Easy Guide for Foreigners' Year-end
Tax Settlement
2005. 12
National Tax Service
www.nts.go.kr
PREFACE
I wish to express my profound appreciation for your faithful tax compliance and
contribution to the development of the Korean economy.
Foreign investment is the key engine to develop Korean economy and advance
the economic and social systems.
Considering the ever-growing population of foreigners furnishing service or carrying
on business in Korea, we strongly feel that it is important for our administration to
provide them with proper guidance and assistance.
Therefore, National Tax Service have introduced various tailored taxpayer services
such as「Help-line for Foreign Taxpayers (397-1440)」, 「Foreign Taxpayer
Advocate」and 「Q&A section by E-mail」 at our english web-site.
We also
published a number of books on Korean tax system for foreign taxpayers.
This booklet is prepared to present a brief explanation of the Year-end Tax
Settlement for wage & salary income earners, focusing on foreigners. The
important changes in legislation enacted in 2005 have been incorporated within
this guide and we have reproduced the relevant pages of the filing forms as a
cross-reference to this guide.
This guide deals with general principles and may be no substitute for expert
advice. However, we sincerely hope that this guide is of interest and benefit to
readers from all walks of life.
Ju-Sung Lee
Commissioner of National Tax Service
2 Table of Contents
Table of Contents
◈ Flow of Year-end Tax Settlement of Wage & Salary Income Tax
◈ What are major new changes for 2005 ?
Ⅰ
General
14
A. Taxpayer ·································································································· 14
1) Resident
2) Non-resident
3) Difference in Tax Treatment
B. Global and Schedular Income Taxation ··················································· 15
C. Monthly Tax Withholding ····················································································· 15
D. Year-end Tax Settlement ··················································································· 16
1) Employee who has worked for 2 companies in 2005
2) Employee who retires during the year
E. Things To Prepare for the Year-end Settlement ······························· 18
1) Proof of documents for Deductions
2) Submission of certified copy of foreigner's registration card
3) Issuance of receipt for wage & salary income taxes withholding
Ⅱ
Taxation of Wage & Salary Income
A. Adjusted Wage & Salary Income ·································································· 20
1) Wage & Salary Income from Employment
2) Income That Is Not Regarded As Employment Income
3) Non-taxable Wage & Salary Income
4) Adjusted Wage & Salary Income
B. Personal Deduction ································································································· 24
1) Basic Deduction
2) Additional Deduction
3) Additional Allowances for Small Number of Dependents
20
Easy Guide for Foreigners' Year-end Tax Settlement 3
C. Pension Premium Deduction ············································································ 26
D. Special Deduction ··································································································· 26
1) Insurance Premiums
2) Medical Expenses
3) Education Expenses
4) Housing Funds
5) Charitable Donations
6) Deductions of Marriage, Funeral Service and Moving Expenses
E. Other Income Deductions ··················································································· 30
1) Credit Card Usage Deduction
F. Calculated Income Tax ························································································· 31
1) Tax Base (Taxable Income)
2) Tax Rates and Tax Amount
G. Tax Credit ······················································································································ 32
1) Tax Credit for Wage&Salary Income
2) Class B Taxpayer Association Credit
3) Foreign Tax Credit
4) Other Tax Credits
※ Tax Exemption for Foreign Engineers
H. Taxes Due ····················································································································· 34
1) Calculation of Payable / Refundable Tax
2) Special Tax for Rural Development
3) Inhabitant Tax
Ⅲ
Example of Income Tax Calculation
35
Ⅳ
Actual Examples of Q&A on NTS website
41
Ⅴ
Tax Forms
46
The explanations and examples in this publication reflect the interpretation by the
National Tax Service of Tax Laws. However, the information given does not cover
every situation and is not intended to replace the law and change its meaning.
4 Easy Guide for Foreigners' Year-end Tax Settlement
◈ Flowchart of Year-end Tax Settlement of Wage & Salary Income Tax
Total Income from Employments
( - ) Non-taxable Income
∙Compensation of Actual Expenses
- wages that are received by a worker due to natural disasters and other calamities,
pays for day duty, night watch, or business travel
- compensation for driving one's own car, research subsidies for teachers, news
allowances for reporters : limit is ￦200,000/month
∙Salary for Workers Abroad : limit is ￦1,500,000/month
∙Special Tax Treatment for Foreign Employees: up to 30% of total income
∙Allowance for Night Duty received by Productive Laborers : limit is ￦2,400,000
∙Meal costs of less than ￦100,000 per month, Qualified School Expenses, etc..
Gross Wage & Salary Income
( - ) Deduction for Wage & Salary Income
∙up to ￦5,000,000
: Total amount
∙￦ 5,000,000~15,000,000 : ￦ 5,000,000 +
∙￦15,000,000~30,000,000 : ￦10,000,000 +
∙￦30,000,000~45,000,000 : ￦12,250,000 +
∙￦45,000,000~
: ￦13,750,000 +
50% of over 5,000,000
15% of over 15,000,000
10% of over 30,000,000
5% of over 45,000,000
( - ) Personal Deduction
∙Basic Deduction : Taxpayer himself, Spouse and dependents with gross income of less than ￦1,000,000
⇒ ￦1,000,000 per capita
* Dependents have Age limit, but the Handicapped is not applied to it.
∙Additional Deduction: The Handicapped ⇒ ￦2,000,000 per capita
The Aged, child under 6 years old ⇒ ￦1,000,000 per capita,
￦1,500,000 (for over 70 years old), Woman ⇒ ￦500,000
∙For Small Dependents : If dependent is one, ￦1,000,000, if two, ￦500,000
( - ) Pension Premium Deduction
( - ) Special Deduction
∙Insurance Premium : National Health Insurance, Employment Insurance ⇒ Total amount
Principal-guaranteed Insurance ⇒ limit is ￦1,000,000
Insurance for the handicapped ⇒ limit is ￦1,000,000
∙Medical Expenses : Taxpayer himself, The Aged: Total amount
Dependents: Medical expense - (Gross Wage & Salary Income × 3%)
⇒ limit is ￦5,000,000
∙Education Expenses: Taxpayer himself ⇒ Total amount
- Up to Kindergarten, Elementary, Secondary, high school ⇒ limit is ￦2,000,000 per capita
- University or College ⇒ limit is ￦7,000,000 per capita
Easy Guide for Foreigners' Year-end Tax Settlement 5
( - ) Special Deduction
∙Housing Fund : limit is ￦10,000,000 (but, if ①+②+③, ￦3,000,000)
① Housing savings : 40% of deposit
② Housing loans for purchase : 40% of principal refunded
③ Housing loans for lease : 40% of principal refunded
④ Mortgage loan : interest paid
∙Donation
∙Standard Deduction : if the total amount of Sepcial Deduction is less than ￦1,000,000
⇒ annual standard deduction : ￦1,000,000
( - ) Other Inocome Deduction
∙Pension Savings Deduction : deposit amount (limit is ￦2,400,000)
* Personal Pension Plan signed before Dec. 31, 2000 : 40% of deposit (limit is ￦720,000)
∙Retirement Pension deduction
- 3,000,000 per annum including pension Saving deduction(commencing Dec. 2005)
∙Investment Association Deduction
- Investment after Jan. 1, 2002 : 15% of investment (limit is 50% of Wage & Salary Income)
∙Credit Card Usage Deduction
① Usage Amount = Credit Card + Debit Card + Tuition through Giro + Prepaid Card + Cash receipt
② Deductable Amount = [① - (Gross Wage & Salary Income × 15%)] × 20%
③ Deduction Limit = lesser of (20% of Gross Wage & Salary Income, ￦5,000,000)
∙Employee Stock Ownership Association Contribution Deduction
⇒ deduction is lesser of contribution or ￦4,000,000
Tax Base (Taxable Income)
( × ) Tax Rate (8∼35%)
∙up to ￦10,000,000
: 8%
∙￦10,000,000~40,000,000 : 17% (minus ￦900,000)
∙￦40,000,000~80,000,000 : 26% (minus ￦4,500,000)
∙over ￦80,000,000
: 35% (minus ￦11,700,000)
Calculated Income Tax
( - ) Tax Credit and Exemption
∙Tax Credit for Wage & Salary Income : limit is ￦500,000
- up to ￦500,000 (55% of calculated income tax) over ￦500,000 (￦275,000 + 30%
of over 500,000)
∙Class B Taxpayer Association Credit(TAC) : 10% of income tax withheld by TAC
∙Home Mortgage Interest : 30% of interest paid
∙Donation for political party : 100,000/year
∙Foreign Tax Credit : foreign income tax amount paid or payable in a foreign country
⇒ Credit = calculated income tax × (foreign source income / gross income)
Payable/Refundable Tax
= Calculated Income Tax - Pre-paid Tax
Easy Guide for Foreigners' Year-end Tax Settlement 7
What are major new changes for 2005 ?
Reduction in Income Tax Rate(Articles 55 and 129 of the Income Tax Act)
Before
After
□ Global/Retirement income tax rate
(progressive deduction)
□ Global/Retirement income tax rate
(progressive deduction)
◦ 10,000,000 or less: 9%
◦ 40,000,000 or less: 18% (900,000)
◦ 80,000,000 or less: 27% (4,500,000)
◦ Over 80,000,000 : 36% (11,700,000)
◦ 10,000,000 or less: 8%
◦ 40,000,000 or less: 17%(900,000)
◦ 80,000,000 or less: 26%(4,500,000)
◦ Over 80,000,000 : 35%(11,700,000)
□ Daily employed workers
□ Daily employed workers
◦ Withholding tax rate: 9%
◦ Withholding tax rate: 8%
Increase in Standard Deduction and Handicapped Persons
Deduction(Article 52 (1) 4 of the Income Tax Act)
Before
After
□ Standard deduction
◦ The employed worker may choose ◦ Increase in standard deduction and
either (a) or (b):
handicapped persons deduction
(a) Spend-based deduction: 12 expense
categories, including education
expense,
medical
expense
and charitable donation
(b) Standard deduction : 600,000
□ Deduction for the handicapped
- ￦1,000,000 per person
➜ ￦1,000,000 (applies only to the employed
worker)
- Self-employed persons are applied
the same deduction amount as
before (of 600,000)
➜ ￦2,000,000 per person
8 Easy Guide for Foreigners' Year-end Tax Settlement
Tax-Exempt Allowance for Over-Time Duty for Logistics
Company Employee(Article 17 of the Enforcement Decree of the Income Tax Act)
Before
After
□ Eligibility for non-taxation
◦ Wage : Fixed monthly wage of ￦ 1,000,000
or less
◦ Non-taxable limit: ￦ 2,400,000 per year
◦ Scope of employment: Factory worker,
miner, fisherman and driver
◦ Extended scope of employment
- Postal delivery, newspaper delivery,
goods delivery, product delivery
and other types of delivery
Expansion in Scope of those Subject to Educational Expense
Deduction (Article 52, (1), 4, (2) of the Income Tax Act)
Before
□ Eligibility for educational expense
deduction
◦ Tuition for regular educational
curriculum paid to those subject
to basic deduction (not subject to
any restriction on the age)
After
◦ Expanded Scope of Eligibility
- Vocational competency development and
training cost paid out from the
employer's personal expense
* Educational institutions shall be
restricted to vocational schools,
private educational institutes and
vocational competency development
and training facilities as prescribed
by the Employed Worker Vocational
Training Promotional Law.
