You who are reading this article probably have incomes in Korea.
your incomes might be rent income from your real-estate in Korea, dividend/interest income from your financial asset in Korea or your income might be wage & salary income generated by woriking in Korea currently.
As other countrires in the world, your incomes in Korea must be reported to tax authority and you shall pay taxes for your income.
In Korea, depending on what kind of incomes you have, your tax obligation is different.
So I'm going to explain below subjects over several postings.
1)What kind of incomes are in Korea? and how you should report each incomes?
2)Year-end tax settlement process for employees
3)how you file your income tax return?
1.Wage & Salary inocme
when you works as an employee, your income will be classfied as an wage & salary income.
Almost every salary, bonus and other benefits you receiced by offering labor is included this income.
typically, wage & salary income is income which is employees get by offering labor following the
employement contrat with employer. it's different with freelancer's business income.
1-1. how to distingusih wage & salary income from business income
However practically even if you work as an employee, your income might be reported as an businee income.
if you want to check the income you reveive is business income or wage & salary income, you only need to see 2things.
First one is social insurance. if you are working as an employee in Korea, you have duty to register to social insurance like national pension or health insurance. In Korea social insurance is paid by both emloyeer and employee half and half.
so you if you are registered to social insurance, some amounts will be deducted from your salary.
1-2.Social insurance duty for foreigners.
Your soical insurance duty can change following treaty with your mother country with Korea,
if you want to see detail, please click below postings.
Do you know about 4 social insurances in Korea?(National pension)
There are 4 kind of social insurance in Korea 1)National pension 2)Healthi insurance(long-term care insurance) 3)unemployment insurance 4)Indestrial accident insurance 1.who is subjected to r..
g-tax.tistory.com
Do you know about 4 social insurances in Korea?(health insurance)
There are 4 kind of social insurance in Korea 1)National pension 2)Healthi insurance(and long-term care insurance) 3)unemployment insurance 4)Indestrial accident insurance 1.who is subjected to reg..
g-tax.tistory.com
Do you know about 4 social insurance in Korea?(employment / industrial accident compensation insurance)
There are 4 kind of social insurance in Korea 1)National pension 2)Healthi insurance(long-term care insurance) 3)unemployment insurance 4)Indestrial accident insurance 1.Foreigner's employment insu..
g-tax.tistory.com
1-3.Withholding Tax rate of wage & salary income.
The secone one you can check your incomes is withholding tax rate.
Unlike fixed 3.3%rate of business income, wage & salary income tax rate follow simplified tax table.
As you can check in below excel file, tax rate increase by sallary increase.
2.Business income
If you own business in Korea, your income from your business classfied as business income.
evenif you don't own your business, if you work as an freelancer the income your are making as an freelancer is also business income.
2-1.Withholding Tax rate of business income
Tax rate for business income is 3.3% and it's fixed rate. when your income is 1,000,000, tax withholded is 33,000.
when your income is 5,000,000 tax withholded is 165,000.
3.Other income
Other income means income other than interest,dividend,business,wage&salary,pension,retirement income and capital gains. other income consist mostly of income generated on a one-off, non-regular basis. for example prize, reward, money obtained through a lottery ticket.
3-1.Withholding Tax rate of other income
Tax rate for other income is typically 20% but it is different following what kind of other income it is.
Other income tax rate can seems look high, but except some of unearn income like lottery prize, most of other income deduct 60% to 90% of income as an cost. so practical tax rate is low. however for unearned income, there are no income deduction so prctical tax rate is qutie high.
if you want to know how much tax you should pay when you win lottery, please see below link
Taxes you should pay on Lottery Winnings
Have you ever thought of winning the lottery? It rarely haapen. but, in case of your lottery winning, I'm going to explain taxes about it. The NTS will charge you income tax and local tax on the..
g-tax.tistory.com
4.Interest income
It includes interest on deposit,bond and securities received in Korea or from overseas. and also it includes profits made from a non-business loan. if you lend money to your friend and get money exceed principal, it is also interest income.
4-1.WithholdingTax rate of interest income
tax rate of interest inocme is 15.4% but for the interest from non-business loan, tax rate is 27.5%
5.Dividend income
it includes dividends or shares of profits or a surplus received from a domestic or foreign corporation.
5-1.WithholdingTax rate of dividend income
tax rate of dividend inocme is 15.4% as same as interest income tax rate.
6.Pension income
Pension income includes various pensions received pursuant to public pension-related Acts like National pension.
and also income which is paid in the form of pension is pension income. simply speking, when you deposit your money to bank and get later as a form of pension, the moeny you are getting is pension income.
6-1.WithholdingTax rate of pension income
It's interesting to know pension income tax rate because it's different following pension receipent's age
7.Retirement income (schedular income)
Retirement income is a lumpsum allowance received upon retirement. a lump sum patment persuant to publice pension-related Acts also can be retiremnt income.
This income belings to schedular income, so unlike global income your tax obltigation finish by withholidng taxes
when you ger retirement benefit.
7-1.WithholdingTax rate of retirement income
Retirement income occurs rarely in one's lifetime. so Korea tax law give lots of deduction to retirement income.
Thus,tax rate is the lowest of all kinds of income in Korea.
To reduce abuse of retirement income, there are limits of retirement income for board members.
8.Capital gains (schedular income)
Capital gains consist of Incomes generated from transferring land / building / real-estate right / stocks / business right / memebership / right to use / etc.
8-1.WithholdingTax rate of capital gains
Typically, capital gain has no withholding taxes except some special case of non-resident's capital gain.
capital gain taxes shall be paid by reporting and calculating taxes. the tax rate is different which cpaital you transferring.
These are all kind of incomes stated in Korea tax law. whatecer your income's name is, your incomes belongs to one of 8 incomes explained above. next posting, I will how each incomes taxed.
Thank you for read my article! I hope it helps.
If you want to see more information about Korea tax and accounting, please follow us.
And if you need help for your tax filing or accountung or looking for CPA in Korea, don't hesitate to contace us
you can contact us easily through direct message
G-tax / Certified Tax Accountant / Steven Yang
+82 10 9599 7152
steven@g-tax.kr
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