		Press Release – Reference Material
Press Release		To be released at 12:00pm, Thursday Jan. 16, 2020

Drafting

Division:

International Tax Resource Management Division

Director

In Soon

Choi

044) 204-2861

Released on:

Thursday Jan. 16, 2020

Deputy Director

Seung Jung

Ryu

044) 204-2877

Guide to the 2019 Year-end Tax Settlement for Foreigners - Issuance of Foreign Language Manual for Year-end Tax Settlement for Non-English Speaking Foreigners -

□  Foreign employees with domestic wage & salary income in 2019 should settle year-end taxes by the day they receive their salary for February this year.

○  Year-end tax settlement is a process of finalizing the total amount of taxes to be borne by a wage & salary income earner. If the sum of the amount of monthly withheld tax is less than the amount of the final settled amount, the amount in shortage should be additionally paid.

-  If the sum of the amount of monthly withheld tax is more, the amount in excess shall be refunded.

※ Foreigners’ year-end tax settlement: 573,000 foreigners, 783.6 bil. won (2018), 558,000 foreigners, 770.7 bil. won (2017)

□  Foreign employees should settle year-end taxes in the same way as Korean citizens apply.

○  It should be noted certain tax policies such as 19% flat tax rate and income tax reduction for engineers apply only to foreigners. Taxpayers are also required to be aware some deductible items such as housing funds, deposits for housing purchase savings, monthly cost for rental housing do not apply to foreigners.

□  To support foreign employees having difficulty to understand Korean language, the National Tax Service of Korea (NTS) provides various English services such as Easy Guide for Foreigners‘ Year-end Tax Settlement, automatic calculation program for year-end tax settlement, and help desk for foreigners (1588-0560)

○  In particular this year, the NTS issued manuals for year-end tax settlement written in Chinese and Vietnamese as well as in English for the convenience of foreign employees from non-English speaking countries. These manuals have been posted on the NTS English website.

□  Aiming to provide better convenience for the benefit of those taxpayers, the NTS will continue to improve its service on the work of foreigners‘ year-end tax settlement.

1		Foreign Employees are also Obligated to Settle Year-end Taxes

□  Foreign employees (excluding daily workers) who had any income in Korea in 2019 should file the year-end tax settlement by the day they receive their February wage & salary for this year, regardless of their nationality, sojourn period and size of income.

○  Foreign employees should prepare for year-end tax settlement by referring to the Guides to Foreigners‘ Year-end Tax Settlement* provided on the NTS English website (https://www.nts.go.kr/eng) so that income deduction and tax credit items are not omitted.

*  Guidebook on year-end tax settlement (English) and year-end tax settlement manual in foreign languages (English, Chinese, Vietnamese), etc.

○  The withholding agent (company) should use the foreign language guide provided by the NTS so that foreign employees who are not fluent in Korean can prepare year-end tax settlement materials without difficulty.

< Year-End Tax Settlement Schedule >

Process	Where to submit	Period/ Deadline
① Preparation of income deduction documents and submission of return	Employee → Company	Jan. 20, 2020 ∼ Feb. 29 2020
② Review of income deduction documents and issuance of year-end tax settlement withholding receipt	Company → Employee	Jan. 20, 2020 ∼ Feb. 29 2020
③ Submission of report of status of withholding of income tax and statement of payment	Company → NTS	Mar. 10. 2020

□  The procedure and method of year-end tax settlement for foreign employees is the same as those for domestic employees

○  While foreign employees can be benefitted by some of special tax rules such as the optional right whether to apply 19% flat tax rate and income tax reduction for engineers, it should be noted that certain income deduction or tax credit items do not apply to foreigners.

2		What Foreign Employees should be Aware When Filing Year-End Tax Settlement

□  (Foreign Resident) If a foreign employee is a resident, he/she is subject to the same general income deduction and tax credit items that apply to domestic residents.

○  However, items such as deduction for housing funds, deduction for deposits in a housing purchase savings account, deductions for monthly rent do not apply to foreign employees (refer to App 3).

