Understanding the Key Changes in 2023 Year-End Tax Settlement
In 2023, NTS introduced several important changes to its year-end tax settlement for salaried taxpayers, impacting both individual taxpayers and businesses. Understanding these changes is crucial for effective tax planning and compliance to get more tax refund. Here's an overview of the major amendments:
Donation Tax Credits:
Introduction of the "Hometown Love Donation" system.
For donations up to KRW 100,000, a full tax credit of 30% is available, including local taxes.
For donations exceeding KRW 100,000, a 15% tax credit is applicable, up to KRW 5 million.
Union Dues:
Union dues paid from October to December can receive a tax credit of 15% (30% for amounts over KRW 1,000,000), provided the union publishes its financial statements by November 30.
Union dues paid from January to September are eligible for tax credit regardless of financial disclosure.
Income Deductions for Credit Card Expenses:
Movie tickets and other cultural expenses incurred after July are now eligible for income deduction for taxpayers with total salaries below KRW 70 million.
The deduction rate for public transportation expenses has increased from 40% to 80%.
Education and Rent Deduction:
Inclusion of SAT(수능응시료) and university entrance exam fees as deductible education expenses.
The loan repayment for student loans is now eligible for a 15% tax credit.
Increase in pension account deduction limits from KRW 4 million (KRW 7 million including retirement pension) to KRW 6 million (KRW 9 million).
The ceiling for the housing value eligible for rent tax credit has been raised from KRW 300 million to KRW 400 million, with a 15% tax credit for rent for employees earning less than KRW 70 million annually.
Tax Reductions for Young and Special Groups:
A 90% income tax reduction (up to KRW 2 million) for young individuals aged 14 to 34 working in small and medium sized enterprises.
A 70% tax reduction (up to KRW 2 million) for the elderly, disabled, and women returning to work after a career break.
For more details, please send an e-mail to jz@taxjz.com or If you would like a free consultation with an English-speaking Accountant in Korea, please schedule a call at: Schedule a Call with Jz
FAQs
What is the year-end settlement in Korea? The year-end settlement in Korea refers to the annual process where employees and companies reconcile their tax liabilities with taxes already paid throughout the year. This process includes adjusting for any tax credits or additional liabilities.
Who needs to participate in the year-end settlement? Both Korean residents and foreign employees working in Korea are required to participate in the year-end settlement process.
What documents are needed for the year-end settlement? Essential documents include salary income details, social security information, and any relevant deductible statements provided downloaded from the Hometax website.
When is the year-end settlement conducted in Korea? The year-end settlement is typically conducted at the beginning of the following year, usually from January to March.
Where can I get assistance for the year-end settlement process? Assistance can be sought from Hometax website, tax professionals, accounting firms specializing in Korean tax law, or through the company’s internal finance department.
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These changes aim to provide more benefits and incentives to taxpayers, especially those contributing to social causes and using eco-friendly transportation methods. Keeping abreast of these changes is essential for individuals and businesses to maximize their tax benefits and ensure compliance.
