 | 42% |
| Over ₩1,000,000,000 | 45% |
Some foreign employees in South Korea can opt to pay a 19% flat tax on their gross income instead of the standard tax rates. This flat rate is generally beneficial for those earning over ₩130 million annually but is only available for the first five years of employment in South Korea.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
Other Taxes in South Korea
Capital Gains Tax
For residents of South Korea, capital gains are included in your ordinary income and taxed at the same rate. Gains from foreign assets (except for foreign shares) are taxable only when you have been a Korean resident for five years or more at the time of the sale.
Non-residents are taxed at whichever of the following rates is lower:
- 10% of the gross proceeds realized from the sale (11% when including provincial income tax.)
- 20% of the net capital gain (22% including the local surtax)
As with ordinary income, non-residents are only taxed on capital gains derived from a South Korean source.
Some capital gains are exempt from taxation for both residents and non-residents. This includes:
- Transfers of certain farmland and other types of real estate
- Transfers of houses
- Transfers of listed stock
Capital losses are deductible only against capital gains. Unused losses may not be carried forward.
Eligible gains and losses should be added up by category (e.g., real estate, stock, etc.) every year. The basic deduction is KRW 2.5 million per year. There is also a special deduction for long-term gains.
Value-Added Tax
South Korea levies a 10% value-added tax (VAT) on certain goods, services, and imports.
Inhabitant Tax
Americans living in South Korea must also pay a local surtax, known as the inhabitant tax. The rate for this local tax is 10% of your national income tax rate.
Property Tax
South Korea also imposes a tax on real property. The rate for this tax generally ranges from 0.24% to 0.6% of the value of the property.
Corporate Tax
As with individual taxpayers, resident corporations are taxed on their worldwide income, while non-resident corporations are taxed only on their South Korea-source income. Non-resident taxation usually happens through a withholding tax on each separate stream of income.
The rates for the South Korean corporate tax are as follows:
| Earnings in KRW | Rate Applicable to Income Level (%) |
| 0 – 200 million | 10% |
| 200 million – 20 billion | 20% |
| 20 billion – 300 billion | 22% |
| 300 billion or more | 25% |
South Korea Tax Filing Requirements
Just like in the US, the South Korean tax year is the same as the calendar year: January 1 to December 31. Individuals are required to file their tax returns by May 31 of the following year. (South Korean residents must also pay 50% of their tax bill by November 30 of the year for which those taxes are due.)
Deadlines and Penalties
The deadline for filing your South Korean tax return is May 31. If you miss this deadline, penalties can apply. Late filing penalties generally amount to 20% of the unpaid tax, and additional penalties may be imposed for underreporting income or failing to file entirely.
Filing Taxes in South Korea
Filing taxes in South Korea as an expat involves several key steps to ensure compliance with local regulations.
1. Determine Your Residency Status
The first step is to determine whether you are classified as a resident or non-resident for tax purposes. This is crucial because residents are taxed on their worldwide income, while non-residents are taxed only on income earned within South Korea.
- Resident: If you reside in South Korea for 183 days or more within a tax year, you are considered a resident.
- Non-resident: If you stay in South Korea for less than 183 days, you are considered a non-resident and are only taxed on South Korean-sourced income.
2. Gather Necessary Documents
Before filing, gather all relevant documents, including:
- Income statements: Such as salary slips, investment income, and other earnings
- Withholding Tax Receipts: Provided by your employer, receipts that show the taxes already withheld from your salary
- Bank statements and investment records: Especially if you have foreign assets or income
- Forms for deductions: Such as medical expenses, education costs, and other eligible deductions
3. Calculate Your Taxable Income
Calculate your total taxable income, which includes salary, bonuses, investment income, and any other sources of income. For residents, this includes both domestic and international income.
4. Apply Deductions and Credits
Deduct eligible expenses from your taxable income. This may include deductions for medical expenses, education, and donations. Additionally, apply any available tax credits, such as the foreign tax credit for taxes paid abroad.