□  (Foreign Non-Resident) If a foreign employee is a non-resident, only certain deductions such as basic deduction for himself/herself and pension insurance premium deduction are permitted, just like domestic non-residents.

○  Special tax credit such as tax credit for medical expenses and education expenses and most other income deductions and tax credits do not apply to non-residents (refer to App 3).

□  Special taxations that apply to foreign employees are as follows:

○  (Application of the 19% flat tax rate) Foreign employees can choose to apply the 19% flat tax rate on annual pay (including non-taxable pay) for five years from the date of first providing service in Korea.

○  (Foreign engineers) Where a foreigner meets certain requirements such as conclusion of a contract on introduction of engineering technology or employment as a researcher in a foreign-invested company, 50% of the calculated tax on wage & salary income generated for five years shall be reduced.

*  Applied for five years starting from the day of first providing service in Korea on or after Jan. 1, 2019. If service was first provided on or before Dec. 31, 2018, the previous regulation (two years) shall apply.

○  (Foreign teachers) A resident from a country that has a tax treaty with Korea containing a tax exemption clause (e.g. U.S., U.K.) who meets the requirements for tax exemption can receive tax exemption for income related to lecture and research received for a certain period (mostly two years).

*  Because the tax exemption clauses differ by tax treaty counterpart, it is advised to check in advance (refer to App1. 12).

3		Support for Foreigners’ Year-end Tax Settlement

□  The NTS provides various customized services for foreign employees’ easy and convenient year-end tax settlement.

○  The NTS publishes the Easy Guide for Foreigner‘s Year-End Tax Settlement in Korean and English for foreign employees and withholding agents.

○  In particular, this year, a foreign language manual for year-end tax settlement was published in Chinese and Vietnamese as well as in English for the convenience of non-English speaking foreign employees.

*  In the year-end tax settlement attributable to the year 2018, Chinese and Vietnamese filers accounted for 44% of the total filers.

○  Also, the NTS English website provides an automatic calculation program for year-end tax settlement so that users can calculate their tax payable or tax refundable.

○  In addition, a help desk for foreigners (1588-0560) is operated for foreigners who are not fluent in Korean.

□  Going forward, the NTS will continue to improve its support services for foreigners’ year-end tax settlement to enhance their convenience.

□ How to use the support services for foreigners’ year-end tax settlement □

Service	How to Access
Help desk for foreigners (phone), on-line consulting	☎ 1588-0560 (English only) www.nts.go.kr/eng > Help Desk > Q&A
Easy Guide for Foreigners’ Year-End Tax Settlement	www.nts.go.kr/eng > Resources > Publication > Easy Guide for Foreigners' Year-end Tax Settlement 2019
Automatic calculation program for year-end tax settlement (English)	www.nts.go.kr/eng > Help Desk > Quick Viewer Service > Automatic Calculation Service for Year-end Tax Settlement
Foreign-language manual for year-end tax settlement	www.nts.go.kr/eng > Resources > Publication > Foreign language Manual for Year-end Tax Settlement 2019

App. 1		FAQ on Foreigners’Year-End Tax Settlement

1		I am a foreign wage & salary income earner and my company withholds tax from my monthly income. What is the year-end tax settlement?

○  When paying an employee’s monthly salary, the withholding agent (company) should pay the amount of tax withheld according to the simplified tax table* to the competent tax office after considering the employee’s monthly salary and income deduction items such as the number of dependent families, and should file year-end tax settlement before salary for February of the following year is paid.

*  A table that determines the amount of tax to be withheld every month depending on the monthly salary and the number of dependent family members.

○  Year-end tax settlement is a process of finalizing the total amount of income tax to be borne by an employee for the wage & salary income earned during the relevant taxable period.

-  The final amount of tax payable is determined by reflecting the report of income deduction and tax credit  submitted by the employee to the wage & salary income of the relevant taxable period.

