Korea, Republic of

Individual - Significant developments

Last reviewed - 10 August 2021

Foreign employees working in Korea may elect to have their employment income subject to a flat tax rate of 19% (rather than a progressive income tax rate with the highest marginal tax rate) for five years from the date they start working in Korea. This flat tax rate was supposed to apply for those who start to work in Korea by the end of December 2018. However, based on the recent tax reform, this flat tax rate can be elected for those who initially started to work in Korea by the end of December 2021.

Currently, 50% tax-exempt treatment is allowed for wages received by a qualified foreign technician/engineer providing services in Korea to a domestic entity for five years from the date one starts to render services in Korea as long as one has started to work in Korea by no later than 31 December 2021. Under the recent tax reform, 70% tax-exempt treatment will be allowed for wages received by the above qualified expatriate, if one works in the categories of raw materials, parts, and equipment, for the first three years out of the above five years as long as one has started to work in Korea on or after 1 January 2020, but no later than 31 December 2022.

A noticeable change from the recently amended individual income tax law is the new taxation of investment income from financial investment instruments.  The newly introduced income tax shall apply to income arising from January 1, 2023, separately from an investor’s income subject to annual income tax return filing (e.g. employment income, interest on bank deposits, dividend), capital gains and retirement income. In addition, a new taxation on the income derived by a Korean resident from the transfer (sale or exchange) or lease of virtual assets (e.g., bitcoins) has been introduced, which would be effective for the income arising from the transfer or lease on or after January 1, 2022.