Verified Facts
In South Korea, tax rates range from 6% to 45% for individuals, with a corporate tax rate of 25% and a value-added tax (VAT) rate of 10%, making it essential for expats and businesses to understand the tax system to navigate their obligations.
Tax laws change frequently. Always consult a qualified tax professional for advice specific to your situation. This is a general guide only.
Quick Facts
Tax System Overview
South Korea imposes a territorial taxation system, where tax is levied on income earned within the country, regardless of the taxpayer's residence. However, individuals who are considered tax residents are subject to worldwide taxation, meaning they are taxed on their global income. To be considered a tax resident, an individual must have a domicile in South Korea or have been present in the country for at least 183 days in a calendar year.
The tax system in South Korea is administered by the National Tax Service, which is responsible for collecting taxes, providing tax guidance, and enforcing tax laws. Taxpayers can file their tax returns online or through a tax professional, and the tax authority provides various resources and support to help individuals and businesses comply with their tax obligations. Understanding the tax system and residency rules is crucial for individuals and businesses to ensure they are meeting their tax obligations and taking advantage of available tax incentives and deductions.
Personal Income Tax
| Income Bracket (KRW) | Tax Rate |
|---|---|
| 0 - 12,000,000 | 6% |
| 12,000,001 - 46,000,000 | 15% |
| 46,000,001 - 88,000,000 | 24% |
| 88,000,001 - 150,000,000 | 35% |
| 150,000,001 and above | 45% |
| Taxpayers in South Korea are entitled to various deductions and allowances, such as a basic deduction of KRW 1.3 million, deductions for mortgage interest, and allowances for education expenses. Tax returns must be filed by May 31st of each year, and taxpayers can choose to file online or through a tax professional. It is essential to note that tax rates and brackets are subject to change, and taxpayers should consult the National Tax Service or a tax professional for the most up-to-date information. |
Corporate & Business Tax
- The corporate tax rate in South Korea is 25%, with a reduced rate of 17% for small and medium-sized enterprises (SMEs) with annual revenues of KRW 20 billion or less.
- Small businesses with annual revenues of KRW 1 billion or less are eligible for a tax exemption on their first KRW 200 million of income.
- South Korea has several free trade zones and free economic zones, which offer tax incentives and other benefits to businesses that operate within these zones.
- Companies must register with the National Tax Service and obtain a tax identification number to conduct business in South Korea.
- Foreign companies that operate in South Korea must also comply with transfer pricing regulations, which require them to establish arm's-length prices for transactions with related parties.
VAT / Sales Tax
- The standard VAT rate in South Korea is 10%, which is applied to most goods and services.
- A reduced VAT rate of 0% is applied to certain goods and services, such as exports, agricultural products, and financial services.
- Some goods and services are exempt from VAT, such as healthcare services, education services, and residential rentals.
- Foreign tourists are eligible for a tax refund on purchases of certain goods, such as clothing, cosmetics, and electronics, if they meet certain requirements.
For Expats & Foreign Workers
- Foreigners who are tax residents in South Korea are subject to worldwide taxation on their income, including income from foreign sources.
- South Korea has double taxation treaties with 93 countries, which help to prevent double taxation and fiscal evasion.
- Expats and foreign workers are required to register with the National Tax Service and obtain a tax identification number to work in South Korea.
- Foreign workers are also required to participate in the social security system, which provides benefits such as pension, health insurance, and unemployment insurance.
- Expats and foreign workers may be eligible for a foreign tax credit on income that is taxed in both their home country and South Korea.
- Foreigners who are non-tax residents in South Korea are subject to a withholding tax on income from Korean sources, such as employment income, dividends, and interest.
Crypto & Investment Income
- Investment income, such as dividends and interest, is subject to a withholding tax of 14.7% for residents and 20.4% for non-residents.
- Capital gains from the sale of stocks, bonds, and other securities are subject to a tax rate of 20%, but are exempt from tax if the gain is less than KRW 2.5 million.
- Cryptocurrency is considered a virtual asset and is subject to capital gains tax when sold or exchanged for other assets.
- Taxpayers who hold foreign financial assets with a value exceeding KRW 500 million are required to report these assets to the National Tax Service and may be subject to penalties for non-compliance.