Special tax concession for foreigners working in Korea
Foreign expatriates and employees who will start to work in Korea no later than 31 December 2023 are able to apply for a flat income tax rate of 19% (excluding local income tax) on their employment income rather than the normal progressive income tax rates of between 6% and 45% (excluding local income tax). In this case, any other income deductions, tax exemption, and tax credit are forfeited. If a foreign expatriate or employee wants to choose the 19% flat tax application, they are required to submit an application to the Korean tax authorities at the time of filing the annual tax return or to their employer at the time of monthly withholding or year-end settlement. A foreign expatriate or employee can choose the 19% flat tax rate as a monthly employment income withholding tax (WHT) rate with submission of an application to Korean tax authorities.
The flat tax rate is applicable for a five-year period, starting with the first day of work in Korea to the end of the tax year immediately preceding the year in which the five-year anniversary of the first day of work falls.
In addition, the flat income tax rate is not applicable for foreigners working for a company that is regarded as a related party to the foreigner. A related party for these purposes is defined as: (i) a corporation where the concerned employee has a direct or indirect controlling influence on the corporation’s management or (ii) a private company that is owned by a relative(s) of the concerned employee.