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South Korea Income Tax Rate for 2017, 2016, 2015, 2014, 2013

South Korea Income tax Rate

Chargeable Income (KRW)

Tax Rate

Up to KRW 12 million

6%

From KRW 12 to 46 million

15%

From KRW 46 to 88 million

24%

From KRW 88 to 150 million

35%

Over KRW 150 million

38%

 

South Korea Local Income Surtax

Chargeable Income (KRW)

Tax Rate

Up to KRW 12 million

0.6%

From KRW 12 to 46 million

1.5%

From KRW 46 to 88 million

2.4%

From KRW 88 to 150 million

3.5%

Over KRW 150 million

3.8%

 

Allowable Deductions and Tax Credits

Tax credits are available in the forms of earned income tax credit (55% up to the tentative tax of KRW 1,300,000), child credits (depending on the number of children), pension fund tax credits and other special tax credits for medical expenses, insurance premiums, donations and education expenses.

Special Expatriate Tax Regime

Foreign employees or executive officers who began work in Korea on or after 1 Jan 2014 may elect to apply for the flat tax rate of 18.7%. In order to do so, they must file an application with the local tax authority.

Capital Tax Rate

Inheritance and gift taxes of 10% to 50% depending on the tax base (after deduction of exempt amounts such as spouse, old age and dependent allowance) are levied on residents for assets acquired worldwide and on non-residents for assets located in Korea only. Capital gains are taxed at the lesser of 10% of sales or 20% of gains.

Consumption Taxes

Nature of the Tax

Value Added Tax (VAT) Standard Rate10% Reduced Tax RateA 0% rate applies to resident taxpayers who engage in exports, international transportation services by sea and air and other goods and services supplied for foreign currency.

Exclusion From Taxation

Goods and services related to social welfare, culture, personal services, the government, finance and insurance, land supplies and basic life necessities are generally tax exempt. Traders have the option to tax for exempt supplies by filing a waiver.

Method of Calculation, Declaration and Settlement

VAT applies to supplies and imports of goods and services as well as reverse-charge services within Korea. VAT must be declared within 20 days of commencing business or face a penalty of 1% of value of supplies made. VAT is filed quarterly

Corporate Taxes

Tax Base For Resident and Foreign Companies

Residents are subject to tax on worldwide income, while non-residents are only subject to tax on Korean-sourced income.

South Korea Corporate tax

10% (up to KRW 200 million)
20% (from KRW 200 million to KRW 20 billion)
22% (over KRW 20 billion)


Local income tax

10% of corporate income tax liability

Accumulated earnings tax, applicable to companies with equity capital of KRW 50 billion or more

10% supplementary tax

Tax Rate For Foreign Companies

Foreign corporations with a permanent establishment in Korea pay standard corporate income tax on Korean-sourced income. Foreign corporations without a permanent establishment deriving Korean-sourced income from qualifying activities are taxed at rates ranging from 2% to 20%. These qualifying activities include: personal services, interests on bonds and financial instruments and leasing income from vessels and heavy equipment. Foreign tax credit is available but is capped at the lesser of the tax paid abroad or the Korean tax liable multiplied by the ratio of foreign-sourced income to total taxable income.

Capital Gains Taxation

For resident companies, capital gains are treated as ordinary business income and taxed at the normal corporate tax rate. For nonresident companies, Korean-source capital gains are taxed at either 11% of sales or 22% of gains (whichever is less).

Main Allowable Deductions and Tax Credits

A dividends received deduction (DRD) is applied to dividends transferred between resident companies. Various types of tax incentives are available for qualifying activities that fulfil the Tax Incentive Limitation Law, including: investments, R&D and high-tech foreign-invested companies.

Other Corporate Taxes

A capital registration tax of 0.48% (or 1.44% for Seoul Metropolitan Area) is levied. A real property tax o 0.24% to 0.6% is levied on land, buildings, vessels and aircraft. A company that owns real estate must pay a real estate tax in addition to property tax. A nominal stamp duty is levied on agreements relating to the creation, transfer and alteration of rights. An acquisition tax of 4.6% is generally applied to the purchase of real estate, motor vehicles and heavy equipment.