○  If the final amount of tax payable is determined by reflecting the income deduction and tax credit items, the withholding agent (company) shall compare the amount to the sum of monthly withheld taxes. If the amount of total withheld tax is more, the amount in excess shall be refunded (added to salary), and if it is less, the amount in shortage shall be additionally collected (subtracted from salary).

※ Related law: Article 134, 137 of the Income Tax Act

2		How do I file year-end tax settlement if I retire from my work in the middle of the year?

○  If an employee retires in the middle of the year, the withholding agent collects the year-end tax settlement amount when paying the wage & salary income for the retiring month.

○  Therefore, an employee who retires in the middle of the year should submit a report of income deduction and tax credit and supporting documents to the company before he/she receives salary for the retiring month. If the employee only has wage & salary income from one place of work in the relevant taxable period, his/her income tax payment obligations are fulfilled with the aforementioned year-end tax settlement.

※ Related law: Article 137 of the Income Tax Act

3		If a foreigner who is a resident of Korea has overseas income from the provision of services overseas, should the overseas wage & salary income be added to the domestic wage & salary income when filing year-end tax settlement?

○  In principle, a foreigner who is a resident of Korea should file year-end tax settlement for all domestic and overseas wage & salary income earned during the year.

-  However, as for a foreign resident who has had his/her domicile or place of residence for not more than five years in total from 10 years before the end of the relevant taxable period, he/she shall file year-end tax settlement only for sum of the amount of wage & salary income paid domestically and overseas wage & salary income paid from overseas but remitted to Korea.

※ Related law: Article 3, 20 of the Income Tax Act

4		Where a flat tax rate (19%) is applied, is the amount of national health insurance premium and employment insurance premium contributed by the employee included in the tax base?

○  In the case of a foreign employee who applies for a flat tax rate application, regulations on non-taxation, reduction and exemption of income tax and income deduction and tax credit do not apply. Therefore, national health insurance premium and employment insurance premium are included in the tax base.

※  Related laws: Article 18-2 of the Restriction of Special Taxation Act, Article 12 Subparagraph 3 of the Income Tax Act

5		If the amount of medical expenses on the simplified year-end tax settlement service is less than the actual medical expenses I spent, how can I receive deduction for the medical expenses that I actually spent?

○  If your medical expense does not show on the simplified year-end tax settlement service (www.hometax.go.kr⇨ 조회/발급 ⇨ 연말정산간소화), write down the additional amount spent on the statement of medical expenses and submit documentary evidence issued from a hospital or pharmacy to receive deduction.

※  Related law: Article 59-4 (2) of the Income Tax Act

6		Are medical expenses paid to a medical facility located in a foreign country deductible?

○  As the deductible expenses for medical purpose indicate an amount paid to any medical facilities specified under Medical Service Act, the expenditure to a foreign medical facility does not fall under the subject of tax deduction.

※  Related law: Article 59-4 (2) of the Income Tax Act, Article 118-5 (1) of the Enforcement Decree of the Act

7		Are credit card expenses spent overseas deductible?

○  Credit card expenses spent overseas are not deductible.

※ Related law: Article 126-2 (1) of the Restriction of Special Taxation Act

8		Can foreigners receive tax credit for monthly rent?

○  Tax credit for monthly rent is applicable only to household heads. In this regard, foreigners cannot receive tax credit for monthly rent because they cannot be household heads.

※ Related law: Article 95-2 of the Restriction of Special Taxation Act

○  Whether a foreign national can receive tax credit for monthly rent

-  If a resident who provides service is a foreign national and cannot be a household head, he/she cannot receive tax credit for monthly rent as prescribed by Article 95-2 of the Restriction of Special Taxation Act.

9		Are education expenses that a foreigner working in Korea spent for his/her child enrolled in a school overseas deductible?

○  The education expenses that a foreign resident spent for his/her child enrolled in an overseas education institution are not deductible.

○  However, education expenses spent for children attending a foreign school authorized and established in Korea under the Elementary and Secondary Education Act are deductible.

