Optimize Your Year-End Tax Settlement in Korea: Key Changes and Tips for 2023

The National Tax Service of Korea has announced the commencement of the year-end tax settlement process for 2023FY. This annual exercise reconciles taxes paid monthly with the actual tax liability. The agency urges both employers and employees to pay close attention to the revised tax laws and valuable tax-saving tips.

For employers, the focus is on completing the year-end tax settlement for all employees (excluding daily workers but including those who have left the company) by the salary payment period in February 2024. Additionally, by March 11, 2024, employers must submit withholding tax statements and payment details.

Employers using the 'Batch Provision Service' for simplified data can download relevant data for registered employees from Home Tax starting January 20, following the opening of the simplified service on January 15.

Employees must consent to the provision of this simplified data by January 19, with tax refunds expected to be processed by April.

Key revisions in the tax laws include:

Increased tax deduction rates for public transport expenses (from 40% to 80%) and cultural/traditional market expenses (from 30% to 40% and 50% respectively).
Higher deduction limits for pension accounts, going up from KRW 4 million (including retirement pensions at 7 million) to 6 million (9 million).
Grandparents can now apply for child tax deductions for grandchildren.
The housing rent deduction criteria have been raised from homes valued at KRW 300 million to 400 million.
Educational expenses now include university entrance exam fees, offering a 15% tax deduction.
Hometown love donations(고향기부금) have expanded tax deduction benefits.
The income tax reduction limit for employees of small and medium-sized enterprises (SMEs) has increased from KRW 1.5 million to 2 million annually.

The National Tax Service also highlights that cash receipts for house rent should be requested through Home Tax. Share-house residents are eligible for rent tax deductions, and additional reductions are possible for young professionals employed in SMEs and women re-entering the workforce. Dual-income couples can benefit from optimized dependent deductions.

Last year, 8 out of 10 employees received tax refunds, while 2 had to pay additional taxes. The most common deductions were for credit cards, mortgage interest repayments, and rent principal repayments, with rent tax deductions showing a significant increase of 62%.

For more details, please feel free to reach out at jz@taxjz.com or If you would like a free consultation with an English-speaking Consultant/Accountant in Korea, please schedule a call at: Schedule a Call with Jz