→ When receiving "Employee Educational
Course Support" under the
Employment Insurance Law, this
amount is excluded from deduction.
Easy Guide for Foreigners' Year-end Tax Settlement 9
Deduction for Amounts Drawn on Credit Cards (Article 26, (2) of
the Restriction of Special Taxation Act and Article 121, (2) of the
Enforcement Decree of the Restriction of Special Taxation Act)
Before
After
□ Eligibility for income deduction on `
amounts used with credit cards
(including cash receipts)
◦ Change in minimum usage requirement
◦ Minimum usage requirement
: Must exceed 15% of gross income
: Must exceed 10% of gross income
□ Exemptions to credit card deductions
(including cash receipts)
◦Insurance premium, tax, utility fees,
apartment
building
management
fee, highway toll fee, etc.
◦Added exemptions to credit card deductions
: Spending in the acquisition of property
that requires payment of registration tax
- Real estate, corporate name,
trademark rights, patent rights,
utility model right, copyright,
publishing right, etc.
Filing and Payment of Tax Withheld on Attributed Bonus
(Article 28, (2) of the Income Tax Act)
Before
Due date for the filing and payment
of the taxes withheld
- Monthly payment: 10th of the month
following the month of being notified
of the change in income amount
- Semiannual payment: 10th of the month
following the last month of the half
year of being notified of the change
in income amount
After
Changes to the filing and payment due
date of taxes withheld for the
attributed bonus
- Monthly and semiannual payment
: 10th of the month following the month
of being notified of the change in
income amount
10 Easy Guide for Foreigners' Year-end Tax Settlement
Newly Added: "List of Dependents Subject to Basic Deduction"
Category on the Information Return Form
Before
After
□ Newly added: List of Dependents Subject
to Deduction
◦ Eligibility
- Dependents subject to basic deduction
(excluding the employee writing the form)
N/A
- Dependents that were given special and
miscellaneous deductions, and not the
basic deduction.
◦ Requested information
- Relationship to the income worker and
name and residence identification
number of the dependent(s)
- Mark "o" where applicable
Newly Added: Mandatory Issuance and Storage of Receipt for
Charitable Donations (Article 160, (3) of the Income Tax Act and Article
208 (3) of the Enforcement Decree of the Income Tax Act)
Before
After
□ Charitable fund-raising organizations
are now required to keep a record
of all donations made.
N/A
◦ Information to enter are:
- Name, residence identification number
and address of donator
- Date and amount of donation
- Date of issuance of donation receipt
Easy Guide for Foreigners' Year-end Tax Settlement 11
Newly Added: Financial Services Provider's Obligation to
Store and Provide Year-End Settlement Documents
(Article 160, (4) of the Income Tax Act and Article 208, (4) of the
Enforcement Decree of the Income Tax Act)
Before
N/A
After
□ Financial services providers are
now required to preserve and
submit, upon request, documents
pertaining to year-end settlements
◦ Information to keep regarding the
issuance of year-end settlement
documents are:
- Name, residence identification number
and address
- Deposit amount into a tax deductible
savings account or insurance
premium payment amount
- Principal or interest repayment amount
on tax-deductible loans
- Amount used with credit cards, etc.
that are subject to income deduction
ꋃ Submission of Information Return (Article 164 of the Income Tax Act)
ꊺ
Before
After
□ Time-frame for the submission of
payment record
◦ Principle: Not later than the end of
February of the year following that
whereto belongs the day of payment
◦ Employment (excluding bonus) and
retirement income: Not later than
the end of February of the year
following that whereto belongs
the day of payment
◦ Business income subject to year-end
settlement: Not later than the end
of February of the year following
that whereto belongs the day of
payment
12 Easy Guide for Foreigners' Year-end Tax Settlement
ꋄ Abolition of Retirement Pension Tax Credit (Article 59, (2) of
ꊺ
the Income Tax Act and Article 17 of the Addendum)
Before
After
25% of the calculated tax amount for
retirement income
- Deduction limit: Number of years of
<Deleted>
service × ￦ 120,000
ꋅ Newly Added: Retirement Pension Deduction (Article 51, (3) of
ꊺ
the Income Tax Act)
Before
Deduction limit on pension savings
- ￦ 2,400,000 per annum
After
Deduction limit on pension savings
- ’05 : ￦ 2,400,000 per annum
- ’06 : ￦ 3,000,000 per annum including
retirement pension deduction
Introduction of retirement pension deduction
N/A
- Income deduction for amount deposited
into retirement pension commencing
December, 2005
- Deduction limit : ￦ 3,000,000 per annum
including income deduction from
pension savings
ꋆ Look-up and Print-out of Medical Payment Records through
ꊺ
the NIHC Website
Before
Proof documents required for
income deduction from medical
expense payments
- Medical cost receipts issued by medical
treatment facilities such as hospitals
and pharmacies as prescribed by the
Rule on the Payment of National Health
Insurance」
After
Additional proof documents now required
for deduction on medical expense
payments
- Medical Expense Payment Record printed
out from the National Health
Insurance Corporation (NHIC) website
will be acknowledged as proof
- Provided, that for each of the treatment
facilities, only one of either (a)
the NHIC webpage print-out or (b)
medical
treatment
facility-issued
receipts is used.
Newly Added: Deduction for Cash Payments that were Issued Cash
Receipts (Article 126, (2) of the Restriction of Special Taxation Act)
Before
After
Deductible income amount for credit
cards, etc.
Deductible income amount for credit - (Total amount using credit cards, etc,
- 15% of gross income) × 20%
cards, etc.
- (Total amount using credit cards, etc. - Limit : The smaller of the two;
- 10% of gross income) × 20%
(a) ￦5,000,000 or
(b) 20% of gross income
- Usage amount of credit cards, etc. : Credit
cards, registered prepaid cards, debit
Expanded scope of the "Total amount
cards and lecture fees paid through the
using credit cards, etc."
Giro system
- Cash receipt usage has been newly
added
- Cash receipts issued beginning January 1,
2005 are applied.
14 Easy Guide for Foreigners' Year-end Tax Settlement
Ⅰ. General
A.
Taxpayer
Taxpayer, who is liable to pay the income tax on his/her income, is classified into
Resident and Non-resident in terms of whether a country has the taxing right on
his/her worldwide or just domestic income.
1) Resident
Principally, a resident is any individual who has his/her domicile in Korea or a
place of residence for 1 year or more in Korea. The domicile shall be judged by
the objective facts of living relationship, such as the existence of a family living
together in Korea and of the property located in Korea. And, the 'place of
residence' means the place where a person has dwelt for a long time besides his
address in which no close general living relationship is formed as the domicile.
A taxpayer who falls within in the following cases is deemed to have a domicile
in Korea.
․Who has an occupation which would require him to reside in Korea for 1 year
or more; or
․Who has his family in Korea and is likely to reside in Korea for 1 year or more
in view of his occupation or assets held in Korea.
On the other hand, according to the general provision1-4 of Income Tax Law,
even when a person has a job overseas and stayed there for more than 1 year,
but he/she has his/her general living relationship including his/her family and
property at home, he/she shall be regarded as a resident of Korea.
A resident is subject to income tax on all incomes derived from sources both
within and outside the country.
Ⅰ. General 15
2) Non-resident
A person who is not a Resident of Korea is deemed a non-resident and is
subject to income tax only on income derived from sources within Korea.
3) Difference in Tax Treatment
When a non-resident who does not have a domestic place of business has
earned wage & salary income in Korea, most of the provisions concerning the tax
base and tax amount of residents shall apply to him/her. However, in calculating
tax base and tax amount, a non-resident is not entitled to basic deduction(except
for oneself), additional deduction(except for oneself) and special deduction.
B.
Global and Schedular Income Taxation
Income derived by residents and non-residents is subject to global or schedular
taxation.
Under global taxation, Real Estate Rental Income, Business Income, Wages &
Salary Income, Temporary Property Income, Pension Income, and Other Income are
aggregated and taxed progressively. Interest and dividend are also taxed globally
with some exceptions of being subject to withholding tax only when paid.
Retirement Income, Capital Gains, and Timber Income are items subject to
schedular taxation and thus taxed separately at varying rates.
※ Tax withholding is applied to each domestic source item of income of
non-residents who do not have a place of business in Korea and do not have
income from real estate located in Korea.
C. Monthly Tax Withholding
Regardless of whether an employee is resident or non-resident, when he/she is
paid a salary income which falls under the category of Class A or B income,
his/her
personal
income
tax
is
monthly
withheld
by
his/her
withholding
agent(employer, taxpayer association) and deducted from his/her salary every
16 Easy Guide for Foreigners' Year-end Tax Settlement
month. That is, an employer paying wage & salary income must deduct income
tax monthly from the earnings of their employees based on 「Simplified Tax
Withholding Table」 issued by National Tax Service (NTS) and the total of these
deductions has to be paid over the NTS (district tax office concerned) by the
tenth day of the following month.
However, a person who has less than ten employees on average from at the end
of January to December of the preceding year may pay taxes withheld to the
government every half-year, after obtaining an approval by the head of the tax
office concerned.
※ In the case of paying ‘independent service income’ to a non-resident, which is
different from ‘Dependent’ Wage & Salary Income, 20% of the amount
payable(paid) is withheld at the time of such payment by the person paying
the amount of income from domestic sources to a non-resident1) who has no
domestic place of business, unless otherwise provided in an applicable tax
treaty. And the withholding agent has to pay it to the government by the 10th
of the following month.
D. Year-end Tax Settlement
One's income tax liability for the year is settled and finalized in January the next
year through year-end exact computation as we call "Year-end Settlement". Then,
the total of monthly deduction(the amount withheld) taken off an employee's
earnings is treated as a credit against the overall amount of tax payable by the
employee for the tax year in question.
To sum up, a person liable for tax withholding, withholding tax agent, must
calculate the tax amount for the year at the time of first payment of wage and
salary income the next year and collect or refund the balance between the tax
amount payable calculated by applying the tax rates and the tax amount withheld
according to the Simplified Tax Withholding Table.