※ Related law: Article 59-4 (3) of the Income Tax Act, Articles 118-6 (4), (5) of the Enforcement Decree of the Act

10		Are tuition fees for private teaching institutes, etc. spent for pre-school children in a foreign country deductible?

○  Private teaching institutes, etc. are not child care facilities under the Child Care Act or private teaching institutes under the Act on the Establishment and Operation of Private Teaching Institutes and Extracurricular Lessons, so such tuition fees are not deductible.

※  Related law: Article 59-4 (3) of the Income Tax Act, Article 118-6 (1) of the Enforcement Decree of the Act

11		If I omitted certain income deduction or tax credit items in this year’s year-end tax settlement, can I get income deduction or tax credit for such items later?

○  Yes, you can receive income deduction or tax credit when you file global income tax in May or file a request for correction at the jurisdictional tax office within five years.

※  Related law: Article 45-2 of the Framework Act on National Taxes

12		What are the general tax exemption requirements for foreign teachers?

○  The tax exemption regulations for foreign teachers by country can be looked up at the National Tax Law Information System.

○  The tax exemption requirements differ depending on the tax treaty counterpart, so the relevant country’s tax treaty should be examined. For your information, there are no tax exemption regulations in the case of Canada, Norway, Sweden, etc.

○  Residents of the U.S. and Australia are eligible for tax exemption for wage & salary income if the following requirements are met:

-  Inviting organization: Government, local government organization, or authorized education institution

＊Private language institutes, English camps in English Villages are excluded.

-  Purpose of invitation: Lecture or research at a university or authorized education institute

-  Purpose of visit: Primarily for the purpose of such lecture or research

-  Invitation period: A period not exceeding two years

※ Related treaty: Article 20 (1) of the Korea-U.S. Tax Treaty, Article 20 of the Korea-Australia Tax Treaty

App. 2		Criteria for Determining Resident/Non-Resident

□  A ‘Resident’ means an individual who has his/her domicile in Korea or has had a place of residence for 183 days or more in Korea while ‘Non –Resident’ means an individual who is not a resident.

○  The definitions of ‘domicile’ and ‘place of residence’, which determine resident status, are as follows:

(Domicile) Determined by objective living status such as family members supported by the resident and assets held in Korea

(Place of residence) The place where an individual resides for a lengthy period of time besides the domicile without forming strong residential ties

□ Criteria for Determining Resident/Non Resident

1. Determination by the place of residence (if an individual satisfies the requirements on length of stay: Resident)	1. Determination by the domicile (if an individual has a domicile regardless of the period of stay: Resident)
○ An individual who has had a place of residence in Korea for 183 days or more - If the length of having the place of residence is 183 days or more* during one taxable period *Consecutive residence not required - The period of having the place of residence shall be from the day after the date of arrival in Korea to the date of departure. Temporary departure is included in the period of residence in Korea.	○ An individual is considered as having a domicile in Korea in the following cases: - When an individual who has resides in Korea has an occupation that requires him/her to reside in Korea for 183 days or more - When an individual who resides in Korea has family members in Korea supported by him/her and is likely to reside in Korea for 183 days or more based on the job and the status of the assets. - In case of a crew member of a ship or an air plane traveling abroad, when the place of residence of family members supported by him /her or the place of stay during the period other than the working period is in Korea, The domicile of him/her is considered to be in Korea
3. An executive or an employee dispatched by a foreign establishment of a resident individual or domestic company or by a foreign company (limited to where a domestic company directly or indirectly invested 100/100 of the total number of stocks issued or the contributed shares) or a public officer working abroad is considered a resident.

○  Even if the individual does not fall under any of the above, It is possible to determine his/her domicile based on objective living status such as family members in Korea supported by him/her and assets held in Korea.

-  Only the living status in Korea is considered. The living status in Korea and overseas is not compared.

