South Korea – Taxation

How does the tax system in South Korea work?

South Korea operates a unified national tax framework — unlike countries such as Germany or the United States, there is no distinct regional or state-level income tax. The body responsible for administering and collecting taxes is the National Tax Service (NTS), which operates under the Ministry of Economy and Finance. Although a local income tax surcharge is levied in addition to the national income tax, it is computed as a set percentage of the national tax liability rather than being determined independently by local authorities.

Korea’s system is built on the principle of residence-based taxation: residents are liable for tax on income from all sources worldwide, while non-residents are only taxed on income arising from within Korea. This approach is conceptually similar to how France or Germany treat their residents, and stands in contrast to purely territorial tax systems that restrict taxation to domestically sourced income only.

An individual qualifies as a tax resident if they are domiciled in Korea or have been physically present in the country for 183 days or more during the tax year. Those whose profession would typically require them to spend 183 days or more in Korea, or those who hold significant assets or have family accompanying them in Korea, are also treated as residents. The test therefore extends well beyond a straightforward count of days spent in the country.

A notable change came into effect from the 2026 tax year: an individual may now be classified as a resident if their total period of presence in South Korea reaches at least 183 consecutive days, counting time spent in the immediately preceding tax year. In effect, residency criteria now capture individuals who accumulate 183 days across two back-to-back tax years, even without exceeding that figure in either year individually. Anyone who divides their time between South Korea and another country should take careful note of this development.

A third category — “short-term residency” — also exists: those who have lived in South Korea for no more than five of the preceding ten years are taxed only on foreign-source income that has actually been remitted to or paid in Korea. This remittance-based treatment offers meaningful relief for recent arrivals who continue to draw income from abroad.

Even if a person works overseas and spends more than 183 days outside Korea in a given tax year, they may still be regarded as Korean tax resident if their primary life connections — family and property, for example — remain in Korea. Residency is ultimately assessed by reference to the overall facts and individual circumstances of each case. Where there is any uncertainty, the NTS or a qualified Korean tax professional should be consulted.

Does South Korea have double taxation agreements, and how do they affect expats?

South Korea has built an extensive network of double taxation agreements (DTAs) covering more than 90 countries around the world. The purpose of these treaties is to ensure that the same income is not taxed in full by two different jurisdictions. This network ranks among the broadest in Asia and offers meaningful protection to a wide variety of foreign residents.

Treaties typically operate by reducing withholding tax rates applied to dividends, interest, and royalties. South Korea also participates in the OECD’s Base Erosion and Profit Shifting (BEPS) framework and complies with international standards on tax transparency and the exchange of information. Where taxes have already been paid in another country, foreign tax credits are available to prevent a double burden.

Where a foreign national is treated as a tax resident in both Korea and their home country simultaneously, competing taxing rights arise. In these situations, the primary country of residence is determined by applying the tie-breaker rules contained in the relevant bilateral tax treaty. These rules typically examine where the individual maintains a permanent home, where their personal and economic ties are most deeply rooted, and where they habitually reside.

In practice, DTAs function either by exempting specified income from tax in one of the two countries, or by permitting a credit for tax already paid elsewhere. A South Korean tax residency certificate can be used to access treaty benefits and may result in lower withholding tax rates on foreign-sourced income. Applications for this certificate are submitted to the NTS and are generally processed within one to two weeks.

The complete list of South Korea’s treaty partners, together with the treaty texts themselves, is available on the NTS website under the “Tax Law/Treaty” section at nts.go.kr/english. It is always advisable to confirm whether a DTA is in force between South Korea and your home country before drawing any conclusions about how your income will be treated — the terms of individual treaties differ substantially.

What taxes do expats need to pay in South Korea?

Expats living and working in South Korea may be liable for a range of taxes. The main categories are described below. All rates and thresholds should be verified against the NTS website, as they are subject to revision.

Income tax

Income tax is charged on an individual’s earnings from all relevant sources, including employment wages, business profits, interest, dividends, and rental receipts. South Korea uses a progressive national income tax scale currently ranging from 6% to 45%, to which a local income tax surcharge must be added. The local income tax amounts to 10% of the national income tax liability and is collected separately. Combined, the effective top marginal rate (as of 2025) reaches approximately 49.5% — placing South Korea among the higher-taxing jurisdictions in the Asia-Pacific region.

