Today, I’d like to give you an overview of personal tax deductions in Korea.
The eligibility criteria for personal deductions for Korean residents are divided into three categories, as follow:
- Basic Deduction (i.e. deduction for taxpayers, spouses, and dependents).
This deduction is for (i) dependent family members who are listed on the registration card of the resident and who actually reside with the resident AND (ii) have an annual adjusted taxable income that does not exceed W 1,000,000. Lineal descendants do not need to satisfy requirement.
A person who has temporarily left the taxpayer’s domicile or residence for reasons of schooling, medical treatment, work, or business may still be entitled to this deduction. The determination of eligibility shall be made based on the existing conditions at the closing date of the tax period concerned.
Additional Deduction (i.e. deduction for the aged, handicapped persons, qualifying female taxpayers, and lineal descendants aged 6 or younger).
Additional Deduction for Taxpayers with Multiple Children
Often, one of the major deductible items is educational expenses.
Eligible taxpayers must submit supporting documents to their employer in order to receive this deduction.
Limitations for deductible education expenses are:
Taxpayers: No limitation (includes tuition for graduate school and course fees for vocational training).
Kindergarten for Dependents: W 3,000,000 per capita.
Elementary, Middle, and High School for Dependents: W 3,000,000 per capita.
University and College for Dependents: W 9,000,000 per capita.
Non-residents may be eligible for deductions for themselves only.
For example, a handicapped non-resident may take a deduction for being handicapped, but may not take the same deduction for a handicapped dependent.
As for other categories of deduction, a non-resident may receive a pension premium deduction, but cannot receive special deductions or other deductions (e.g. monthly rental charge for residency deduction, and expat resident can't apply this deduction).
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