May's Tax Thunderbolt: Comprehensive Income Tax for 12.55 Million Individuals Hits Hard
As May rolls in, so does the beginning of the comprehensive income tax declaration season, bringing with it a surprising jolt for many taxpayers. With 12.55 million individuals set to file their declarations, there's a collective gasp as households grapple with the unexpected burden of taxes during what's traditionally seen as the month of financial outflow.
Comprehensive income tax, or 종소세 (jong-so-se) in Korean, encompasses taxes on all personal earnings, including income from business, labor, interest, dividends, pensions, and rent, with tax rates ranging from 6.6% to 49.5%. While typically associated with self-employed individuals reporting their business income from the previous year, even employees may find themselves subject to it if they've earned rental income, lecture fees, or annual interest/dividend income exceeding 20 million KRW.
According to the National Tax Service (NTS), last year saw a staggering 49% increase in the number of finalized comprehensive income tax declarations compared to four years prior, totaling 10.28 million individuals. Of the 11.73 million individuals identified as potential taxpayers by the NTS last year, a remarkable 88% ended up paying their dues. This year, the numbers are expected to soar even higher, surpassing previous records.
The NTS has expanded its outreach, issuing tax notifications to an additional 820,000 individuals compared to the previous year, now totaling 12.55 million recipients. An NTS official attributed this increase to "a significant number of individuals receiving high-interest financial income."
On the 2nd of May, the NTS's online platform, "Hometax PC," experienced severe delays as individuals rushed to check their comprehensive income tax details. The influx of users caused day-long access delays reminiscent of the ticket rush for a popular concert, with waitlists reaching nearly 4,000 individuals at one point.
Every May, individuals must settle their dues on income earned over the past year, including earnings from business, interest, dividends, pensions, and rent. Tax rates vary depending on income, ranging from 6.6% to 49.5%. Financial income below 20 million KRW is subject to a flat withholding tax rate of 15.4%, but anything beyond that falls under comprehensive taxation.
In the face of this tax thunderbolt, individuals across Korea brace themselves for the financial impact while tax authorities gear up for what promises to be a record-setting year in comprehensive income tax filings.
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