The income tax brackets in force for residents are as follows (as of 2024–2025):

A 10% local income tax surcharge applies on top of the national tax across all brackets. Always consult the NTS website for the most current brackets, as these may be adjusted through annual tax reform legislation.

Capital gains tax

Gains from the disposal of capital assets form part of an individual’s taxable income, but are assessed separately from general income. Certain capital gains are specifically excluded from taxation. The applicable rates vary according to the taxpayer’s shareholder status, the nature of the asset, and the length of time it was held, and relevant thresholds and rates have been subject to change under the 2024–2026 reform cycle. An annual basic deduction of KRW 2.5 million is available. Specific exemptions exist for both residents and non-residents — for instance, the transfer of certain farmland and other qualifying real estate may be exempt. Capital losses may only be offset against capital gains and cannot be carried forward. The NTS or PwC Korea Tax Summary should be consulted for the rates applicable to your particular asset type.

Inheritance and gift tax

Both inheritance tax and gift tax fall under South Korea’s Inheritance and Gift Tax Law. Inheritance tax arises on the transfer of property without consideration upon death, or where an individual is declared missing. Gift tax applies where property is transferred with donative intent and the consideration received falls short of market value. Rates range from 10% to 50% of the taxable amount. Korean residents may be taxed on worldwide assets under these provisions, while non-residents are generally liable only in respect of assets situated in Korea.

It is worth noting that South Korea has announced plans to reform its inheritance tax regime in 2028, moving away from a tax levied on the estate as a whole toward a charge on each beneficiary’s individual share of the inheritance. This is a significant proposed change that expats holding assets in Korea should monitor closely.

Property tax

An annual tax ranging from 0.07% to 5%, subject to certain exceptions, is levied on the statutory value of land, buildings, houses, vessels, and aircraft. Property tax on residential housing ranges from 0.1% to 4%. Luxury residences, apartments, and houses may attract additional property taxes assessed by regional authorities. Value-added tax (VAT) is set at 10%.

Social security contributions

South Korea maintains a comprehensive social security framework comprising the National Pension Scheme (NPS), National Health Insurance (NHI), Employment Insurance (EI), and Workers’ Compensation Insurance (WCI). As of 2025, both employers and employees each contribute 4.5% of the employee’s salary to the NPS, giving a combined total of 9%, and employee contributions are deductible for Korean income tax purposes. Pension reform legislation will see contribution rates rise gradually from 2026 onwards, making it important to confirm the current-year rules at the time of filing.

Expatriates working in businesses that employ at least one person are required to participate in the national pension plan. Where Korea has concluded a totalization agreement with the expatriate’s home country, however, the terms of that agreement take precedence over domestic pension law. This means individuals covered by a totalization agreement — such as those from the United States — may be able to contribute solely to their home country’s scheme, avoiding the burden of dual contributions.

Foreign financial account reporting

Foreign financial accounts with aggregate balances exceeding KRW 500 million must be reported to the NTS on an annual basis. The NTS cross-references employer filings, banking data, and international information exchange agreements. With the Common Reporting Standard (CRS) fully operational, undisclosed foreign accounts are increasingly likely to come to the NTS’s attention.

Are there any tax breaks or special regimes for expats in South Korea?

South Korea provides a notable preferential tax option for foreign employees, as well as limited exemptions under certain tax treaties. While it does not offer a sweeping non-domicile regime comparable to the UK’s former non-dom rules, or a single flat-tax arrangement covering all income types such as Portugal’s erstwhile NHR programme, the combination of the flat-rate election and the short-term residency rules delivers meaningful relief for many newly arrived expats.

Flat 19% income tax rate for foreign workers

A special flat tax rate of 19% is available to foreign workers employed in South Korea for up to five years (with the possibility of extension). For higher earners, this option may produce a significantly lower tax bill than applying the progressive rate schedule. It is important to bear in mind that this 19% flat rate remains subject to the 10% local income tax surcharge, bringing the effective combined rate to approximately 20.9%.

Foreign employees may elect this flat 19% rate for up to five years, after which they must revert to the progressive tax rates. The election is of particular value to individuals whose earnings would otherwise fall into the upper tax brackets. To make the election, taxpayers must submit an application at the time the monthly payroll withholding tax return or year-end payroll tax reconciliation is processed, or when the annual comprehensive income tax return is filed.