On the other hand, when a taxpayer has wage & salary income only, he/she is
not subject to final composite income tax return(self-assessment), if he/she has
1) excluding non-residents with real estate income or timber income
Ⅰ. General 17
other incomes in addition to wage & salary income, he/she should file final composite
income tax return in total of the incomes by the end of May of the next tax year.
※ If a withholding agent does not withhold income tax on payment or does not pay
the withheld tax to tax authority by the due date, a penalty tax shall be imposed
in the amount no greater than 10% of the payable tax, but larger of the two:
(1) Unpaid tax(shortfall amount in the event payment was not made in full) ×
the number.of days past the due date to the date of voluntary filing or
date of payment notification × interest rate as prescribe by the Presidential
Decree, the calculation of which shall be based on the interest rate
financial service providers apply to late loan repayments
(2) 5/100 of the unpaid tax(shortfall amount in the event payment was not made in full)
1) Employee who has worked for 2 companies in 2005
In case where an employee with double employment income from more than 2 work
place, the withholding agent of principal working place shall conduct year-end
settlement combining the wage & salary incomes of the former work place.
In case where an employee who has retired halfway in the current year is newly
employed at another work place, the withholding agent of such new work place
shall have the relevant employee submit the receipts for tax withholding for the
wage & salary incomes at the former work place, and a copy of the book for tax
withholding for wage & salary incomes, and conduct the year-end settlement
including the aggregate of wage & salary incomes at the former work place.
In case where an employee has both Class A wage & salary income and Class B
wage & salary income which has been withheld by Class B wage & salary income
taxpayers association, the employer who pays Class A wage & salary income shall
conduct the year-end settlement for the employee.
If a withholding agent is not available for the bankruptcy or missing, etc., the
employee shall file a final tax return for the wage & salary income at the district
tax office concerned not later than May 31st of next year.
18 Easy Guide for Foreigners' Year-end Tax Settlement
2) Employee who retires during the year
In case where an employee retires during the year, the withholding agent must
conduct year-end settlement when he/she pays the earning of retiring month and
issue the receipt for the wage & salary income taxes withholding.
E.
Things to Prepare for the Year-end Settlement
1) Proof of Documents for Deductions
Employees shall submit the documents required for deductions, exemptions and tax
credits by the law to prove the expenses within the period of year-end settlement to
the withholding agent. If an employee fails to submit the required documents within
the period, he/she must file the final composite income tax return not later than May
31st to the district tax office concerned to enjoy the benefits of deductions.
In case where an employee who applies incorrect amount of deductions by
submitting false or fake receipts, he/she shall be imposed the tax for the incorrect
deductions and penalties later by the law.
Proof of Documents
Eligibility and Issuer
∙Report of Exemption & Deduction
from Wage & Salary Income
- Taxpayer
∙Certified Copy of Foreigner's
Registration Card
- Employees who was hired in 2005
- Employees whose dependents were changed
- Issued by immigration office
∙Copy of Receipt for Insurance
Payment
- Employees who bought a policy of life,
property loss, and accident insurance
- Issued by insurance company
∙Copy of Receipt for Medical
Expenses
- Employees who paid more than 3% of
Gross wage as medical payments
- Issued by hospitals, pharmacies, etc.
∙Copy of Receipt for Education
Expenses
- Employees whose dependents or him/
herself are students
- Receipt issued by principal of school
※ Issued at vocational training facilities
Ⅰ. General 19
Proof of Documents
Eligibility and (or) Issuer
∙Copy of Receipt for Education
Expenses for Overseas Educational
Institutes
- Employees whose dependents go to schools
in foreign countries
- Receipt issued by principal of school
∙Copy of Receipt for Donation
- Organizations who received donations
∙Report for Deduction of Credit
Card Usage, etc.
- Receipt of Credit card payments
- Taxpayer
- Credit card, debit
companies, etc.
∙Application Report of Flat Tax
Rate for Foreign Employees
- Taxpayer who chooses separate taxation
method with 17% flat rate
∙Tax Credit Report of Foreigner's
Employment Income
- Foreign employees who meet the requirements
under the relevant law
∙Exemption Report of Foreigner's
Employment Income
- Foreign employees who was dispatched to
Korea by the agreement b/w the governments
∙Foreign Tax Credit Report
- Taxpayer who served the labor and paid
the income tax in foreign countries
card,
prepaid
card
2) Submission of Certified Copy of Foreigner's Registration Card
Instead of copy of resident registration card of Korean citizen, a foreigner shall
submit a 「certified copy of foreigner's card」 or other similar documents along
with the 「Report of Exemption and deduction from Wage & Salary Income」 to
the withholding agent.
3) Issuance of Receipt for Wage & Salary Income Taxes Withholding
Withholding agent shall make 3 copies of the receipt for wage & salary income
taxes withholding and give an each copy of the receipt to the tax office and
employee and maintain a copy of the receipt.
20 Easy Guide for Foreigners' Year-end Tax Settlement
Ⅱ. Taxation of Wage & Salary Income2)
A.
Adjusted Wage & Salary Income
A Wage & Salary Income earner may fill out the 「Report of Exemption and
Deduction from Wage&salary Income」attached after reading related-instructions
and then submit it to his/her withholding agent along with related supporting
documents
(receipts,
etc.)
for
the
preparation
of
his/her
year-end
exact
computation of Korean Wage & Salary Income Tax for the calendar year 2005.
First of all, Taxable Income of a wage&salary income earner is calculated to
determine his/her wage & salary income tax due.
1) Wage & Salary Income from Employment
At the first stage, as seen in the flow chart, to get the amount of adjusted wage
& salary income, the amount of non-taxable income is deducted from the total of
Wage & Salary income, which includes all kinds of salary, bonus and allowances.
An employee's wage & salary income subject to Korean income taxation is the
amount received as payment for labor performed in Korea. This income has two
types, Class A income and Class B income.
Class A:
ⅰ) Wage, salary, remuneration, allowance, bonus, and any other allowance of a
similar nature received in return for services
ⅱ) Income received as a bonus by a resolution at the stockholders or partners
general meeting of a corporation, or a similar deliberative organ
ⅲ) Amount treated as bonus under the Corporation Tax Law
ⅳ) Income, other than retirement income, received due to retirement
2) Wage & Salary Income is referred to as Wage & Salary Income, Payroll Income, Labor Income or Earned
Income in this writing.
Ⅱ. Taxation of Wage & Salary Income 21
Class B:
ⅰ) Wages and salaries received from a foreign agency or from the U.N. Forces
in Korea (excluding the U.S. Armed Forces)
ⅱ) Wages and salaries received from a foreigner or foreign corporation outside
Korea, excluding those claimed as a deductible expense for a Korean place
of business of a non-resident or a foreign corporation
ⅲ) Income
incurred
from
exercise
of
stock
options
granted
by
foreign
associated company
It is notable that if salary income paid to employees is deducted from taxable
income of a foreign corporation's permanent establishment in Korea to which they
belong, the salary income will be categorised as Class A income, not Class B
income, even though the income is paid directly by the foreign corporation's head
office in a foreign country.
Roughly speaking, the sorts of earning which counts as taxable income from an
employment are : an annual salary or wage; bonus; overtime; commission; tips or
gratuities; holiday pay; sick pay; earnings from a part-time employment; directors'
fees or other remuneration; and benefits-in-kind etc.
2) Income That Is Not Regarded As Employment Income
• Any income accruing from the difference between the acquisition value of such
stocks that is acquired by a member of employee stockholders association
determined by the law and decree and the market value.
• The insurance premium, trust installment or mutual aids installment imposed on
the employer in connection with the insurance, trust or mutual aids whose
contractor is an employee or whose beneficiary is an employee, his spouse, or
tother family member.
• Benefits obtained from a house provision which is provided to an officer who is
not a stockholder or a contributor, an employee who is not an officer and the
person who is paid the earned income by the State or local governments.
22 Easy Guide for Foreigners' Year-end Tax Settlement
• Research subsidies received by teachers of universities, junior colleges, and the
schools equivalent to them and research activity expenses received by persons
directly engaged in the research activities at the research institutes subject to
the Support of Specific Research Institutions Act, the government-contributed
research institutes established by a special Act, the local government-invested
research institutes under the Act on the Establishment and Operation of Local
Government-Invested Research Institutes, or the research institutes attached to
enterprises such as the small and medium enterprise, venture enterprise under
Article 15 ① 1 and 3 of the Enforcement Decree of the Technology
Development Promotion Act, which are the amounts with the limit of those
calculated by applying 10/100 to the total sum of wages. And an amount of
not more than 200,000 won per month from among the research activity
expenses received by the person who directly supports the research activities
determined by the Ordinance of the Ministry of Finance and Economy at the
research institutes.
• An amount not exceeding 30,000,000 won per year of the gross profits that an
employee may drive by exercising the stock options when the employee serves
in a domestic corporation determined by the Presidential Decree.
3) Non-taxable Wage & Salary Income
Non-taxable income is the income for which the Korea government waives its
taxing rights. Whether an application for non-taxation is made or not, such
income is not taxable, some of which are as follows :
• Special Taxation Treatment for Foreign Employee : limit is up to 30% of Total
Wage & Salary Income
- Provisions concerning such tax exemption, deduction, reduction, tax credit,
and year-end settlement shall be applicable same as resident.
Ⅱ. Taxation of Wage & Salary Income 23
- A foreigner may choose separate taxation of wage & salary income by
multiplying such income by 17/100 instead of non-taxable treatment on 30%
of total wage & salary income. In this case, provisions concerning such tax
exemption, deduction, reduction, and tax credit shall not be applicable.
• Pensions or payments of a consolation nature receivable by a person injured
while working
• Pay receivable by a retired employee, a retired teacher, a retired official, a
veteran, a former President or his bereaved family.
• Education fees prescribed by Presidential decree
• Payments in the nature of compensation for actual expenses
– wages that are received by a worker due to natural disasters and other
calamities, pays for day duty, night watch, or business travel
– compensation for driving one's own car, research subsidies for teachers,
news allowances for reporters : limit is ￦200,000/month
• Wages receivable by persons serving with a foreign government or the U.N.
and organizations thereof; in the case of a foreign government, the principle of
reciprocity shall be applied.
• Wages receivable by furnishing work or services overseas as follows:
– Pay of up to ￦1,500,000 per month receivable from furnishing service
overseas
(including
service
in deep-sea
fishing boats
or ocean-going
vessels)
– Overseas service allowance of public officials, etc.
• Fringe benefits of employees.
• Allowance for Night Duty received by Productive Laborers : The Maximum is
￦2,400,000/year
• Meal costs of less than ￦100,000 per month, Qualified School Expenses, etc.
• Pay receivable by an enlisted person in the armed forces or a person mobilized
under law.
