Taxes in South Korea: A Complete Guide for US Expats

Whether you’re a digital nomad, on a foreign assignment for work, or teaching English in this country, it’s well worth learning about taxes in South Korea.

While all Americans — even those living abroad long-term — are subject to US taxes, most living in South Korea have tax obligations there as well.

Navigating two different countries’ tax systems might seem confusing — and, in reality, it is. However, even brushing up on the basics will help you better understand your tax and reporting obligations in each country. In turn, that can help simplify filing and may even reduce your tax bill.

Below, we’ve put together a thorough but easy-to-read guide for US expats in South Korea. Learn who files and pays taxes in South Korea, how the South Korean tax system works, which tax breaks are available, and more.

Snapshot of taxes in South Korea

• Tax authority: National Tax Service
• Primary tax form: Year-End Tax Settlement
• Tax deadline: May 31st
• Reporting website: National Tax Service online portal
• Administrative language(s): Korean
• US Tax treaty? Yes
• Totalization agreement? Yes

Determining South Korean tax residency & liability

The taxes you pay in South Korea depend on whether or not you are a resident for tax purposes.

• Tax residents: Anyone who is domiciled in Korea, has spent 183 days or more there, or retains enough ties there (e.g. family, property) for it to count as their tax base, pay South Korean taxes on worldwide income.
• Non-residents: Anyone who does not meet the tax resident requirements, pays South Korean taxes on Korean-sourced income only.
  • Note: Foreigners who spend more than five of the previous ten years in Korea will be subject to taxes on worldwide income.

Understanding the South Korean tax system & deadlines

Unlike the US, South Korea does not require all its tax residents to file a return. This is because your employer typically withholds income taxes from your paycheck and submits a year-end tax certificate to the government.

Generally, you must file a Year-End Tax Settlement if you receive income that falls outside the Class A designation (income from an employer in South Korea). This may include Class B income (e.g. rental income, business income), capital gains, and more.

Class B income earners generally must file as well unless they join a taxpayer’s association. These taxpayer’s associations charge monthly income taxes and take care of tax dues at the end of calendar years.

Year-End Tax Settlements — and any other forms you must fill out — are due by May 31st of the following year.

Taxation of income in South Korea

Korea levies taxes at progressive, marginal rates, which increase as income does. Both tax residents and non-tax residents are subject to the following individual income tax rates:

Income (KRW)	Income (USD)	Tax Rate	Local Income Tax Rate
₩0 – ₩14 million	~$0 – $10,436	6%	0.6%
₩14 million – ₩50 million	~$10,436 – $37,272	15%	1.5%
₩50 million – ₩88 million	~$37,272 – $65,598	24%	2.4%
₩88 million – ₩150 million	~$65,598 – $111,814	35%	3.5%
₩150 million – ₩300 million	~$111,814 – $223,726	38%	3.8%
₩300 million – ₩500 million	~$223,726 – $372,874	40%	4.0%
₩500 million – ₩1 billion	~$372,874 – $745,748	42%	4.2%
₩1 billion+	~$745,748+	45%	4.5%

Foreign residents can choose to either:

• Pay taxes on their South Korea-sourced income at the rates above, OR
• Pay a flat rate of 19% on their employment income, which excludes other types of income such as capital gains or rental income.

In addition to these national income taxes, a local tax equal to 10% of the national tax is levied.

However, if they choose to pay taxes at the flat 19% rate, they won’t be eligible for certain credits and income deductions.

Expats can claim this favorable tax regime for up to 20 years — talk about a nice welcoming gift!

Deductions & allowances

A few of the most common tax breaks in South Korea include the following:

• Personal allowance:  ₩1.5 million (~$1,123) per year, with an additional ₩1.5 million (~$1,123) for each spouse or dependent that earns less than ₩1 million (~$749) per year
  • Disabled individuals: ₩2 million (~$1,498)
  • Ages 70+:  ₩1 million (~$749)
  • Female head of household: ₩500,000 (~$375) for those earning ₩30 million (~$ 22,468) or less in annual taxable income
  • Single parents: ₩1 million (~$749) 
• Employment income: 2% to 70%, depending on income level (the more you earn, the lower the percent) up to ₩100 million (~$74,892)
• Pension contributions: Contributions to national pensions are fully deductible; 12% on individual pension contributions up to ₩9 million (~$6,742) or 15% if the taxpayer earns less than ₩45 million (~$33,709)
• Dependents: Applies to both dependent children and grandchildren. Those who claim this deduction can receive ₩150,000 (~$112) for the first dependent (age 8+), ₩200,000 (~$150) for the second, and ₩300,000 (~$225) for any additional child
• Charitable contributions: 15% on donations up to ₩10 million (~$7,492) plus 30% on donations between ₩10 million (~$7,492) and ₩30 million ($22,475) plus 10% on anything above that
• Educational expenses: 15% on expenses up to ₩9 million (~$6,742) for dependent college students and ₩3 million (~$ 2,245) for dependents in preschool to high school; no limit on the amount if the educational expenses are for the taxpayer themselves
• Insurance premiums: 12% on premiums for qualified insurance plans (e.g. life insurance, accident insurance, fire insurance); contributions to national health and unemployment insurance premiums are fully deductible
• Medical expenses: 15% on expenses up to ₩7 million (~$5,239) if they exceed 3% of employment income (limit does not apply to those 65+, disabled people, and children below 6)
• Mortgage interest: Deductions available for those who previously did not own a home, or for those whose home is below a certain size

Other taxes in South Korea

Capital gains taxes

Tax residents

The sale or transfer of land, buildings, and stocks typically comes with a long-term capital gains rate of 6% to 45%. This percentage depends on the type and holding period. There is an additional tax on gains from the transfer/sale of luxury properties exceeding ₩1.2 billion (~$898,143).³

In a few scenarios, capital gains taxes can reach as much as 50% (on properties held less than a year) to 70% (on properties owned but not registered by the taxpayer).

