How to pay global income tax in Korea

In South Korea, residents are required to pay income tax on their worldwide income. Non-residents, on the other hand, are only taxed on income earned in Korea. The tax rate and the criteria for paying income tax in Korea vary depending on the individual's residency status, income level, and other factors.

  1. Residency Status: The first factor to determine whether an individual is liable to pay global income tax in Korea is their residency status. According to Korean tax laws, an individual is considered a resident for tax purposes if they meet one of the following criteria:
  • If an individual has a domicile or place of residence in Korea, or
  • If an individual stays in Korea for 183 days or more in a given calendar year.

If an individual is classified as a resident, they will be liable to pay income tax on their worldwide income. If they are classified as a non-resident, they will only be liable to pay tax on the income earned in Korea.

  1. Types of Income: Korean tax laws classify income into different categories, such as employment income, business income, rental income, capital gains, dividends, and interest income. Each type of income is taxed differently, and the tax rate also varies based on the level of income.

Employment income: Employment income earned in Korea is subject to tax at progressive tax rates that range from 6% to 42% for residents and from 20% to 44% for non-residents. Employers are required to withhold tax from the employee's salary and pay it to the tax authority on their behalf.

Business income: Business income earned by Korean residents from domestic and foreign sources is taxed in Korea. Non-residents who earn business income in Korea are subject to tax on the portion of income that is attributable to their Korean operations.

Rental income: Rental income earned by Korean residents from domestic and foreign properties is taxed in Korea. Non-residents who earn rental income from properties located in Korea are subject to tax on the portion of income that is attributable to the Korean property.

Capital gains: Capital gains are taxed at a flat rate of 20% for both residents and non-residents. However, if an asset is held for less than one year, the gains are treated as ordinary income and taxed at the taxpayer's marginal income tax rate.

Dividends and interest income: Dividends and interest income are subject to a withholding tax of 22% for non-residents. Korean residents are also subject to tax on dividends and interest income, but the tax rate varies depending on the taxpayer's income level.

  1. Deductions and Exemptions: Korean tax laws provide various deductions and exemptions that can reduce the taxable income. Some of the common deductions include expenses related to education, medical expenses, charitable donations, and mortgage interest payments. The amount of deduction available varies depending on the type of expense and the taxpayer's income level.

There are also several exemptions available for certain types of income earned by foreign workers. For example, foreign workers may be eligible for a tax-free allowance, which is an amount of income that is not subject to Korean income tax. Additionally, reimbursement for expenses related to work, such as relocation expenses or business travel expenses, may be exempt from tax.

  1. Filing and Payment Deadlines: Korean residents are required to file their income tax returns by May 31 of the following year. Non-residents are required to file their returns within three months from the date of income payment. Payment of income tax is due by the same deadline as the filing of the return.

In Korea, there is a penalty for late filing or non-filing of tax returns, as well as for late payment of taxes. Penalties can include additional taxes, interest, and fines.

In conclusion, the criteria for paying global income tax in Korea include residency status, types of income earned, deductions and exemptions, and filing and payment deadlines. It is important for individuals to understand the Korean tax laws and regulations to ensure compliance and avoid any

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