Korea Income Tax Rates 2014 and Deductions

Korea Income Tax Rate for Individual Tax Payers

Lowest Individual Tax Rate is 6% and Highest Rate is 38%

Chargeable Income (KRW)

Tax Rate

0 to 12,000,000

6%

12,000,001 to 46,000,000

15%

46,000,000 to 88,000,000

24%

88,000,000 to 150,000,0000

35%

Over 150,000,000

38%

 

 

In addition, resident tax of 10 percent of the total income tax amount is assessed.

However, expatriates can elect to apply a 17 percent flat tax rate2 to total Korea-sourced employment income.

Non-residents

Tax rate for non-residents is the same as that for residents.

Salary earned from working abroad
Where days worked outside Korea are considered to be an integral part of the period of residence for an expatriate, the taxable salary of the expatriate may not be reduced by allocating income to working days spent abroad on business trips.

Korea Tax-exempt income
The following items generally are considered to be either non-taxable reimbursements or tax-exempt earned income. This listing is not intended to be comprehensive:

meal allowance up to KRW100,000 per month

reimbursement of vehicle operating expenses up to KRW200,000 per month when an employee uses his/her own vehicle for business purposes

cost of uniforms provided to those required by law to wear uniforms

cost of work clothes worn only at the workplace by employees in certain industries

reimbursements for social membership and entertainment expenses incurred for business purposes

qualified employee’s education fees paid by the employer

cost of housing of the expatriate employee, paid by the employer directly on behalf of the employee where the rental contract was entered into between employer and landlord.

Salary earned from working abroad

Corporate Tax Rates in Korea

The basic corporate federal rate of tax in Korea is 24.20%.

Capital Gains Tax in Korea

Capital gains tax is charged using either flat rates or a progressive schedule, depending on the category of assets. The rates for tax year 2014 are as follows.

Sale of real property (commercial or residential) held less than one year 50%

Sale of real property (commercial or residential) held for one year or more but less than two years 40%

Sale of real property (commercial or residential) owned by the taxpayer but not registered 70%

Capital gains arising from sale of shares in unlisted companies
SMEs 10%
Other 20% (30 if sale by a major shareholder)

For real property other than the ones described earlier that is registered in the taxpayer’s name and has been held for two years or more, the following rates apply.

Capital gains Tax rate 2014
Over KRW Under KRW Percent
0 12 million                6%
12 million 46 million   15%
46 million 88 million   24%
88 million 150 million 35%
150 million Over        38%

Korea Dates of filing Returns / Reporting and Payment

It is the employer’s responsibility to file quarterly tax returns. The employer has one month after the end of each quarter to file such returns. Additionally, the employer is required to file annual salary tax reconciliation outlining salaries paid to each employee, deductions, exemptions, tax due, and the net salary paid to each employee.

31 December is the tax end date.

Compliance requirements for tax returns in Korea

Residents and non-residents
Generally, the employer is required to compute the salary tax and withhold it at the source on a monthly basis. They are obliged to remit it to the relevant tax office within the first 15 days of the following month. Employees are not required to file tax returns unless the employer is non-resident or has no permanent establishment in Korea. In such case, the employee will be required to file a tax return at the first of January of each year. Additionally, the employer is required to file a quarterly tax return. The employer has one month after the end of each quarter to file the quarterly tax returns.

At the year-end, the employer is required to prepare an annual reconciliation of the salary tax to determine whether there are any differences and to remit such tax differences, if any, to the competent tax office within January of the following year.

Penalties are imposed in the case of not complying with the due dates mentioned earlier at 2 percent plus the discount rate declared by the Central Bank of Korea (discount rate is 11 percent approximately).

The tax authority audits the employer for individual income tax purposes and not each individual separately.

 

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