Tax residents can claim a capital gains deduction of up to KRW 2.5 million (~$1,871).

Non-tax residents

Non-tax residents typically pay a tax of 10% of the capital gains sales proceeds. When you can easily confirm acquisition value, you can choose between a tax of 10% of the proceeds or 20% of gains from the sale.

Property taxes

There are several different property taxes in South Korea:

Buying Property

• Acquisition tax: 2% to 4%, depending on property value & type
• Stamp duty: .2%
• VAT: 10% on new properties only
• Registration tax: 1% to 3% on property transfers

Owning Property

• Annual property tax: 0.1% to .5% on residential housing; 4% on luxury housing
  • Multiply by 1.2 to account for local education tax
• Comprehensive real estate tax: .5% to 2.7% on property exceeding a certain size
  • Multiply by 1.2 to account for special rural development tax

Selling Property

Typically 6% to 45%, although primary residences held for two years or more are usually exempt.

Social security taxes

Social security is a withholding tax in South Korea that includes:

• National Pension Fund: 4.5% capped at a maximum of ₩265,500 (~$199) per month
• National Health Insurance: 4.004% capped at a maximum of ₩9,579,760 (~$7,167) per month
• Employee Insurance: .90%

The total social security tax collected, then, is 9.404%.

South Korea has a totalization agreement with the US, preventing nationals from one country living in the other from paying double social security taxes. If you’ll be in South Korea for five years or less, you’ll pay US social security taxes. If you’ll be in South Korea for over five years, you’ll pay South Korean social security taxes.

VAT

The value-added tax (VAT) in South Korea—the tax added to the sale of most goods and services—is 10%. Certain items (health services, government transactions, farm products) are exempt.

Business owners must charge VAT on all applicable goods and services and remit the proceeds to the government every quarter.

Additional

• Interest/dividend income: 15.4% for residents, 22% for non-residents (unless income is from a government bond or local company, in which case it carries a 15.4% tax)
• Gains from exercising stock options: Subject to ordinary income tax rates (6% to 45%) and social security rates (9.404%)
• Inheritance/estate/gift taxes: 10% to 50%, depending on value
• Corporate income tax: Corporate taxes run between 9% and 24%, depending on total income

How to avoid double taxation as an expat in South Korea

As we mentioned earlier, the US considers all citizens and permanent residents to be tax residents. If they meet a minimum income reporting threshold, they must file a US tax return and may be subject to US taxes. This applies even to those who live abroad. In some situations, expats may even be required to pay state income taxes.

If you also have to pay taxes in South Korea, this could mean double taxation. While the US/South Korea tax treaty eliminates this risk in theory, in practice, its benefits are limited. This is due to the Saving Clause, which allows the US government to disregard large parts of the treaty.

It’s not all bad news, though. Americans abroad get two special tax breaks that can significantly reduce (and often eliminate) their US tax liability:

The Foreign Tax Credit (FTC)

The FTC gives Americans tax credits on any qualified foreign income taxes they have paid. This lets you essentially subtract what you paid in foreign income taxes from your US tax bills. 

In South Korea, where taxes are generally higher than in the US, this typically eliminates your US tax liability and gives you surplus credits. You can then apply these credits to future US tax bills.

The Foreign Earned Income Exclusion (FEIE)

The FEIE lets Americans who pass either the Physical Presence Test or Bona Fide Residence Test exclude some of their foreign-earned income from US taxation. Under the FEIE, expats can exclude up to $120,000 for tax year 2023 (the taxes you pay in 2024) and $126,500 for tax year 2024.

Qualifying for the FEIE also automatically makes you eligible for the Foreign Housing Exclusion or Deduction, which can help you offset the price of qualifying foreign housing expenses (e.g. rent, utilities, parking, etc.).
B!T note: Expats with more than $10,000 must file a Foreign Bank Account Report (FBAR). Those abroad with $200,000 on the last day of the tax year or $300,000 at any point in the year must file Form 8938.

Navigate taxes in South Korea with confidence

The bottom line is that most US expats living in South Korea are subject to US and South Korean income taxes. With different rules, regulations, and tax rates for each country, it can all feel pretty overwhelming. The best way to mitigate your tax liability while ensuring full compliance is to speak with an expat tax professional.

Resources:

1. Korea, Republic of – Individual – Residence
2. Korea, Republic of – Individual – Taxes on personal income
3. Taxation of international executives: South Korea
4. Korea, Republic of – Individual – Income determination
5. Korea, Republic of – Individual – Deductions
6. Buying property in South Korea as a foreigner: a full guide
7. Korea, Republic of – Individual – Other taxes
8. Average annual wage in South Korea adjusted for Purchasing Power Parity from 2000 to 2022
9. Cost of Living in South Korea