24 Easy Guide for Foreigners' Year-end Tax Settlement
4) Adjusted Wage & Salary Income
In respect of a resident (or non-resident) having any wage income, the following
amount shall be deducted from the amount of gross income in the current year to
work out the adjusted gross amount.
Amount of Gross Income
Deduction Amount
Up to ￦5,000,000
Total amount
￦5,000,000～￦15,000,000
￦5,000,000 + 50% of the excess over ￦5,000,000
￦15,000,000～￦30,000,000
￦10,000,000 + 15% of the excess over ￦15,000,000
￦30,000,000～￦45,000,000
￦12,250,000 + 10% of the excess over ￦30,000,000
over ￦45,000,000
￦13,750,000 + 5% of salary exceeding ￦45,000,000
B.
Personal Deduction
With respect to Personal Deduction, a taxpayer may be qualified or not depending
on his/her status for the income allowance such as “Basic Deduction", "Additional
Deduction", "Additional Allowances for Small Number of Dependents".
Regarding the eligibility for Personal Deductions, persons eligible for spouse
deduction, dependents deduction, or exemption for handicapped or aged persons
must be family members who are listed on the Registration Card of the
her/himself actually living at the same domicile or residence with the taxpayer. A
person who has temporarily left the taxpayer's domicile or residence for reasons
of schooling, medical treatment, business, or work may still be entitled to the
deduction. The determination of eligibility shall be made based on the existing
conditions at the close of the tax period in question.
A Wage & Salary Income earner, whose family status already declared to NTS is
changed, has to submit an application for personal deductions with documentary
evidences before receiving Wage & Salary Income for December of each year.
Ⅱ. Taxation of Wage & Salary Income 25
1) Basic Deduction
A resident with Wage & Salary Income is entitled to an annual deduction for an
amount calculated by multiplying the number of family members falling under any
of the following sub-paragraphs by ￦1,000,000 per capita.
ⅰ) a resident taxpayer him/herself
ⅱ) a person who is the spouse of and lives with the taxpayer, and has no
annual income, or whose annual income is not more than ￦1,000,000 in the
aggregate.
ⅲ) dependents living in the same household with the taxpayer. A dependent
means a lineal family member or a brother/sister who is 20 years and under
or 60 years and more (55 years for woman) supported by the taxpayer and
who has no income or an income of not more than ￦1,000,000
In the case of a foreign taxpayer, a certified copy of the foreign registration
certificate of spouse or dependent is required for Basic Deduction.
The determination on whether a person falls on the dependents or handicapped
person shall be depend on the situation as of the 31st of December.
2) Additional Deduction
When a person who is qualified for Basic Deduction〔oneself, his/her spouse,
dependents〕falls under any of the following situation, the amount calculated by
multiplying the number of persons by the amount below, shall be deducted each
year from the taxpayer's income under each case.
ⅰ) where the person is 65 years old or more: ￦1,000,000 per capita
- 70 years old or more: ￦1,500,000 per capita
ⅱ) where the person is handicapped : ￦2,000,000 per capita
ⅲ) where the person is a married woman having her spouse, or a head of family
having dependents having no spouse: ￦500,000 per capita
ⅳ) where every employees who has lineal descendant under the age of 6 years:
￦1,000,000 per capita
26 Easy Guide for Foreigners' Year-end Tax Settlement
3) Additional Allowances for Small Number of Dependents
If the number of persons eligible for basic deduction is one or two, ￦1,000,000
or ￦500,000, respectively will be allowed for additional deduction.
C. Pension Premium Deduction
Pursuant to the Article 51-3 of the Income Tax Law, the total of the following
pension contribution paid for pension insurance in the name of the taxpayer
him/herself is deducted.
a. Pension insurance contribution paid by the taxpayer him/herself based on
National Pension Law
b. Contribution paid by the taxpayer him/herself based on Soldier Pension Law,
Civil Service Pension Law etc.
D. Special Deduction
Under the changes to the Individual Income Tax Law in 1996, the following listed
items (insurance premiums, medical expenses, educational expenses, contribution
expenses, etc.) were consolidated into the Special Deduction. Under Standard
Deduction System, a taxpayer who has not submitted supporting documents for
deduction or has a special deduction amount under ￦1,000,000 may receive
￦1,000,000 income deduction a year without submission of the supporting
documents. If a salary income earner wishes to have a separate income
deduction rather than the Standard Deduction, he/she must submit the necessary
supporting documents respectively to receive the income deductions as mentioned
above.
Ⅱ. Taxation of Wage & Salary Income 27
1) Insurance Premiums
Qualified insurance premiums include those paid by a Wage & Salary income
earners to Korean insurance companies (including Korean branches of foreign
insurance companies) located in Korea relative to the following types of insurance
(beneficiary can be either the taxpayer or the dependents who have no income for
the year): Life insurance, Life insurance for the handicapped, Damage & Accident
Insurance, Fire and Burglary Insurance and insurance similar thereto.
Types of Insurance
Deduction Amount
Medical Insurance Premium
total amount
Employment Insurance Premium
total amount
Other Security Insurance
up to 1,000,000
handicapped Only Security Insurance
up to 1,000,000
Maximum amount available for income deduction is generally ￦1,000,000 per
annum on average and this upper limit does not apply to medical care insurance
premium as seen below.
To apply for the deduction, supporting documents (i.e., original insurance
premium receipts, not copies) must be attached to the Report of Exemption and
Deduction from Wage & Salary Income. Insurance premium receipts issued by the
insurance company will indicate whether or not such insurance premiums qualify
for an income tax deduction. If supporting documents are not readily available,
then a certificate of payment of insurance premium issued by the concerned
insurance company must be attached to the Report.
2) Medical Expenses
Qualified medical expenses are those paid out to hospitals or drug stores in Korea for
the taxpayer him/herself and his/her dependents who resided in Korea with him/her.
Limit for deductions of medical expenses by taxpayer him/herself, the aged, and
the handicapped is abolished. Otherwise, deduction for qualified medical expenses
are allowed up to a maximum of ￦5,000,000 to the extent that such expenses
exceed 3% of earned income. For deduction, supporting documents (i.e., original
receipts) must be attached to the report.
28 Easy Guide for Foreigners' Year-end Tax Settlement
3) Education Expenses
Qualified education expenses are those expenses, such as school entrance fees,
tuition and any other school payments, paid by a Wage & Salary Income earner
for the taxpayer him/herself or his/her qualified spouse or dependents (except for
the graduate school expenses paid for the qualified spouse or dependents).
Limitation for this deduction is as follows :
ⅰ) Employee himself(herself) : No limitation, Graduate school is included in the
qualified educational facilities(includes course fees at the vocational competency
development and training facilities) for taxpayer himself(herself).
ⅱ) Kindergarten : ￦2,000,000 /person
ⅲ) Elementary School, Secondary & High School : ￦2,000,000 /person
ⅳ) University & College : ￦7,000,000 /person
Education expense from the overseas educational institutes that is equivalent to
the school of Korea under the Elementary and Secondary Education Act or the
Higher Education Act may be deducted also.
For tax deduction, supporting documents (i.e., original receipts, not copies) must
be attached to the Report. Where supporting documents are not readily available,
then a certificate for payments of tuition fees issued by the principal of the
respective school must be attached.
4) Housing Funds
This deduction includes Housing Savings Deduction, Repayment Deduction for
Principal&Interest for Housing and Long-term Mortgage Interest Deduction. The
limitation for this deduction is a total of ￦10,000,000.
In case an employee get a long-term mortgage for more than 15 years for the purpose
of Kukmin(small-size) house, on which the loan is secured, interest and its equivalent
qualified for deduction is up to ￦10,000,000 won a year.
Ⅱ. Taxation of Wage & Salary Income 29
5) Charitable Donations
Qualified charitable donations include amounts disbursed in Korea for the following
purposes :
ⅰ) 100% tax deductible donations
⦁Donations to the Korean government or local autonomous government bodies
(either in cash or in kind)
⦁Donations for national defense purposes (in cash)
⦁Donations to welfare facilities prescribed by the Presidential Decree, which are
available for public use free of charges or at practical charges from among
welfare facilities installed under the Social Services Act.
⦁Donations to government relief funds relative to disasters, earthquakes, floods,
etc. (either in cash or in kind)
⦁Consideration for the voluntary support served in Special Disaster Area
⦁Donations made to cover costs required for facilities, education, scholarship, or
research in private schools under the Private School Act, technical colleges under
the Technical College Act, hospitals attache to national universities, College of
Seoul National University and Industrial&Educational Corporation Corps. were
added.
ⅱ) 50% tax deductible donations
⦁Certain other charitable donations as allowed by the Article 73 of the Special
Tax Treatment Control Law e.g., donations made to qualified charitable
organizations such as schools, Red Cross(registered with the competent
government authorities) or others
ⅲ) 30% tax deductible donations
⦁Employee Stock Ownership Association Contribution Deduction.
ⅳ) 10% tax deductible donations
⦁Donations prescribed in the Article 34 ① of the Corporation Tax Law e.g.,
donations for the purpose of public interest of religion, art, education etc.
To obtain the deductions, supporting documents (i.e., original receipts, not
copies) must be attached to the Report.
30 Easy Guide for Foreigners' Year-end Tax Settlement
6) Deductions of Marriage, Funeral Service and Moving Expenses
Any resident whose gross wage income is not more than 25 million won may
deduct 1,000,000 won for marriage, funeral service and/or moving expenses from
the wage & salary income of the relevant year.
E.
Other Income Deductions
These
are
itemized
deductions
which
includes
Individual
Pension
Savings
Deduction, Investment Association Deduction, and Credit Card Usage Deduction.
Among these deductions, the Credit Card Usage Deduction is canvassed herein,
relevant for the purpose of this book.
1) Credit Card Usage Deduction
Expenditures by credit cards include the payments by credit cards, department
store cards, debit card, prepaid card with name registered, Cash receipt Usage, which
are issued only in Korea in the name of taxpayer or his/her qualified spouse or
dependents who have income less than ￦1,000,000. The credit cards payments
used only in Korea are subject to credit card usage deduction. Deduction amount
and limit is as follows.
Calculation of Deduction Amount
① Usage of Credit Card etc. = Credit Card + Debit Card + Prepaid Card + Cash
receipt Usage + Tuition fee payment for Educational institutions(Hakwon) through
Giro transfer
② Deduction Amount = [ ① - (total wage&salary Income of the year × 15%) ] × 20%
③ Limit of Deduction Amount= lesser of (20% of total wage&salary income, 5
million won)
However, the payments by credit cards for the following purposes are not entitled
to the credit card usage deduction.
