How to prepare for 2023FY year-end tax settlement in Korea: Practical Guide for Foreigner
How to prepare for the year-end tax settlement in 2023 The year-end tax settlement is a process of recalculating your income and tax deductions for the year 2022 and getting a refund or paying extra taxes. The year-end tax settlement can be different every year, so you need to be smart about your spending and prepare your receipts and documents. The year-end tax settlement simplified service is a service that allows you to easily check and submit your income and tax deduction documents online. You can use this service from January 15 to February 28, 2023. If you missed the application for the refund, you can apply personally at the tax office during the final income tax period from May 1 to May 31, 2023. In this blog post, I will guide you through the key steps and tips for the year-end tax settlement in 2023. I will also introduce some of the changes in the tax law that will affect your tax settlement. Let’s get started!
Step 1: Check your income and tax deduction documents (January 15 to February 15, 2023) The first step is to check your income and tax deduction documents online. You can do this by using the year-end tax settlement simplified service on the National Tax Service (NTS) website1. This service will show you the documents that the NTS has collected from various sources, such as your employer, bank, credit card company, hospital, etc. You can also download and print these documents for your reference.
Step 2: Collect and submit additional documents (January 20 to February 28, 2023)
The second step is to collect and submit any additional documents that are not provided by the simplified service. These include receipts or certificates for expenses that are eligible for tax deductions, such as medical expenses, education expenses, rent, donations, etc. You need to fill out an income and tax deduction application form and submit it to your employer along with the additional documents. Here are some examples of documents that are not provided by the simplified service2:
Certificate of severe disability for cancer, dementia, incurable diseases, etc.
Rent tax deduction
Medical expenses for newborn babies whose resident registration number was not reported to the hospital
Overseas education expenses for children or siblings
Purchase or rental expenses for assistive devices for disabled people, such as hearing aids, wheelchairs, etc.
Purchase expenses for glasses, contact lenses, etc.
Uniform purchase expenses for middle and high school students
Donations to religious organizations
Pre-school children’s tuition fees
Donations to social welfare organizations, civic groups, etc.
Step 3: Calculate your tax amount and receive your withholding tax receipt (January 20 to February 28, 2023)
The third step is to calculate your tax amount and receive your withholding tax receipt. Your employer will review your income and tax deduction application form and documents, and calculate your final tax amount. They will also issue you a withholding tax receipt, which shows your income and tax details for the year 2022. You should check this receipt carefully and make sure there are no errors or omissions.
Step 4: Submit your income statement and withholding tax report to the NTS (by March 10, 2023)
The fourth step is to submit your income statement and withholding tax report to the NTS. Your employer will submit these documents to the NTS by March 10, 2023. These documents are the basis for your tax refund or payment.
Step 5: Receive your tax refund or pay your additional tax (March to April 2023)
The fifth step is to receive your tax refund or pay your additional tax. If your final tax amount is less than the amount you paid during the year, you will receive a tax refund. If your final tax amount is more than the amount you paid during the year, you will have to pay additional tax. The refund or payment will be made through your bank account or salary. The refund or payment date may vary depending on your employer, but it will be completed by April 2023.
Step 6: Apply for a correction if you missed or omitted anything (March 11, 2023 onwards)
The sixth step is to apply for a correction if you missed or omitted anything in your tax settlement. If you did not do your tax settlement or forgot to include some deductions, you can apply for a correction through the NTS website or visit the tax office personally. You can do this from March 11, 2023 onwards, after the submission deadline of the income statement and withholding tax report. You can apply for a correction for up to five years. For example, if you missed some deductions in your tax settlement for the year 2018 to 2021, you can still apply for a correction and get a refund.
Step 7: File your final income tax return if you have other income sources or personal reasons (May 1 to May 31, 2023)
The seventh and final step is to file your final income tax return if you have other income sources or personal reasons. If you have income from sources other than your employer, such as business, property, interest, dividends, etc., you need to file your final income tax return and report your total income and deductions. You can also file your final income tax return if you have personal reasons, such as divorce, remarriage, rent, etc., that you do not want to disclose to your employer. You can do this during the final income tax period from May 1 to May 31, 2023. The NTS will refund your tax directly to you without notifying your employer.
Changes in the tax law for 2023
In addition to the steps above, you should also be aware of some of the changes in the tax law that will affect your tax settlement for 2023. Here are some of the major changes that you should know3:
The credit card income deduction rate has increased from 15% to 20% for income below 70 million won, and from 10% to 15% for income above 70 million won. The maximum deduction amount has also increased from 3 million won to 4 million won.
The rent tax deduction rate has increased from 10% to 20% for income below 70 million won, and from 5% to 10% for income above 70 million won. The maximum deduction amount has also increased from 5 million won to 7 million won.
The donation tax deduction rate has increased from 15% to 25% for donations to designated donation organizations, and from 5% to 10% for donations to other organizations. The maximum deduction amount has also increased from 25% to 30% of the income amount.
The education expense tax deduction rate has increased from 15% to 20% for income below 70 million won, and from 10% to 15% for income above 70 million won. The maximum deduction amount has also increased from 2.5 million won to 3 million won per child.
The medical expense tax deduction rate has increased from 15% to 20% for income below 70 million won, and from 10% to 15% for income above 70 million won. The maximum deduction amount has also increased from 7 million won to 10 million won.
These changes will apply to the expenses that you made in 2022, so you should keep your receipts and documents and claim your deductions accordingly. I hope this blog post was helpful for you to prepare for your year-end tax settlement in 2023. If you have any questions or comments, please leave them below. Thank you for reading!
