In Korea, tax rates adhere to a progressive tax rate system, where the tax rate increases with higher income. As per the income tax law, tax rates range from 6% to 45%.
Nevertheless, there exists a special taxation scheme for foreigners. Those who qualify for this special taxation can benefit from a 20% flat tax rate. While the 20% tax rate may seem lower compared to the normal progressive tax rate in Korea (6%~45%), there are pros and cons to consider. If you wish to delve into more detailed information, please check below posting
[Tax benefit]Tax Benefits Available to foreign employees in Korea - Part 1 (Special tax rate)
Korea's tax rates follow a progressive tax system, which means that the more income you earn, the higher the percentage of your income you pay in taxes. Below is the Korean tax rate table. As you can see, the tax rate can increase to approximately 50% when
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[Tax benefit]Tax Benefits Available to foreign employees in Korea - Part 2 (Special tax rate)
[Tax benefit]Tax Benefits Available to foreign employees in Korea - Part 1 (Special tax rate) Korea's tax rates follow a progressive tax system, which means that the more income you earn, the higher the percentage of your income you pay in taxes. Below is
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The special tax rate application period was initially 5 years from the commencement of work in Korea. However, due to recent law updates in 2023, this period has been extended to 20 years. This is excellent news for foreign workers in Korea as it can significantly reduce their income taxes.
As we approach the February 2024 deadline for the 2023 Year-end tax settlement, it's crucial to check whether you qualify for these benefits to alleviate your tax burden.
Below are Q&A about Flat tax rate updats.
Q1) "I've already benefited from the flat tax rate for 5 years, and its period has ended. Now, I'm applying the normal tax rate. With the extension of the period, is it still possible to avail the flat tax rate?"
A1) As per the updated law, the flat tax rate is applicable for 20 years from the date of commencing work in Korea. Yes, it is possible.
However, it's crucial to note that the revised law came into effect from January 1, 2023. Therefore, it's not possible to apply for the previous years.
For example, if Employee A started working in 2015, applied the flat tax rate for 5 years (2015~2020), the normal tax rates were applied for 2021 and 2022. With the period for the flat tax rate extended to 20 years from the initial 5 years, A can benefit from the flat tax rate until 2035 (20 years from the date of first starting work), starting from 2023 (not applicable for 2021 and 2022).
Q2)"How can I apply this speical taxation?"
A2) As an employee in Korea, you are required to complete year-end tax settlement every February or file your income tax return in May. If you wish to benefit from the flat tax rate, you should follow these steps:
1.Complete the Necessary Documents: Fill out the required application documents to request the flat tax rate.
2.Submit the completed application documents to the Korea Tax Office. This step is essential to initiate the process of obtaining the flat tax rate.
By following this process, you can take advantage of the flat tax rate.
If you encounter difficulties in applying for the flat tax rate or if you were unable to secure the flat tax rate in your previous tax filings, please do not hesitate to contact us. Our tax firm specializes in assisting foreigners and foreign corporations in Korea. We have the expertise and experience to help you navigate the tax regulations and optimize your tax situation. Feel free to reach out to us for expert guidance and support.
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