ⅰ) Payments for company's expenses (i.e. entertainment made by an employees
credit card and reimbursed by the employer),
Ⅱ. Taxation of Wage & Salary Income 31
ⅱ) Payments for national or local taxes,
ⅲ) Payments for utilities (i.e. gas, telephone, etc.),
ⅳ) Payments for social costs such as medical insurance, pension, etc., and
ⅴ) Payments for education expenses.
vi ) Other Payments
– telephone charges include internet bill
– toll, apartment management fee, pur-chase price for valuable papers such
as gift certificates, lease rate
To obtain the deductions, supporting documents (i.e. certificates of credit card
usage amount issued by the respective credit card companies) must be attached
to the report.
F.
Calculated Income Tax
1) Tax Base (Taxable Income)
Taxable
Income
is
calculated
after
Personal
Deduction,
Pension
Premium
Deduction, Special Deduction and Other Income Deduction have been made from
the amount of Adjusted Wage & Salary Income.
2) Tax Rates and Tax Amount
After Tax Base is calculated from Adjusted Wage & Salary Income minus Income
Deductions, the amounts of income tax is calculated by applying progressive
marginal tax rates to respective tax base, as seen in the following table.
Tax Base
Tax Rates
Progressive Deduction
Up to ￦10,000,000
8%
-
￦10,000,000～￦40,000,000
17%
￦900,000
￦40,000,000～￦80,000,000
26%
￦4,500,000
over ￦80,000,000
35%
￦11,700,000
32 Easy Guide for Foreigners' Year-end Tax Settlement
G. Tax Credit
1) Tax Credit for Wage & Salary Income
The following amount shall be credited against total tax on Wage & Salary
Income. Where the amount of credit exceeds ￦500,000, the credit is limited to
￦500,000
Tax Amount
Amount of Tax Credit
up to ￦500,000
55% of total tax
more than ￦500,000
￦275,000 + 30% of amount over ￦500,000
2) Class B Taxpayer Association Credit
In the case of Class A income, it is subject to withholding tax by, and is the
responsibility of, the employer. However, as the employer paying Class B income
does not necessarily reside in Korea, the employee him/herself is responsible for
his/her personal income tax. A Class B income earner may either join a
Taxpayers' Association to pay monthly taxes, thereby enjoying 10% tax credit, or
may wait and file an annual tax return by the end of May of the following year
with no benefit of credit. If an employee has only Class B income, and has paid
his/her taxes through a Taxpayers' Association, or if he/she has both Class A
income and Class B income on which income tax is withheld monthly through
Taxpayers' Association, he/she is not required to file an annual tax return.
However, if a Class B income earner choose seprate taxation with 17% flat rate under
Article 18-2 ② under the Restriction of Special Taxation Act, this class will not be applied.
3) Foreign Tax Credit
In case where any foreign source Wage & Salary Income is added to the domestic Wage
& Salary Income amount of a taxpayer, if the foreign income tax amount as determined
by the Presidential Decree is paid or payable in a foreign country with respect to
such income of the foreign source, the taxpayer is eligible for foreign tax credit.
Ⅱ. Taxation of Wage & Salary Income 33
The foreign income tax amount may be credited from the calculated income tax amount in the
current year, within the limit of the amount calculated by multiplying the calculated total income
amount in the current taxable period calculated under Article 55 of Income Tax Law by the ratio
of the foreign source income to the total income amount in the current taxable period.
For application of this credit, supporting documents such as Foreign Tax Credit
Statement, Foreign Tax Credit Receipt are required to be submitted to NTS.
4) Other Tax Credits
Other than three credits above, there are Home Mortgage Interest Credit,
Long-term Stock Savings Credit.
․Home Mortgage Interest : 30% of interest paid
․Donation for political fund: limit is ￦100,000/year (amount over ￦100,000 may be
deducted from gross income)
※ Tax Exemption for Foreign Engineers
A foreign engineer who falls under the Enforcement Decree of RSTA §16 ① shall be
allowed to be exempted from income tax on employment income derived from the provision
of his services to a national within Korea if such employment income has been earned
until the month whereto belongs the date on which 5 years have passed since the first
date on which the foreign engineer provided his services in Korea. (RSTA §18 ①)
A foreign engineer shall be allowed to be exempted from income tax on employment
income derived by providing his services to a national within Korea under a contract for
the introduction of technologies as referred to in the Foreign Investment Promotion Act.
In this case the exemption amount shall be limited to the income earned until the month
whereto belongs the date on which 5 years have passed since the date of delivery of the
certificate of report on a contract for the introduction of such technologies. (RSTA §18 ②)
Foreign engineer shall file a written application for tax exemption to the tax
office not later than the 10th of the month next to that whereto belongs the
day on which he has provided a service.
34 Easy Guide for Foreigners' Year-end Tax Settlement
H. Taxes Due
1) Calculation of Payable / Refundable Tax
After tax credit is made, the calculated tax amount comes out. Then, the
pre-paid
income
tax
amount,
which has
been withheld
by an employee's
withholding agent based on Simplified Tax Withholding Table and paid to NTS
monthly, is deducted from the adjusted tax amount to work out the amount
payable or refundable.
2) Special Tax for Rural Development
Under the Law of Special Tax for Rural Development, an individual whose tax
liability has reduced under the Restriction of Special Taxation Act, Local Tax
Law, or Customs Law has responsibility of paying the Special Tax for Rural
Development(STRD). Accordingly, STRD is levied as a surtax on the amount
of exemption of individual income tax and is calculated by multiplying 20%
by tax base of STRD, which is the total of Home Mortgage Interest Credit
and
the
reduced
tax
amount
through
Investment
Association
Deduction
herein.
3) Inhabitant Tax
Inhabitant Tax has two types : per capita and pro rata. The tax base of Pro
rata Inhabitant Tax is the amount of income tax to be paid pursuant to the
provisions of Income Tax Law. That is, individuals liable to the payment of
income tax have a responsibility to pay inhabitant tax. A surcharge, pro rata
inhabitant tax, is added to income tax in computing the total tax liability (10%
of income tax).
Ⅲ. Examples of Income Tax Calcualtion 35
Ⅲ. Examples of Income Tax Calcualtion
1. Example one
< Information >
⦁Adam working for a private English school had Wage&Salary Income during
2005 as follows: He earned ￦3,000,000 every month. (For the sake of
convenience, he is assumed to have no bonuses)
⦁His family members are as follows: Adam (age 40), Mary (Adam's wife, age
35), David (Adam's son, age 5), Wilkins (Adam's Father, age 67)
⦁He paid ￦500,000 for life insurance premium, ￦300,000 for national pension
contribution, and ￦1,000,000 for education fee for David in Korea.
⦁He chose 30% exemption method under the article 18-2 of the RSTA.
⦁The amount withheld monthly by his withholding agent (the school) is as follows:
Based on the Simplified Tax Withholding Table(2005), the amount withheld
matching his situation is ￦22,120 (other than Inhabitant tax) every month.
< Calculation of Income Tax >
Total Income(excluding Non-taxable income)
￦25,200,000
Gross wage & Salary Income
Deduction for his Wage & Salary Income
Personal Deduction
– Basic Deduction
– Additional Deduction
Pension Premium Deduction
Special Deduction
– life insurance premium
– educational expense
Taxable Income
Tax amount (8%)
Tax Credit for Wage & Salary Income
Tax determined
Prepaid Tax
Payable Tax
￦25,200,000
11,530,000
4,000,000 (1,000,000×4)
2,000,000 (1,000,000×2)
300,000
500,000
1,000,000
￦ 5,870,000
￦ 469,600
￦ 258,280
￦ 211,320
￦ 265,440
￦ △54,120
36 Easy Guide for Foreigners' Year-end Tax Settlement
2. Example two
< Information >
1) Taxpayer & his Employer
⦁Taxpayer: John P. (660405-9342344)
⦁Employer: ABC Co. (123-33-34432)
2) Taxpayer's Family
⦁John has his spouse, 2 children (age 13, age 5) and mother (age 75)
3) Details of Wage&Salary income for each source
⦁ Gross payroll (current job): ￦51,000,000
- Salary: ￦40,000,000
- Bonus: ￦10,000,000
- Allowance: ￦1,000,000
⦁Gross payroll of the previous job (Woori co. 123-35-12342): ￦15,000,000
⦁Tax Withheld (current + previous): ￦800,000 (other than Inhabitant tax)
4) Detailed Items of Expenditures
⦁National Pension contribution: ￦1,000,000
⦁Insurance premium
- Medical Care Insurance Premium: ￦300,000
- Life Insurance Premium ￦600,000, Car Insurance Premium: ￦500,000
⦁Medical expenses
- Expense to hospital for spouse: ￦2,000,000
- Entrance Fee to hospital for mother: ￦1,000,000
- Payment to drugstore for mother: ￦400,000
- Purchase of a pair of glasses for sight recovery for mother: ￦300,000
⦁Education expenses
- Kindergarten Fee for a child: ￦1,000,000
- Middle School Fee for a child: ￦1,500,000
⦁Donation to government relief funds relative to floods: ￦900,000
⦁Credit Card Usage: ￦15,200,000
(Cash Credit Service ￦2,500,000 is included.)
Ⅲ. Examples of Income Tax Calcualtion 37
< Calculation of Income Tax >
30% Exemption Method
Total Income(excluding Non-taxable income)
￦46,200,000
Wage & Salary Income
￦46,200,000
Deduction for his Wage & Salary Income
13,810,000
Personal Deduction
- Basic Deduction
5,000,000 (1,000,000×5)
- Additional Deduction
2,500,000
Pension Premium Deduction
1,000,000
Special Deduction
- insurance premium
300,000
․Medical Care Insurance
․Other Premium
1,000,000
- medical expense
2,314,000
- educational expense
2,500,000
900,000
- donation
1,154,000
- credit card usage
Taxable Income
￦15,722,000
Tax amount (17%)
￦ 1,772,740
Tax Credit for Wage & Salary Income
￦
Tax determined
￦ 1,115,918
Prepaid Tax
￦
800,000
Payable Tax
￦
315,918
Separation Taxation Method with 17% Flat Rate
￦11,220,000 (Tax amount) = 66,000,000 × 17%
656,822
38 Easy Guide for Foreigners' Year-end Tax Settlement
[Tax Form 24(1)]
Control
No.
（page1)
□ Receipt for Wage & Salary Income Taxes Withholding
□ Statement on Wage & Salary Income Payment
(Copy to report by issuer)
Residency
Resident 1/Non-Resident 2
Nationality
Citizen 1/Foreigner 9
Application of Flat tax rate
Yes 1 / No 2
State of Residence
State Code
① Company Name
ABC Co.
② Representative Name
P. Paul
③ Tax Reg. No.
123-33-34432
④ Resident Reg. No.
560405-9342344
⑤ Address
101-1 Jongro-1ga, Jongro-gu, Seoul
John P.
⑦ Resident(Alien) Reg. No.
