Seoul

๐Ÿ’ผ

Taxes

Overview of income tax, sales tax, and any tax-related obligations for residents, workers, and businesses.

Sections

1. Overview of the Tax System in South Korea

South Korea has a well-structured tax system managed by the National Tax Service (NTS). Taxes are levied at both the national and local levels, and they apply to individuals, businesses, and property owners. Residents of Seoul are subject to the same national tax laws as the rest of the country, with some local taxes specific to the city.

The tax year in South Korea is the calendar year (January 1 to December 31). Taxes are generally filed annually, but certain taxes (e.g., VAT) may require quarterly filings.

2. Types of Taxes in Seoul

A. Income Tax

Income tax in South Korea applies to both residents and non-residents, but the scope of taxable income differs:

  • Residents: Taxed on worldwide income.
  • Non-residents: Taxed only on income earned in South Korea.
Income Tax Rates (2023)

Income tax is progressive, with rates as follows:

  • Up to KRW 14 million: 6%
  • KRW 14 million โ€“ KRW 50 million: 15%
  • KRW 50 million โ€“ KRW 88 million: 24%
  • KRW 88 million โ€“ KRW 150 million: 35%
  • KRW 150 million โ€“ KRW 300 million: 38%
  • KRW 300 million โ€“ KRW 500 million: 40%
  • Over KRW 500 million: 45%
Additional Local Income Tax
  • A 10% surcharge on the national income tax is levied as local income tax. For example, if your national income tax is KRW 1 million, you will pay an additional KRW 100,000 as local income tax.
Filing and Payment
  • Employees: Income tax is typically withheld by employers through the year-end tax settlement process in January or February of the following year.
  • Self-employed/Other Income: Individuals must file a Global Income Tax Return by May 31 of the following year.
Deductions and Credits
  • Standard Deductions: Available for all taxpayers.
  • Special Deductions: For medical expenses, education, insurance premiums, and charitable donations.
  • Tax Credits: For dependents, housing, and pension contributions.

B. Value-Added Tax (VAT)

VAT is a consumption tax applied to goods and services in South Korea.

VAT Rate
  • Standard rate: 10%
  • Certain goods and services (e.g., basic food items, medical services) are exempt.
Who Pays VAT?
  • Businesses are responsible for collecting VAT from consumers and remitting it to the government.
  • Foreigners can claim VAT refunds on eligible purchases made in South Korea when leaving the country (minimum purchase of KRW 30,000 at participating stores).
Filing and Payment
  • Businesses must file VAT returns quarterly (January, April, July, October).

C. Property Tax

Property tax is levied on real estate owners in Seoul.

Property Tax Rates
  • Residential property: 0.1% to 0.4% (depending on the propertyโ€™s assessed value).
  • Commercial property: 0.5% to 0.7%.
Additional Taxes
  • Comprehensive Real Estate Tax (CRET): Applies to high-value properties exceeding a certain threshold.
  • Acquisition Tax: Levied when purchasing property (ranges from 1% to 3% of the purchase price).
  • Registration Tax: Levied during property registration (approximately 1%).
Filing and Payment
  • Property tax is billed annually in July and can be paid in installments.

D. Capital Gains Tax

Capital gains tax applies to profits from the sale of real estate, stocks, or other assets.

Rates
  • Real estate: 6% to 45% (progressive rates based on the gain amount).
  • Stocks: 20% to 25% (for large shareholders or foreign investors).
Exemptions
  • Primary residence sales may be exempt if certain conditions are met.

E. Inheritance and Gift Tax

Inheritance and gift taxes are levied on the transfer of wealth.

Rates
  • Progressive rates ranging from 10% to 50%.
Exemptions
  • Certain family transfers may qualify for deductions or exemptions.

F. Local Taxes

In addition to national taxes, Seoul residents pay local taxes, including:

  • Resident Tax: A flat fee (KRW 10,000 to KRW 20,000) plus a percentage of income tax.
  • Vehicle Tax: Levied on vehicle owners, payable twice a year (June and December).

3. Tax Filing Procedures

A. For Employees

  • Employers handle most tax filings through the year-end tax settlement process.
  • Employees must provide documentation for deductions (e.g., receipts for medical expenses, education costs).

B. For Self-Employed Individuals

  • File a Global Income Tax Return online via the Hometax system (https://www.hometax.go.kr) or in person at a local tax office.
  • Deadline: May 31 of the following year.

C. For Foreigners

  • Foreigners are subject to the same tax rules as residents but may qualify for special tax treatments, such as:
    • Flat Tax Rate Option: Foreign workers can opt for a flat 19% tax rate on income for up to 5 years instead of the progressive rates.
    • Tax Treaties: South Korea has tax treaties with many countries to avoid double taxation. Check with your home countryโ€™s tax authority or the NTS.

4. Payment Methods

Taxes can be paid via:

  • Online banking through the Hometax system.
  • Credit card or bank transfer.
  • In-person at banks or tax offices.

5. Resources and Support

A. National Tax Service (NTS)

  • Website: https://www.nts.go.kr
  • Offers tax guides in multiple languages, including English, Chinese, and Japanese.

B. Seoul Global Center

C. Tax Professionals

  • Hiring a tax accountant is common, especially for self-employed individuals or those with complex tax situations. Fees typically range from KRW 100,000 to KRW 500,000, depending on the complexity.

6. Unique Considerations for Foreigners

  • Flat Tax Rate Option: Foreign workers can opt for a flat 19% tax rate, which may simplify tax calculations.
  • Tax Treaties: Check if your home country has a tax treaty with South Korea to avoid double taxation.
  • Language Barrier: While the NTS and Seoul Global Center provide multilingual support, hiring a bilingual tax accountant can be helpful.

7. Key Deadlines

  • Income Tax Filing: May 31 (for the previous tax year).
  • VAT Filing: Quarterly (January, April, July, October).
  • Property Tax Payment: July (installments available).

By understanding the tax system in Seoul and utilizing available resources, you can ensure compliance and potentially reduce your tax burden through deductions and credits. If you have specific questions or need personalized assistance, consider consulting a tax professional or visiting the Seoul Global Center.