The number of foreigners who file the year-end tax settlement in Korea has increased from 344,000 in 2008 to 403,000 as of 2010. Since there is a growing interest in the details of the year-end tax settlement among foreign workers in Korea, the National Tax Service has issued a guidebook available online.
Receiving the year-end tax settlement is mostly the same for foreign workers as it is for Korean nationals, yet some deductions including housing fund, interest payments on loans for long-term housing mortgages, and home purchase savings are not applied to foreign workers.
Moreover, special deductions for medical expenses, educational expenses,and most income deductions are not allowed for non-resident foreigners.
A special tax treatment for foreign workers includes a 15% flat rate. They can choose to apply a 15% flat tax rate for their gross income. Foreigners meet the requirement for tax exemption if they are from countries that have a tax exemption provision for teachers or professors in their tax treaty with Korea, in which case their income for teaching or research in an authorized school is exempt from tax for a certain period.
If non-Korean engineers who work on a technology-transfer contract or who work as researchers for research institutes provides their services in Korea, their income tax is exempted by 50% for two years.
For a foreign resident whose combined period of residence in Korea is less than five years, he/she will only be taxed on his/her foreign-source income if the foreign-source income has been paid in Korea or remitted to Korea.
A foreign taxpayer can also claim a basic deduction for lineal ascendants that do not live together if they don’t have a gross annual income exceeding 1 million won and are over 60 years of age.
When it comes to foreign language teachers, the requirements for tax exemption differ by each country’s tax treaty, and they should check the applicable tax treaty between Korea and their home country. For example, American ESL teachers invited by the government, regional governments, or authorized educational institutions can be exempt from paying taxes on their income.
Employees must submit the final return of deductions between January 25 and February 10, and a refund will be given by the end of March.
For more information, please visit the NTS website (English) or (Chinese) and visit to get an estimate on your tax refund.
The PDF file for'Easy Guide 2011 is also attached to this article.
By Jessica Seoyoung Choi
Korea.net Staff Writer