660405-9342344
Employee ⑥ Name
(Taxpayer) ⑧ Address
1012 Jongro-1ga, Jongro-gu, Seoul
⑨ Period Attributable (mm/dd/yy)
From
To
⑩ Period of Tax Exemption
From
To
Description
Current Job
Previous Job
Previous Job
Taxpayer Association
Total
ABC Co.
Woori Co.
Details ⑪ Company Name
⑫ Tax Reg. No.
123-33-33432
123-35-12342
of
Income ⑬ Gross Payroll
28,000,000
10,500,000
by
⑭ Gross Bonus
7,700,000
0
Company ⑮ Deemed Bonus
0
0
ꊘ
ꊉ
Total
35,700,000
10,500,000
46,200,000
ꊙ Overseas Allowances
ꊉ
ꊚ Night time Allowances
ꊉ
ꊛ Other Allowances
ꊉ
ꊒ Total (ꊉ
ꊊ
ꊙ+ꊉ
ꊚ+ꊉ
ꊛ)
Non-taxable
Income
19,800,000
19,800,000
ꊓ Gross Wage & Salary (ꊉ
ꊊ
ꊘ)
46,200,000
ꊕ Per'l Pension Savings Deduction
ꊌ
ꊔ Deduction for Wage & Salary Income
ꊊ
13,810,000
ꊖ Pension Savings Deduction
Special ꊌ
ꊕ Adjusted Wage & Salary Income
ꊊ
32,390,000
ꊗ Investment Assn Deduction
Deduction ꊌ
by
ꊖ Employee
ꊊ
1,000,000
ꊘ Credit Card Usage Deduction
ꊌ
1,154,000
Basic
Special ꊌ
ꊗ Spouse
ꊊ
1,000,000
ꊙ Employee Stock Ownership Deduction
Deduction
Taxation ꊌ
ꊚ Retirement Pension deduction
ꊘ Dependents (3)
ꊊ
3,000,000
ꊙ The Aged (1)
ꊊ
1,500,000
ꊛ Sub-Total
ꊌ
1,154,000
ꊚ The Handicapped
ꊒ Taxable Income (Tax Base)
ꊍ
15,722,000
Additional ꊊ
Deduction ꊊ
ꊛ Women
ꊓ Calculated Income Tax
ꊍ
1,772,740
ꊒ under 6 years old (1)
ꊋ
1,000,000
ꊔ Income Tax Act
ꊍ
ꊓ For Small Dependents
ꊋ
ꊕ RSTA
ꊍ
Tax
Items
Exemption ꊍ
ꊔ For Pension Contribution
1,000,000
ꊖ
Deduc- ꊋ
tion
ꊕ Insurance
ꊋ
1,300,000
ꊗ Total Exemptions
ꊍ
ꊖ Medical Expenses
ꊋ
2,314,000
ꊘ Tax Credit for Class A
ꊍ
656,822
ꊗ Education Expenses
ꊋ
2,500,000
ꊙ Taxpayer Assn. Credit
ꊍ
ꊘ Housing Fund
ꊋ
ꊚ Home Mortgage Interests
ꊍ
Special
ꊙ Donation
ꊋ
900,000
ꊛ Foreign Tax Credit
ꊍ
Tax
Deduction
Credit ꊎ
ꊚ Marriage,Funeral,Moving
ꊋ
ꊒ Political Money Donation
ꊛ
ꊋ
ꊓ
ꊎ
ꊒ Sub-Total
ꊌ
7,014,000
ꊔ
ꊎ
ꊓ Standard Dedcution
ꊌ
ꊕ Sub-Total
ꊎ
656,822
Final Tax Liability (ꊍ
ꊓ -ꊍ
ꊗ-ꊎ
ꊕ)
ꊔ Income after Deduction
ꊌ
16,876,000
1,115,918
Special Tax for
Cash receipt
Classification
Income Tax
Inhabitant Tax
Total
Agriculture
Usage
ꊖ Final Tax Liability
ꊎ
1,115,918
111,591
1,227,509
Tax
ꊗ Previous Job
ꊎ
300,000
30,000
330,000
Prepaid
Tax
ꊘ Current Job
ꊎ
500,000
50,000
550,000
￦
ꊙ Taxes Due
ꊎ
315,918
31,591
347,509
List names of dependents subject to deduction. (For each dependent, mark ○ on the column to indicate the type of deduction. The
employee filling out this form should not be included in the dependent list. Use and attach a separate sheet when rows run out)
Relation Name
Basic
Medical
Education Credit Card
Resident Reg. No.
Handicapped Under 6
Insurance
ship
Deduction
years old
Expense
Expense
Usage
2
Mrs. B
300103-2456003
○
○
3
Mrs. A
620102-2234001
○
○
4
Tom F
900505-1234004
○
○
4
Judy P.
980505-2234005
○
○
○
※ Relationship Code : Linear ascendant of employee=1, Linear ascendant of spouse=2, spouse=3, Linear descendent=4, Brother and Sister=5, others=6
(Please state relationship to employee and spouse for 4,5,6,)
We acknowledge the withholding (or payment) of above taxes (or payroll income).
January . 2006
Taxes withheld by
(Signature or seal)
Under "Cash receipt Usage" list only the amount that was issued a cash receipt.
Employer
Ⅲ. Examples of Income Tax Calcualtion 39
[Tax Form37]
（page1)
Report of Exemption & Deduction from Income/
Report of Exemption & Deduction from Wage & Salary Income
(For the Year-end Settlem ent of 2005 Incom e)
Employee
Name
John P.
Resident (Alien)
Reg. No.
660405-9342344
Employer
Name
(Company Name)
ABC Co.
Tax Registration
No.
123-33-34432
Basic Deduction
Additional(If applicable, mark “○”)
Aged
Description Relationship
Code
Name
Myself
Personal
Deduction
Spouse
Dependent
3
Address
Basic
Dedu
ction
101-1 Jongro-1ga
Jongro-gu, Seoul
○
Resident (Alien)
Reg. No
Mrs. A
620102-2234001
65
～
69
Credit
under Insur Medi Educ
Card
handi Wo 6 ance cal ation
over capped man years Prem Expe Expe Usage
Deduc
70
old ium nses nses
tion
○
○
101-1 Jongro-1ga
Jongro-gu, Seoul
Mother
Mrs. B
300103-2456003
Child
Tom F
900505-1234004
○
○
Child
Judy P.
980505-2234005
○
○
○
○
○
○
○
○
※ The child should be the one who was born after Jan. 1, 1985 for the child deduction.
※ Relationship Code : Linear ascendant of employee=1, Linear ascendant of spouse=2, spouse=3, Linear descendent=4,
Brother and Sister=5, others=6 (Please state relationship to employee and spouse for 4,5,6,)
Place of duty
Pension
Deduction
Items
1,000,000
Total
1,000,000
Class
Previous
premium
Current
premium
Previous
premium
Current
premium
Employment
Insurance
General Ins. (life, accident, etc.)
premium
Insurance for the Handicapped
premium
Total
Special
Deduction
Medical
Expenses
Limit
Deduction Amt.
Total Amt.
Current Place
Breakdown of Payment
Health Ins.
Insurance
Premium
Premium Paid
Previous Place
Pension
Premium
Amt. Paid
Total Amt.
1,000,000
1,000,000
Limit
Total Amt.
300,000
Total Amt.
300,000
Total Amt.
Total Amt.
1,000,000
1,000,000
1,000,000
1,000,000
1,300,000
1,300,000
For Dependents
expenses
2,000,000
-
614,000
Him/herself․the Aged․
the Handicapped
expenses
1,700,000
-
1,700,000
3,700,000
Total(ⓐ)
2,314,000
Total
medical
expenses
Total(ⓑ+ⓒ)
expenses
Credit Card( Cash
receipt) Usage (ⓑ)
expenses
Cash Usage(ⓒ)
expenses
Him/Herself
(include the graduate student)
Tuition
For Child before entering an
elementary school ( )
Tuition etc.
1,000,000
2 mil/person
1,000,000
Tuition
1,500,000
2 mil/person
1,500,000
Education For Students ( )
(elementary, secondary, high)
Expenses
For Undergraduates (
(college or university)
)
Tuition
For the handicapped (
)
Tuition etc.
Total education expenses
Total Amt.
7 mil/person
Total Amt.
2,500,000
2,500,000
40 Easy Guide for Foreigners' Year-end Tax Settlement
(page2)
Items
Breakdown of Payment
Housing savings
Housing
Funds
Class
Housing loans with savings
principle and
Interest
Mortgage loan (over 10 years)
interest
Special
Total Housing Fund Deduction
Deduction
Donation for 100% deductible
Donation Amt.
Donation for 50% deductible
Donation Amt.
Donation for 30% deductible
Donation Amt.
Donation for 10% deductible
Donation Amt.
Donation
Amount Paid
Limit
Deduction Amt.
900,000
Total Amt.
900,000
deposit
Total Amount
Marriag, Funeral, Moving Expenses
(Personal)
Pension Plan
Deduction
Investment
Assn.
Deduction
Other
Deductions Credit Card
Usage
Deduction
900,000
Signed after Jan. 1, 2001
contribution
Signed before Dec. 31, 2000
contribution
2,400,000
Total
Invested after Jan. 1, 2002
investment
Issued in the your name
Amt. used
Issued in the name of your qualified
spouse or dependents.
Amt. used
Cash receipt (after Jan.'05)
Amt. used
GIRO receipt of private teaching institutes
Amt. used
12,700,000
Total Deduction
1,154,000
Employee Stock Ownership Assn. Contribution
contribution
Retirement Pension Deduction
contribution
Breakdown
Kinds of tax credit
Rate
Amt. paid (￦)
Foreign Tax
Tax
Credit
Tax
Home mortgage interest
Credit
Donation for
Political money
Purpose of Entry
Foreign
Employee
Date of tech. importation
or beginning of service
Exemption Application for
Foreign Employment Income
Amt. paid (＄)
-
Country
Date of
Submission of
Application
Working Period
Interest Paid in
2005
Date of Payment
Total Donation
100,000 Limit
Overseas
Working Place
Position
30%
□ Convention b/w governments
□ technology Importation contract
□ Exemption under RSTA
Expiration Date of
Exemption
Date of
Date of
Acceptance
Submission
In accordance with the Article 140 of the Income Tax Law, I hereby file this report.
Date: Jan. , 2006
Taxpayer :
(Signature)
Do you submit an application form for flat rate tax of foreign employee?
Previous Company Name
(Tax Reg. No.)
Woori Co.
(101-81-00021)
Total Wage&Salary
Yes □ No □
￦ 15,000,000
The Receipt attachs?
Yes □ No □
※ You should report final composite tax return unless you combine wage & salary income from previous company attaching "Receipt for Wage & Salary
Income Taxes Withholding" issued by former employer, otherwise you may be if you received.