5. File the Annual Income Tax Return
Complete your South Korean annual income tax return. This can be done online through the National Tax Service (NTS) website or by submitting paper forms to the local tax office.
6. Pay Any Taxes Owed
If you owe additional taxes after accounting for withholding and deductions, ensure that these are paid by the May 31 deadline. Payment can be made online via the NTS website or through designated banks.
7. Review and Submit
Double-check your tax return for accuracy before submission. Make sure all required forms and supporting documents are included. Submit your tax return by the May 31 deadline to avoid penalties.
8. Get Help from a Pro
Given the complexities of South Korean tax law, especially for expats, it may be advisable to consult a tax professional who specializes in expat taxes. These professionals can assist in ensuring compliance, optimizing deductions, and navigating the intricacies of both South Korean and US tax obligations.
When filing, always keep copies of your tax return and all related documents for future reference, especially in case of an audit or if you need to file amendments. This is a good habit to build when filing your taxes in any country!
Impact of US-South Korea Tax Treaty
The US and South Korea have a tax treaty in place to help expats avoid double taxation. The treaty defines the rules for determining which country has the right to tax income, thus reducing the risk of being taxed twice.
The US also has a totalization agreement with South Korea to clarify which country’s social security system an American expat may be obligated to contribute to. As with the US-South Korea tax treaty, this agreement is designed to prevent double taxation.
Tax Deductions for Expats Living and Working in South Korea
In addition to the US-Korea tax treaty and totalization agreement, the IRS also provides several other potential tax credits and deductions for expats, such as:
Using these tax benefits, most expats are able to erase their US tax debt entirely.
When you live in the US, tax day is simple: April 15th! When you move abroad, it’s not so straightforward! Learn about all the expat deadlines and extensions you need to know to file.
South Korea Tax Rate FAQs
1. Who is considered a tax resident in South Korea?
You are considered a tax resident in South Korea if you stay in the country for at least 183 days in a single tax year or have a domicile or occupation that requires you to stay for at least 183 days. Even without meeting these criteria, you may still be considered a resident if you have close family members or substantial assets in South Korea.
2. How are non-residents taxed in South Korea?
Non-residents are only taxed on income that originates from South Korea. They do not have to report their worldwide income as residents do.
3. Is there a flat tax option for expats in South Korea?
Foreign employees can opt for the flat 19% tax rate for up to five years. After this period, they must switch to the progressive tax rates.
4. What are the common deductions and allowances available for expats in South Korea?
Expats in South Korea can benefit from several deductions, including:
- Personal allowances
- Employment income deductions
- Pension contributions
- Deductions for dependents
- Charitable contributions
- Educational expenses
- Insurance premiums
For example, expats can deduct 15% of their educational expenses up to a certain limit, depending on their level of education. Contributions to national pensions are also fully deductible.
5. Are there any specific tax credits available for expats with children?
Yes, expats in South Korea can claim various tax credits related to dependent children. For instance, they can receive deductions for educational expenses, which can be up to ₩3 million for children in preschool to high school or ₩9 million for dependent college students. There is also a child tax credit available in the US that expats may qualify for, which provides up to $1,500 per child.
6. What should I do if I earn income in both South Korea and the US?
If you earn income in both South Korea and the US, you need to file taxes in both countries. South Korea taxes residents on their worldwide income, but the US also requires its citizens and green card holders to file taxes on their global income regardless of where they live. To avoid double taxation, you can take advantage of the US-South Korea tax treaty, the Foreign Earned Income Exclusion, or claim a Foreign Tax Credit on your US tax return.
Greenback Can Help You File Your Expat Taxes in South Korea
As an American living in South Korea, managing your international taxes can be a hassle. If you’d like to let someone else handle the headaches, we can help!
Greenback Expat Tax Services is an American company started by (and for) US expats. Our team of CPAs and IRS Enrolled Agents have years of experience helping individuals and small businesses prepare their taxes overseas. Since 2009, we’ve helped more than 18,000 expats file over 60,000 returns in 193 countries — all while maintaining glowing reviews. Now, we’re ready to help you!
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.
