Eos Global Expansion

South Korea Year-End Income Tax Settlement: A Guide

South Korea Year-End Income Tax Settlement yets

Here’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.

juminzei resident tax
Photo by Scott Graham on Unsplash

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 

cross-border taxation
Photo by Towfiqu barbhuiya on Unsplash

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

Author

Zofiya Acosta

Zofiya Acosta is a B2B copywriter with a rich background of 6 years as a professional writer. She has honed her craft in the dynamic writing field, beginning as an editor for a lifestyle publication in the Philippines, giving her a unique perspective on engaging diverse audiences.

Reviewer

Chris Alderson MBE

Chris Alderson is a seasoned CEO with over 25 years of experience, holding an honours degree from Durham University. As the founder and CEO of various multinational corporations across sectors such as Manufacturing, Research & Development, Engineering, Consulting, Professional Services, and Human Resources, Chris has established a significant presence in the industry. He has served as an advisor to the British, Irish, and Japanese governments, contributing his expertise to international trade missions, particularly focusing on global expansion and international relations. His distinguished service to the industry was recognised with an MBE (Member of the Order of the British Empire) awarded by Her Majesty Queen Elizabeth II.

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