App. 3		Comparison of Deduction/Tax Credit between Domestic/Foreign Residents/Non-residents

Type			Domestic		Foreign		Note
			Resident	Non-resident	Resident	Non-resident
Total wage & salary income			Including Foreign- source income	Domestic- source income	Including Foreign- source income	Domestic- source income	Article 3, Income Tax Act
Deductions for wage & salary income			◯	◯	◯	◯
Personal deduc- tions	Basic deductions (Yourself, spouse, dependent family)		◯	Only yourself	◯	Only yourself	Article 122, Income Tax Act
	Additional deductions (Senior citizens, the disabled, woman, etc.)		◯	Only yourself	◯	Only yourself	Article 122, Income Tax Act
Deductions for pension insurance premium			◯	◯	◯	◯
Special income deductions		National health insurance, employment insurance premium	◯	X	◯	X
		Housing fund	◯	X	X	X	A foreigner is not deemed the head of a household.
Other income deductions		Pension savings, etc.	◯	X	◯	X
		Deposits in a mutual aid fund for small enterprises and small entrepreneurs	◯	X	◯	X
		Savings account for housing purchase	◯	X	X	X	A foreigner is not deemed the head of a household.
		Contributions to a small and medium business start-up investment fund	◯	X	◯	X
		Credit card usage	◯	X	◯	X
		Employees of SMEs that maintain employment	◯	X	◯	X
		Long-term collective invest ment securities savings	◯	X	◯	X
		Contributions to Employee Stock Ownership Association	◯	◯	◯	◯	Applicable to all association members
Tax credits, etc.		Wage and salary income	◯	◯	◯	◯
		Child tax credit	◯	X	◯	X
		Special tax credit(insurance premium, medical expenses, education, expenses, donations)	◯	X	◯	X
		Monthly rents	◯	X	X	X	A foreigner is not deemed a householder.
		Taxpayer association	◯	◯	◯	◯	Applicable if you joined an association and taxes were withheld
		Foreign tax credit	◯	X	◯	X
		Standard tax credit	◯	X	◯	X

App. 4		Example of Calculation

1. Regular way of conducting year-end tax settlement

Step 1

Gross wage/salary income

Annual wage/salary income

(-) non taxable income

= Gross wage and salary income

○ Non-taxable income

- Subsidies for self-driving (200,000 won/month)

- Non-taxable tuition expenses, employment scholarships

- Foreign source income (1 million won [3 million won]/ month)

- Child care allowance for children aged 6 or under

(100,000 won/month), etc.

Step 2

Adjusted wage/salary

income

Gross wage/salary inco0e

(-) wage/salary income deduction

= Adjusted wage & salary income

○ Deductions for wage & salary income

Total wage/salary amount (won)	Deduction (won)
5 million or less	Gross wage & salary × 70%
More than 5 million to 15 million or less	3.5 Mn＋(amount exceeding 5 Mn × 40%)
More than 15 million to 45 million or less	7.5 Mn＋(amount exceeding 15 Mn × 15%)
More than 45 million to 100 million or less	12 Mn＋(amount exceeding 45 Mn × 5%)
More than 100 million	14.75Mn＋(amount exceeding 100 Mn × 2%)

Step 3

Tax base

Adjusted wage/salary income

(-) Other deductions

ㆍPersonal deduction

ㆍPension insurance premium deduction

ㆍSpecial income deduction

ㆍOther deductions

(+)Amount exceeding the composite ceiling of income deduction

= Tax base

○ Personal deductions

-  Basic deduction, additional deduction

○ Deduction for pension premium

-  Premium allotment paid by the taxpayer for National Pension, Public Officials Pension, etc.

○ Special income deduction and other deductions

Special income deduction	Other deductions
① Insurance premium	① Individual pension savings
	② Investment association
	③ Credit card usage
	④ Deposits in a mutual aid fund for small enterprises and small entrepreneurs
	⑤ Contributions to an employee stock ownership association
	⑥ Wage cut amount by small and medium enterprises which have maintained the same level of employment
	⑦ Long-term collective Investment Secu rities Savings

○ Amount exceeding the composite ceiling of income deduction

-  If the deduction amount included in the composite ceiling (e.g. special income deduction, etc.) exceeds 2.5 million won, the exceeding amount will be added to the tax base.