Ⅳ. Examples of Actual Q&A on NTS website 41
Ⅳ. Examples of Actual Q&A on NTS website
1. Question on taxes deducted from salary by employer
A. Question
I am currently teaching as an English teacher in Korea. I am earning ￦1,900,000
per month, and am being taxed at a rate of 7% per month....￦133,000 is
deducted from my pay each month. I have been informed that this amount is
incorrect, and I should only be getting 3.5% deducted per month. Can you tell
me if this information is correct?
If I suspect that my Employer has not registered me with the NTS, and are not
paying my taxes at all, is there any way I can find out. I do not wish to work for
a dishonest employer. I have tried requesting a copy of my tax certificate from
my Employers, but this has been denied.
Your advice and answers would be appreciated.
B. Answer
As far as individual income tax is concerned, when you have earned monthly
income of ￦1,900,000, the income tax amount to be withheld from your wage is
￦24,470 monthly according to the Simplified Tax Withholding Table (assuming the
number of your family is one, just yourself, which means you have no qualified
spouse or dependents who live together with you in Korea).
However, to take into account the contribution amount under the National Pension
Scheme, the amount to be deducted from your monthly income may increase.
Although, National Tax Service is not in charge of the National Pension Scheme,
We would like to outline the system briefly for your convenience.
Generally speaking, foreigners working at the workplace with more than 5 full-time
employees are included in the mandatory coverage of the Scheme, with some exceptions
(For further information, contact National Pension Corporation to the number 1355 without
dialing code). The contribution of workplace-based insured persons is equally shared
between the employer and the employee.
42 Easy Guide for Foreigners' Year-end Tax Settlement
The contribution rate for the insured person is 9%, which is normally calculated by
multiplying the insured person's Standard Monthly Income shown on the National Pension
Contribution Table, which has a similar function to Simplified Tax Withholding Table
for income tax withheld, by contribution rate.
In the case of monthly income of 1.9 million won, the portion of contribution an
employee should assume, which is to be deducted from his/her wage, is ￦83,700.
To sum up, in your case, the amount deducted from your monthly salary will be at
least ￦108,170(Income Tax withheld + National Pension Contribution). Moreover, a
bit of residence tax and medical insurance fee may be added.
To add one thing, your employer should accept your request to present a copy of your
tax certificate(Receipt for Wage & Salary Income Tax Withholding). When you retire
from your current job before the end of this year, your employer would have responsibility
to have your tax status settled for you at the time of your retirement. So, you could
get tax refunded or pay more tax then from(to) your employer.
2. Question on tax return of a taxpayer who has income(s) other than earned
income.
A. Question
I have been an employee in a company and earned salary income since August
this year, and, happened to earn some performance fee from a TV broadcasting
company. In this case, do I have to file the final tax return next year in addition
to the year-end tax settlement of the end of this year?
B. Answer
You may be treated as a resident (taxpayer) when you have an occupation which requires
you to reside in Korea one year or more. Then, you are supposed to file an income
tax return for your worldwide income including your Korean source income. Therefore,
when you do not have any foreign-source income, you only have to file a return on
your Korean source income.
If you had Wage and Salary Income only, your income tax liability would be
settled through the year-end settlement. However, in your case, as you had an
occasional income (Other Income) from a television broadcasting company (80%
Ⅳ. Examples of Actual Q&A on NTS website 43
of the amount will be deducted as necessary expenses when calculating taxable
income) as well as Wage&Salary Income, you are subject to file income tax return
for the two kinds of income by the end of May next year to the district tax office
concerned.
3. Difference in tax treatment between resident and non-resident
A. Question
I've been here in korea just for three months working at a company incorporated
in Korea. Recently the company requested me to hand in an application of tax
allowances for year-end tax settlement. My question is whether there is any kind
of discrimination against foreign labor-income earners.
B. Answer
A person is for the tax purpose either a resident or a non-resident of Korea
depending on his status on residence or domicile. Thus, you have to identify
whether you are to be treated as resident or non resident (Having a job which
substantially needs more than 1 year of stay in Korea, you may meet the criterion
for resident even if you have resided in Korea less than 1 year).
A resident is liable to income tax on items of income derived from sources both
within and outside Korea. On the other hand, a non-resident is liable to income tax
only on items of income derived from sources within Korea. Under the income tax
law, income earned by both residents and non-residents is subject to global and
schedular taxation. Under global taxation, real estate rental income, business
income, earned income, temporary property income, and miscellaneous income
attributed to a resident are aggregated and taxed progressively.
Interest and
dividends are subject to tax withholding. Non-residents are similarly taxed on income
from Korean sources. The tax rates on individual income range from 8% to 35%.
Although most of the provisions concerning the tax base and tax amount of
residents shall apply to a non-resident who has earned wage and salary income
in Korea, the non-resident taxpayer is not entitled to basic deduction(except for
oneself), additional deduction(except for oneself) and special deduction.
44 Easy Guide for Foreigners' Year-end Tax Settlement
4. Other Frequently Asked Questions
What kind of taxes are there in Korea?
Taxes in Korea comprise national and local taxes. National taxes are divided into
internal taxes, customs duties, and three earmarked taxes; the local taxes include
province taxes and city & county taxes as shown below.
The national internal taxes consist of direct and indirect taxes, and each consists of six and
five taxes, respectively. Of these eleven taxes, Income Tax, Corporation Tax, and Value
Added Tax make up the bulk of the Korean tax revenue. There also exist three national
earmarked taxes, Transportation Tax, Education Tax, and Special Tax for Rural Development;
the revenues from these sources go directly to pre-designated government programs.
There are seventeen local taxes, and they are divided into province and city & county
taxes. At the province level, there are four ordinary taxes and three earmarked taxes.
At the city & county level, there are eight ordinary taxes and two earmarked taxes. In
the six large specially designated cities that are run as autonomous local
administrative units, the tax composition is slightly different from that of the provinces
and cities or counties, although the residents are required to pay the same taxes.
What is the concept and functions of Taxpayer Associations for Class B wage and
salary income earners?
Class B wage and salary income earners may organize taxpayer associations
through which they may pay taxes. A taxpayer association shall collect income tax
from the members each month. And income tax for each month collected by a
taxpayer association will be paid to the government by the 10th day of the following
month. Tax credit for payment of tax by taxpayer association is 10%.
Would you explain withholding tax settlement for Class A wage and salary income in brief?
If wage or salary is paid monthly, the tax amount to be withheld is calculated by
the "Simplified Tax Table" attached at the end of the Income Tax Law. Then a
person subject to tax withholding must calculate the total annual tax amount in
January of the following year or at the time of the last payment of income in the
year (i.e., when the income earner completes employment during the year) and
collect or refund the difference between the tax amount payable. This amount is
calculated by applying the basic tax rates and the tax amount withheld, already
through the Simplified Tax Withholding Table
Ⅳ. Examples of Actual Q&A on NTS website 45
What are penalty taxes to my employer on failures to withhold tax and on failures
to report withholding invoices?
If a person subject to tax withholding fails to withhold tax at source or fails to pay
the government tax withheld within the payment period, a penalty tax3) shall be
charged. On the other hand, if a concerned person fails to submit a payment report
within the reporting period or if the reported facts concerning payment are found to
be unclear as specified by the Presidential Decree, a penalty in the amount of 2%
of the payment due shall be charged.
Is there a way we can get a refund for last year's income tax?
The tax amount taken off your wage is treated as a credit against the overall
amount of tax payable by you for the tax year in question. In January of the
following year or at the time of the last payment of income in the year, your tax
liability is settled and finalized through exact calculation by applying the related tax
rates. And then, the balance between the sum of the amount of tax withheld
monthly and final tax due to be paid is collected or refunded to you, which means
you have to check your tax settlement with your employer.
Helpline for Foreigners
02-397-1440
3) If a withholding agent does not withhold income tax on payment or does not pay
the withheld tax to tax authority by the due date, a penalty tax shall be imposed
in the amount no greater than 10% of the payable tax, but larger of the two:
(1) Unpaid tax(shortfall amount in the event payment was not made in full) ×
the number.of days past the due date to the date of voluntary filing or
date of payment notification × interest rate as prescribe by the Presidential
Decree, the calculation of which shall be based on the interest rate
financial service providers apply to late loan repayments
(2) 5/100 of the unpaid tax(shortfall amount in the event payment was not made in full)
46 Easy Guide for Foreigners' Year-end Tax Settlement
Ⅴ. Forms
1. Receipt for Wage & Salary Income Taxes Withholding (Statement on
Wage & Salary Income Payment)
2. Report of Exemption & Deduction from Wage & Salary Income
Ⅴ. Forms 47
[Tax Form 24(1)]
Control
No.
（page1)
□ Receipt for Wage & Salary Income Taxes Withholding
□ Statement on Wage & Salary Income Payment
(Copy to report by issuer)
Residency
Resident 1/Non-Resident 2
Nationality
Citizen 1/Foreigner 9
Application of Flat tax rate
Yes 1 / No 2
State of Residence
State Code
① Company Name
② Representative Name
③ Tax Reg. No.
④ Resident Reg. No.
⑤ Address
⑦ Resident(Alien) Reg. No.
Employee ⑥ Name
(Taxpayer) ⑧ Address
⑨ Period Attributable (mm/dd/yy)
From
To
⑩ Period of Tax Exemption
From
To
Description
Current Job
Previous Job
Previous Job
Taxpayer Association
Total
Details ⑪ Company Name
⑫ Tax Reg. No.
