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ToggleHere’s a handy guide to navigating the South Korea Year-End Income Tax Settlement (YETS)
As the fiscal year draws to a close, taxpayers need to reconcile their tax liabilities with taxes withheld throughout the year. In South Korea, all workers who earned income in the country in the past year are required to file their Year-End Income Tax Settlement (YETS)—no matter what their nationality is or where they’re living.
What is the Year-End Income Tax Settlement?
The South Korea year-end income tax settlement is an annual process where employees reconcile their taxes by comparing the amount of income tax withheld by the employer throughout the year against their actual tax liability. This settlement allows individuals to claim deductions and tax benefits for various expenses incurred during the fiscal year.
The goal is to ensure that citizens pay the correct amount of tax—neither too much nor too little. Taxpayers may receive a refund for any overpayment or be required to make additional payments if they have underpaid their taxes, thus aligning the withheld tax with the actual end-of-year obligation.
What will get taxed?
South Korea residents, who are taxpayers who have been residing in the country for at least a year for work-purposes or have family residing there and are likely to stay in the country for at least a year, are subject to being taxed on all their income sources, whether they were derived in the country or abroad.
Non-South Korea residents, meanwhile, are only taxed for the income they gained from their work in the country.
How much gets taxed?
South Korean citizens are taxed progressively based on their income. Here is a chart detailing how:
Annual taxable income | Tax rate |
Over 1 billion KRW | 45% |
500 million to 1 billion KRW | 42% |
500 million to 300 million KRW | 40% |
300 million to 150 million KRW | 38% |
150 million to 88 million KRW | 35% |
88 million to 50 million KRW | 24% |
50 million to 14 million KRW | 15% |
Under 14 million KRW | 6% |
Foreign workers, meanwhile, can opt to be taxed at the 19% flat rate for 20 years since they first started working in the country. Previously, this was limited to five years but was increased in 2023 along with other tax reforms.
There are also additional tax breaks for some foreign workers. Foreign engineers, for example, get a “50-percent cut on income taxes” for ten years.
Read more: Choosing A Global Payroll Service Provider: What To Look For
Conclusion
As we approach the culmination of this year’s tax settlement cycle, it remains crucial for all employees to submit their documents accurately and on time. This is paramount in ensuring an accurate and efficient settlement process.
An employer of record (EOR) service like Eos can be instrumental in navigating the complexities of the Korean tax settlement process, especially for companies with global workforces. As experts in local tax regulations, an EOR assists businesses by shouldering the responsibility of ensuring tax compliance on behalf of the employees. They ensure the accurate and timely preparation of essential documents such as the ‘FY23 Year-End Tax Settlement Withholding Receipt’, manage the calculation and reporting of the appropriate tax withholdings, and interact directly with the National Tax Service (NTS) to submit any necessary filings.
This level of support not only minimizes the risk of penalties for non-compliance but also alleviates the administrative burden on the company’s internal staff, allowing them to focus on core business operations. By leveraging an EOR, companies can foster a more efficient settlement process and provide peace of mind for both employers and employees during the tax season.
Check out the services that we at Eos provide or contact us directly here.
Featured photo by Mathew Schwartz on Unsplash