Step 4

Calculated tax amount

Tax base

(×) tax rate

= Calculated tax amount

Tax base (won)	Rate	Calculated tax amount (won)
12 million or less	6%	Tax base × 6%
More than 12 million to 46 million or less	15%	720,000 + (amount exceeding 12 Mn × 15%)
More than 46 million to 88 million or less	24%	5.82 Mn + (amount exceeding 46 Mn × 24%)
More than 88 million to 150 million or less	35%	15.9 Mn + (amount exceeding 88 Mn × 35%)
More than 150 million to 300 million or less	38%	37.6 Mn + (amount exceeding 150 Mn × 38%)
More than 300 million to 500 million or less	40%	94.6 Mn + (amount exceeding 300 Mn × 40%)
over 500 million	42%	174.6 Mn + (amount exceeding 500 Mn × 42%)

Step 5

Determined tax amount

Calculated tax amount

(-) tax credit

= Determined tax amount

○ Tax credit

- Tax credit for wage & salary income, child tax credit, pension account tax credit, special tax credit, taxpayer association tax credit, etc.

Step 6

Tax payable

(refundable)

Determined tax amount

(-) Prepaid tax

= Tax payable (refundable)

○ Prepaid tax

- Monthly amount withheld from wage & salary income according to the simplified tax withholding table or at a 19% flat tax rate

* For non-residents, only some of the deduction and tax credit in the above table applies, so refer to Appendix 2 for details

2. Year-end Tax Settlement by applying a 19% flat tax rate
Step 1 Annual wage & salary income	Including non-taxable income	○ Non-taxable income - Subsidies for self-driving (200,000 won/month) - Work-related education expenses - Employee contributions to National Health Insurance and Employment Insurance - Child care allowance for children aged 6 or under (100,000 won/month), etc.
Step 2 Determined tax amount (=Calculated tax amount)	Annual wage & salary income (×) 19% = Determined tax amount
Step 3 Tax payable (refundable)	Determined tax amount (-) Prepaid tax = Tax payable (refundable)	○ Prepaid tax - Monthly amount withheld from wage & salary income according to the simplified tax withholding table or at a 19% flat tax rate

◎ Regular Year-end Tax Settlement and 19% flat tax rate
< Information > ∙ James works for Company ABC and earned 200,000,000 won as wage & salary income in 2017. - Annual wage & salary income 200,000,000 won - Non-taxable income 5,000,000 won ∙ His family members are as follows: James (aged 36), Jane (His wife, aged 38) (His wife is subject to basic deduction with gross income of 1,000,000 won or less for the relevant tax year) ∙ Expenditure details - National pension contribution 2,500,000 won - National health insurance premium 1,500,000 won ∙ Monthly prepaid tax amount (excluding local income tax) 44,334,000 won
Regular method		19% flat tax rate
Total Income Non-taxable income	₩200,000,000 (-) 5,000,000	Total Income	₩200,000,000
Gross Wage & Salary Income Deduction for wage & salary income	₩195,000,000 16,650,000
Adjusted Wage&Salary Income Personal deduction –Basic deduction -Pension contribution deduction Special income deduction –National health insurance premium Other deduction	₩ 178,350,000 3,000,000 2,500,000 1,500,000
Tax Base	₩ 171,350,000
Calculated Income Tax (basic tax rate) Tax Credit for Wage & Salary Income	₩ 45,713,000 500,000
Determined tax Prepaid tax	₩ 45,213,000 (-) 44,334,000	Determined tax Prepaid tax	₩ 38,000,000 (-) 44,334,000
Tax due	₩ 879,000	Tax due	₩ △6,334,000

