Korea, Republic of

The applicable period for special tax concession for foreign employees or engineers has been extended under the latest amendment of the Individual Income Tax Law (‘IITL’). 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 20 years from the date they start working in Korea. This flat tax rate can be elected for those who initially started to work in Korea not later than the end of December 2023.

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 ten years from the date one starts to render services in Korea. This treatment shall apply for those who start to work in Korea not later than the end of December 2023. In addition, a 70% tax reduction is applicable to wages received by the above qualified expatriate, if one works in the categories of raw materials, parts, and equipment, for the first three years as long as one started to work in Korea not later than 31 December 2022.

Another noticeable change from the recently amended IITL expands the income tax bracket subject to the lowest tax rate with the aim of alleviating the tax burden of low- and middle-income earners. Meanwhile, the newly introduced taxation of investment income from financial investment instruments and the transfer (sale or exchange) or lease of virtual assets (e.g. bitcoins) will be postponed for two years, until 1 January 2025.