of
Income ⑬ Gross Payroll
by
⑭ Gross Bonus
Company ⑮ Deemed Bonus
ꊘ
ꊉ
Total
ꊙ Overseas Allowances
ꊉ
ꊚ Night time Allowances
ꊉ
ꊛ Other Allowances
ꊉ
ꊒ Total (ꊉ
ꊊ
ꊙ+ꊉ
ꊚ+ꊉ
ꊛ)
Non-taxable
Income
ꊓ Gross Wage & Salary (ꊉ
ꊊ
ꊘ)
ꊕ Per'l Pension Savings Deduction
ꊌ
ꊔ Deduction for Wage & Salary Income
ꊊ
ꊖ Pension Savings Deduction
Special ꊌ
ꊕ Adjusted Wage & Salary Income
ꊊ
ꊗ Investment Assn Deduction
Deduction ꊌ
by
ꊖ Employee
ꊊ
ꊘ Credit Card Usage Deduction
ꊌ
Basic
Special ꊌ
ꊗ Spouse
ꊊ
ꊙ Employee Stock Ownership Deduction
Deduction
Taxation ꊌ
ꊚ Retirement Pension deduction
ꊘ Dependents
ꊊ
ꊙ The Aged
ꊊ
ꊛ Sub-Total
ꊌ
ꊚ The Handicapped
ꊒ Taxable Income (Tax Base)
ꊍ
Additional ꊊ
Deduction ꊊ
ꊛ Women
ꊓ Calculated Income Tax
ꊍ
ꊒ under 6 years old
ꊋ
ꊔ Income Tax Act
ꊍ
ꊓ For Small Dependents
ꊋ
ꊕ RSTA
ꊍ
Tax
Items
Exemption ꊍ
ꊔ For Pension Contribution
ꊖ
Deduc- ꊋ
tion
ꊕ Insurance
ꊋ
ꊗ Total Exemptions
ꊍ
ꊖ Medical Expenses
ꊋ
ꊘ Tax Credit for Class A
ꊍ
ꊗ Education Expenses
ꊋ
ꊙ Taxpayer Assn. Credit
ꊍ
ꊘ Housing Fund
ꊋ
ꊚ Home Mortgage Interests
ꊍ
Special
ꊙ Donation
ꊋ
ꊛ Foreign Tax Credit
ꊍ
Tax
Deduction
Credit ꊎ
ꊚ Marriage,Funeral,Moving
ꊋ
ꊒ Political Money Donation
ꊛ
ꊋ
ꊓ
ꊎ
ꊒ Sub-Total
ꊌ
ꊔ
ꊎ
ꊓ Standard Dedcution
ꊌ
ꊕ Sub-Total
ꊎ
Final Tax Liability (ꊍ
ꊓ -ꊍ
ꊗ-ꊎ
ꊕ)
ꊔ Income after Deduction
ꊌ
Special Tax for
Cash receipt
Classification
Income Tax
Inhabitant Tax
Total
Agriculture
Usage
ꊖ Final Tax Liability
ꊎ
Tax
ꊗ Previous Job
ꊎ
Prepaid
￦
Tax
ꊘ Current Job
ꊎ
ꊙ Taxes Due
ꊎ
List names of dependents subject to deduction. (For each dependent, mark ○ on the column to indicate the type of deduction. The
employee filling out this form should not be included in the dependent list. Use and attach a separate sheet when rows run out)
Relation Name
Basic
Medical
Education Credit Card
Resident Reg. No.
Handicapped Under 6
Insurance
ship
Deduction
years old
Expense
Expense
Usage
Employer
※ Relationship Code : Linear ascendant of employee=1, Linear ascendant of spouse=2, spouse=3, Linear descendent=4, Brother and Sister=5, others=6
(Please state relationship to employee and spouse for 4,5,6,)
We acknowledge the withholding (or payment) of above taxes (or payroll income).
January . 2006
Taxes withheld by
(Signature or seal)
Under "Cash receipt Usage" list only the amount that was issued a cash receipt.
48 Easy Guide for Foreigners' Year-end Tax Settlement
[Tax Form37]
（page1)
Report of Exemption & Deduction from Income/
Report of Exemption & Deduction from Wage & Salary Income
(For the Year-end Settlem ent of 2005 Incom e)
Employee
Name
Resident (Alien)
Reg. No.
Employer
Name
(Company Name)
Tax Registration
No.
Basic Deduction
Additional(If applicable, mark “○”)
Aged
Description Relationship
Code
Name
Resident (Alien)
Reg. No
Address
Basic
Dedu
ction
65
～
69
Credit
under Insur Medi Educ
Card
handi Wo 6 ance cal ation
over capped man years Prem Expe Expe Usage
Deduc
70
old ium nses nses
tion
Myself
Personal
Deduction
Spouse
3
Dependent
※ The child should be the one who was born after Jan. 1, 1985 for the child deduction.
※ Relationship Code : Linear ascendant of employee=1, Linear ascendant of spouse=2, spouse=3, Linear descendent=4,
Brother and Sister=5, others=6 (Please state relationship to employee and spouse for 4,5,6,)
Place of duty
Pension
Deduction
Pension
Premium
Premium Paid
Limit
Previous Place
Total Amt.
Current Place
Total Amt.
Total
Items
Breakdown of Payment
Class
Previous
premium
Total Amt.
Current
premium
Total Amt.
Previous
premium
Total Amt.
Current
premium
Total Amt.
General Ins. (life, accident, etc.)
premium
1,000,000
Insurance for the Handicapped
premium
1,000,000
For Dependents
expenses
-
Him/herself․the Aged․
the Handicapped
expenses
Total(ⓐ)
Health Ins.
Insurance
Premium
Employment
Insurance
Amt. Paid
Limit
Total
Special
Deduction
Medical
Expenses
Total
medical
expenses
Total(ⓑ+ⓒ)
expenses
Credit Card( Cash
receipt) Usage (ⓑ)
expenses
Cash Usage(ⓒ)
expenses
Him/Herself
(include the graduate student)
Tuition
Total Amt.
For Child before entering an
elementary school ( )
Tuition etc.
2 mil/person
Tuition
2 mil/person
Education For Students ( )
(elementary, secondary, high)
Expenses
For Undergraduates (
(college or university)
)
Tuition
7 mil/person
For the handicapped (
)
Tuition etc.
Total Amt.
Total education expenses
Deduction Amt.
Ⅴ. Forms 49
(page2)
Items
Breakdown of Payment
Housing savings
Housing
Funds
Class
Amount Paid
Housing loans with savings
principle and
Interest
Mortgage loan (over 10 years)
interest
Special
Total Housing Fund Deduction
Deduction
Donation for 100% deductible
Donation Amt.
Donation for 50% deductible
Donation Amt.
Donation for 30% deductible
Donation Amt.
Donation for 10% deductible
Donation Amt.
Donation
Limit
Deduction Amt.
deposit
Total Amt.
Total Amount
Marriag, Funeral, Moving Expenses
(Personal)
Pension Plan
Deduction
Investment
Assn.
Deduction
Other
Deductions Credit Card
Usage
Deduction
Signed after Jan. 1, 2001
contribution
Signed before Dec. 31, 2000
contribution
2,400,000
Total
Invested after Jan. 1, 2002
investment
Issued in the your name
Amt. used
Issued in the name of your qualified
spouse or dependents.
Amt. used
Cash receipt (after Jan.'05)
Amt. used
GIRO receipt of private teaching institutes
Amt. used
Total Deduction
Employee Stock Ownership Assn. Contribution
contribution
Retirement Pension Deduction
contribution
Breakdown
Kinds of tax credit
Rate
Amt. paid (￦)
Foreign Tax
Tax
Credit
Tax
Home mortgage interest
Credit
Donation for
Political money
Purpose of Entry
Foreign
Employee
Date of tech. importation
or beginning of service
Exemption Application for
Foreign Employment Income
Amt. paid (＄)
-
Country
Date of
Submission of
Application
Working Period
Interest Paid in
2005
Date of Payment
Total Donation
100,000 Limit
Overseas
Working Place
Position
30%
□ Convention b/w governments
□ technology Importation contract
□ Exemption under RSTA
Expiration Date of
Exemption
Date of
Date of
Acceptance
Submission
In accordance with the Article 140 of the Income Tax Law, I hereby file this report.
Date: Jan. , 2006
Taxpayer :
(Signature)
Do you submit an application form for flat rate tax of foreign employee?
Previous Company Name
(Tax Reg. No.)
Total Wage&Salary
Yes □ No □
The Receipt attachs?
Yes □ No □
※ You should report final composite tax return unless you combine wage & salary income from previous company attaching "Receipt for Wage & Salary
Income Taxes Withholding" issued by former employer, otherwise you may be if you received.
<Appendix> Class B Taxpayer Association
Name
Tel
Location
United States
Embassy
397-4348
82 Sejongno, Jongno-gu, Seoul
Embassy of
Japan
733-5626
18-11 Junghak-dong, Jongno-gu, Seoul
Abroad
Employment
757-9582
163-3 Euljiro 2-ga, Jung-gu, Seoul
Kukje
6676-2460
13th Fl. Hanhwa Securities Bldg. 23-5
Yeoeuido-dong, Yeongdeung-gu, Seoul
Samil
796-7000
21st Fl. Hanil Bldg. 191 Hangangno 2-ga,
Yongsan-gu, Seoul
Korea
3271-3104
21th Fl. First Bank Bldg. 100 Jongno 1-ga,
Jongno-gu, Seoul
Namsan
3438-2488
15th Fl. Construction Bldg. 71-2
Nonhyeon-dong, Gangnam-gu, Seoul
Seoul
Regional
784-9265
4th Fl. Bridge Securities Bldg. 25-10
Yeoeuido-dong, Yeongdeungpo-gu, Seoul
Kangnam
2112-0924
9th Fl. Star Tower 737 Yeoksam-Dong,
Gangnam-gu, Seoul
Seyang
3703-8745
12th Fl. Jeokseon Hyundai Bldg. 80
Jeokseon-dong, Jongno-gu, Seoul
Amkor
460-5448
280-8 Seongsu 2-ga, Seongdong-gu,
Seoul
KwangGyo
(031) 255-8500
3rd Fl. Daedo Bldg. 128-13 Maesanno
3-ga, Gwonseon-gu, Suwon
Korean
Mariners
(051) 462-3633
84-14 Jungangdong 4-ga, Jung-gu, Busan
Youngnam
(051) 636-3893
541Ho Jayu Market Bldg., 830-24,
Beomil-dong, Dong-gu, Busan
DongJIn
(051) 462-7691
1406 Tongun Bldg. 1211-1
Choryang-dong, Dong-gu, Busan
Busan
Gyeongnam
(051) 552-3147
7-602 Hanyang Apt. Nangmin-dong,
Donglae-gu, Busan
National Tax Service provides following foreign taxpayer services.
Foreign Taxpayer Help-line (English)
☎ +82-2-397-1440
Q&A, Foreign Taxpayer Advocate (English)
www.nts.go.kr/eng
English Web Page of NTS
www.nts.go.kr/eng
National Tax Consultation Center
☎ 1588-0060
NTS Hometax Service
www.hometax.go.kr
Easy Guide for Foreigners' Year-end
Tax Settlement
∙Issue Date : December, 2005
∙Publisher : International Tax Resources Management Division,
National Tax Service of Korea
∙Edited by : Director Jo Sung-Keun
Deputy Director Yoo Young-Il
Tax Inspector Yoo Uni-Jong
This book was published to present a brief overview of the taxation of Wage
& Salary Income Earner. Its contents are also provided on the NTS website.
If any discrepancies are found between its contents and the current Korean
Tax Code, the latter shall prevail. If you have any questions regarding the foregoing
or if we can be of any assistance in connection with your 2005 year-end exact
computation of Korean income tax, please do not hesitate to contact us at (02)
397-1440 or 720-4105(Facsimile). This book may not be lent, resold, hired
out or otherwise disposed of by way of trade in any form of binding or cover
other than that in which it is published, without the prior consent of the publisher.