App. 5		Summary of Income Deduction Items for Year-End Tax Settlement for 2019

Item

Ceiling

Deduction requirements

Personal deduction

Basic

deduction

1.5 mil. won per person

Employee, his/her spouse, and dependent family members sharing a livlihood (persons with annual income of 1 mil. won or less), * No age restrictions in the case of disabled persons

Dependent family	Lineal ascendants	Lineal descendants	Siblings	Foster child	recipients*
Age	60 or older	20 and below	60 & older, 20 & below	1Below 18	None

* Basic livlihood security system recipients

Additional deduction

Differs by subject

Where a person subject to basic deduction falls under the below

Eligibility	The elderly (70 & up)	The disabled	Woman(Dependant/married)	Single parent
Deduction amount	1 mil. won	2 mil. won	500,000 won	1 mil. won

*  Single-parent deduction does not apply with deduction for woman (when both apply, apply single-parent deduction)

Pension insurance premium

Public pension insurancepremium

Full amount

National pension insurance premium or public official’s pension premium borne by yourself

Special income deduction

Health insurance and employment insurancepremium

Full amount

National health insurance (including long-term care insurance premium) and employment insurance premium bonred by youself

Other income deductions

Personal pension savings

720,000 won per year

Deduction of 40% of the personal pension savings deposit (account opened on or before Dec. 31, 2000)

Deposits made in a mutual aid fund for small enterprises and small entrepreneurs

200 mil. won,

300 mil. won,

500 mil. won

Deposits to a Yellow Umbrella Deduction Cooperative by a company representative with gross wage & salary of 70 mil. won or less

(Deduction ceiling) 5 mil. won for persons with wage & salary income of 40 mil. won or less; 3 mil. won for persons with wage & salary income of more than 40 mil. won and not more than 100 mil. won; 2 mil. won for persons with wage & salary income of more than 100 mil. won

Contributions to

an investment association, etc.

50% of the wage & salary income amount (income deduction for venture company investment trusts cannot exceed 3 mil. won)

Deduction of 10% (100%, 70%, 30%) of the contributions or investments to a small and medium business start-up investment fund

* Direct investment to a venture company, etc. (30 mil. won or less: 100%, 50 mil. won or less: 70%, More than 50 mil. won: 30%)

※ Non-taxation of special tax for rural development

Credit card

The lesser of [20% of gross wage & salary, 2 mil. won, 2.5 mil. won, 3 mil. won] +1 mil. won (traditional market)

+100 mil. won (public transportation)

+1 mil. won (books, performance tickets, etc.)

Income deduction of 15% (30%, 40$) of the amount exceeding 25% of gross wage & salary (Credit card expenses: 15%, cash receipts, debit (pre-paid) card, books, performance tickets, museum tickets, art exhibitions: 30%, traditional markets, public transportation: 40%)

* Museum and art exhibition tickets: Applicable for purchases on or after Jul. 1, 2019

Contribution to employee stock ownership association

4 mil. won per year (15 mil. won for venture companies)

Amount of contributions to an employee stock ownership association to acquire company stocks

Employees of SMEs that maintain employment level

10 mil. won per year

Deduction of 50% of employees’ reduced wage

Long-term collective investment securities savings

2.4 mil. won per year

40% of the deposited amount for employees with gross wage & salary of 80 mil. won or less in the taxable period (up to 6 mil. won per year) (non-taxation of special tax for rural development)

* (Savings account opened on or before Dec. 31, 2015) Amount paid in the taxable period for 10 years from the date of opening the account

App. 6		Summary of Tax Credits Items for Year-End Tax Settlement for 2019

Item

Ceiling

Tax Credit Requirements

Wage & salary income

740,000 won, 660,000 won, 500,000 won depending on gross wage & salary

Tax credit of 55% for calculated tax of 1.3 mil. won or less; 30% for tax exceeding 1.3 mil. won.

