Tax Figures
Corporate Income Tax
First KRW 200,000,000 of taxable income = 10% tax rate;
Income in the KRW 200,000,000 – KRW 20 billion is taxed at 20%;
22% tax rate applies to all the income above KRW 20 billion.
There is also a local income surtax of 10% that applies to corporate income before tax credit and exemptions. Losses could be carried forward for a period of time up to 10 years. Small and medium businesses in some cases are allowed to carry losses back for one year.
Income Tax Rate
- KRW0 – KRW12,000,000: 6% + 0.6% (local income tax)
- KRW12,000,001 – KRW46,000,000: 15% + 1.5%
- KRW46,000,001 – KRW88,000,000: 24% + 2.4%
- KRW88,000,001 – KRW150,000,000 : 35% + 3.5%
- Above KRW150,000,000: 38% + 3.8%
As in most other developed countries, residents are taxed on their income from worldwide sources. A person is usually considered to be a resident if they maintains a domicile or residence in Korea for one year or longer. Nonresidents are taxed on their income from Korean sources only.
Sales Tax
Value Added Tax of 10% is imposed on the supply of goods and provision of services. There is a zero rate that applies to exports and services rendered outside Korea.
Withholding Tax
Dividends, royalties and interest on regular loan paid to nonresident individuals or companies are taxed at a 22% rate (includes the local surtax), unless there is a treaty that reduces this rate. The same tax rate is usually imposed on services provided by a nonresident companies (or individuals). Interest on bonds is, however, subject to a 15.4% withholding tax. Technical service fees maybe classified as royalties in some cases.
Other Tax
When a company purchases real estate,heavy equipment, motor vehicles and other items it has to pay acquisition tax of 4.6% (including the local surtax).
There is also a capital registration tax of 0.48% (with the local surtax), which is levied when a company registers its incorporation or capital increase with the court registry. This tax rate for a company incorporated in the Seoul Metropolitan Area would be higher, at a rate of 1.44%.
Time to prepare and Pay Taxes
188 hours
Employers and Employees Social Security and statutory contributions
Both the employer and the employee pay the following social security contributions that are based on the gross income of employees: national pension, unemployment insurance and medical insurance premiums. They contribute 4.5% of the monthly salary to the national pension fund. The employer and employee also contribute 2.945% and 0.55% of the average monthly wage as a national medical insurance premium and an unemployment insurance premium, respectively. In addition to the unemployment insurance, the employer contributes an insurance premium, which varies from 0.25% to 0.85% of an employee’s average monthly wage based on the number of employees. The long-term care insurance contribution is imposed on the national medical insurance premium at a 6.55% rate.
The maximum amounts of the national medical insurance premium and national pension premium are KRW 4,901,380 and KRW 350,100, respectively, including both the employee and the employer’s portion.
Payroll
There are specific rules for payroll and taxation in South Korea, depending upon the number of employees. Foreign employees are required to pay income tax in South Korea. The primary concerns for a foreign company that needs to comply with tax laws in South Korea are: individual income tax for employees in South Korea, social security costs, payroll tax, sales tax, employment insurance, social insurance programs, withholding tax, business tax, pension contributions and permanent establishment concerns.
Remote Payroll
A remote payroll in South Korea is where a foreign company, i.e. a non-resident company, payrolls a resident employee in South Korea. One option for a non-resident company to payroll its employees (local and foreign) in South Korea is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in South Korea under one of the forms available, but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Internal Payroll
Larger companies with a commitment to South Korea may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a South Korean payroll, and can fulfill all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with South Korean employment laws.
Currency
₩ Won (KRW)
