Many expats have recently come to me with questions about the Individual Income Tax as they prepared their Year-end Settlement documents (연말정산) for deductible items on their salary income. Usually, I would recommend obtaining the “Digital Certificate” (공인인증서), which I am sure most of you have heard about. The process is not an easy one, not even for Koreans, and can only be carried out on the Internet Explorer browser with ActiveX installed on a Windows computer.
Salaried employees may have their Year-end Settlement completed by their employer and later make amendments in May, along with global income tax returns for sole proprietors.
Deductible items are based solely upon your expenses made by check or credit card issued by a Korean bank. Credit card usage is especially important to save your tax and also the individual retirement pension (for those who plan on staying in Korea for more than ten years). All individuals, including salaried employees and sole proprietors, can file their Year-end Settlement once a year in May. If missed, you may run into some problems in a couple of years. The National Tax Service (NTS) will come to your door to collect the tax based on the claim of the expenses made under your ID. You may also file previous Year-end Settlements from within the last five years if you paid more than you needed to or missed other deductible items; for example, donations to churches and temples.
Check with your employer to see if you are eligible for the tax exemption based on the tax treaty or if you are a “qualified engineer” according to the Foreign Direct Investment (FDI) articles. Many expats are hired by SMEs (small or medium enterprises), and if you are under the age of 30, you are also eligible to apply for the tax exemption program that is available to Korean young adults.
I hope you receive all your necessary tax refunds. If you have any questions, please feel free to email me at jz@joezoh