※ Tax credit ceiling: 740,000 won (Gross wage & salary of 33 mil. won or less), 660,000 won (Gross wage & salary of 70 mil. won or less), 500,000 won (others)

Pension account

1.05 mi. won per year

Tax credit of 12% (15% for gross wage & salary of 55 mil. or less) of the pension account deposit amount (ceiling of 7 mil. won per year; pension savings – 4 mil. won for gross wage & salary of 120 mil. won or less or global income of 100 mil. won or less, 3 mil. won for persons exceeding such amounts)

Child tax credit

Basic deduction

Full amount

150,000 won per child if there are 2 or less children aged 7 and up (including children under 7 enrolled in school); 300,000 won per child if there are more than 2 children

Childbirth, adoption

Full amount

300,000 won for the first adopted or newborn child, 500,000 won for the second child and 700,000 won for the third child and up

Special

tax credit

Insurance premium

Coverage insurance

120,000 won per year

Tax credit of 12% of the coverage insurance premium paid if a person subject to basic deduction is the insured

Coverage insurance for the disabled

150,000 won per year

Tax credit of 15% of the premiums paid for a coverage insurance for the disabled of which a disabled person who is subject to basic deduction is the insured or the beneficiary

Medical expenses

① Self, etc.

(including  infertility treatment expenses)

Full amount

Where medical expenses exceed 3% of the gross wage & salary, tax credit of 15% (20% for infertility treatment expenses) of the amount in excess (no limit in dependent family members’ age and income)

Amount subject to tax credit	② < 3% of gross wage & salary	② ≥ 3% of gross wage & salary
	① - (3% of gross wage & salary - ②)	① + (② - 3% of gross wage & salary)

※ Ceiling of amount subject to tax credit: Dependent family members (7 mil. won per year), self, etc. (full amount)

② Dependent families

1.05 mil. won per year

Education expenses

Pre-school children

450,000 won

per person

Tax credit of 15% of the education expenses

※No limit in age

(lineal ascendants are not eligible)

Tuition for daycare centers, kindergartens, private education facilities, sports education facilities, afterschool program expenses (including book expenses, excluding supply expenses), meal expenses: Up to 3 mil. won per person

Tuition fee, school meal expenses, textbook expenses, afterschool program expenses (including book expenses, excluding supply expenses), overseas education expenses, uniform purchase expenses (up to 500,000 won for middle & high school students), excursion expenses (up to 300,000 won for elementary, middle & high school students): UP to 3 mil. won per person

Elementary, middle & high school students

College students

1.35 mil. won per person

Education expenses (including cyber university and degree acquisition programs), overseas education expenses: 9 mil. won per person

Self

Full amount × 15%

Education expense for education programs of 1 semester or more for university or graduate schools, tuition fee for occupational capacity development and training, repayment of student loans

Special education for the handicapped

Full amount × 15%

Expenses paid for the rehabilitation of the disabled who are subject to basic deduction

* No limit in income, lineal ascendants are also eligible

Item				Ceiling	Tax Credit Requirements
	Donation	Political funds	100,000 won or less	100% of wage & salary income	Tax credit of 100/110 of the amount of 100,000 won or less
			Over 100,000 won		Tax credit of 15% for the amount over 100,000 won and not over 30 mil. won; 25% for the amount over 30 mil. won
		Statutory			Within the ceiling for each donations, 15% if the sum of the amount subject to tax credit is 10 mil. won or less; 30% for the amount exceeding 10 mil. won
		Employee stock ownership association		30% of wage & salary income
		Designated (excluding donations to religious organization)
		Designated (donations to religious organization)		10% of wage & salary income
Standard tax credit				130,000 won per year	Where application for special income deduction, special tax credit and special tax credit for monthly rent was not filed ※ Applied where the amount of deductions such as special income deduction is less than 130,000 won per year
Taxpayer association				Full amount	Tax credit of 5% of the global income tax amount for wage & salary income withheld by the taxpayer association
Overseas paid tax				Full amount within ceiling	The overseas paid tax of a resident is deducted from his/her global income tax amount of the relevant year ※ Deduction ceiling = Wage & salary income tax × (Overseas wage & salary income/ wage & salary income)