Short-term residency and remittance-based taxation

A foreign national who has lived in Korea for five years or fewer during the preceding decade is taxed on foreign-source income only to the extent that it is either paid from or remitted to Korea. This remittance-based approach bears some conceptual resemblance to territorial tax systems and provides substantial relief for expats during their initial years in South Korea, particularly where overseas income remains outside Korea and is not brought into the country.

DTA-based exemptions for teachers and government employees

A number of South Korea’s tax treaties include specific provisions exempting employment income for certain classes of worker — most frequently public school teachers and government employees — during a defined introductory period. An individual holding a valid residency certificate who submits it to their school may be exempt from Korean income tax for their first two years in the country. This benefit is narrow in scope: it applies only to those employed at public schools engaged by the government, and does not extend to those working for private institutions or after-school programmes. Treaty-specific provisions should always be verified with the NTS or a qualified tax adviser.

Foreign Investment Zone incentives

Individuals investing in designated Foreign Investment Zones may be eligible for additional tax benefits, including reduced corporate tax rates, exemptions from customs duties, and reductions in property tax. These incentives are intended to stimulate foreign direct investment in particular sectors or geographic areas.

How and when do expats file a tax return in South Korea?

South Korea’s tax year follows the calendar year, running from 1 January to 31 December. Tax residents are required to submit an annual income tax return by 31 May of the year following the tax year in question. Where an employee’s sole source of income is Korean employment, their employer will ordinarily handle the year-end tax settlement process in February. Those who are self-employed or have income from multiple sources must file a comprehensive annual return independently.

The step-by-step process for filing your Korean income tax return is as follows:

1. Determine your residency status. Establish whether you are a resident, short-term resident, or non-resident for the relevant tax year, as this determines the scope of income you need to report. Keep a record of all arrival and departure dates throughout the year.
2. Gather documentation. Collect all relevant financial documents, including income statements and receipts for deductible expenses. Include documentation of any income earned outside South Korea — such as rental income, dividends, and interest from non-Korean sources — as well as records supporting any deductions you intend to claim.
3. Calculate your taxable income. Calculate your total taxable income, which includes salary, bonuses, investment income, and any other sources. For residents, this includes both domestic and international income. Deduct eligible expenses, which may include medical expenses, education, and charitable donations, and apply any available tax credits, such as the foreign tax credit for taxes paid abroad.
4. File using the NTS Hometax system. The NTS provides an online portal called Hometax where you can file your taxes, make payments, and access tax records. The system is primarily in Korean, so you may need assistance if you are not familiar with the language. Visit hometax.go.kr or access the NTS English portal at nts.go.kr/english.
5. Pay any outstanding tax. If you owe additional taxes after accounting for withholding and deductions, ensure that these are paid by the 31 May deadline. Payment can be made online via the NTS website or through designated banks.
6. Seek professional help where needed. A certified tax agent in South Korea can guide you through the process, help you stay compliant, and help you claim all eligible deductions.

Failing to submit a return on time typically incurs a penalty of 20% of the tax due, and the surcharge may be higher where the NTS considers the omission to have been deliberate. Filing with inaccurate information can likewise attract additional penalties and interest charges. Always check the NTS website for the current filing deadline and any updates to procedures.

What are the tax implications of leaving South Korea?

Departing South Korea after a period of tax residence brings with it a number of important obligations. It is strongly advisable to plan well ahead of your intended departure date, particularly if you hold significant assets within Korea.

Final tax return on departure

Individuals leaving Korea on a permanent basis are required to file a final tax return before they depart, covering the period from 1 January to the date of departure. Certain circumstances — including a permanent exit from South Korea — may alter the applicable filing deadlines. In such cases, it is prudent to consult the NTS or a local tax professional to confirm the correct date by which your return must be submitted.

Exit tax on unrealised gains

South Korea operates an exit tax regime that applies to certain individuals who hold qualifying domestic assets at the point of permanent departure. Those planning to leave South Korea on or after 1 January 2027 should be aware that the revised exit tax provisions may affect their planning decisions. The exit tax rules are continuing to evolve, and specialist advice should be obtained well in advance of any planned departure.

Deregistering as a tax resident

A foreign national leaving Korea for good should notify an immigration officer at the point of departure and surrender their ARC (Alien Registration Card) at that time. A number of procedures must be followed when terminating your Korean tax residency, and failing to properly close your tax affairs could result in ongoing obligations or difficulties if you return to Korea in the future.

National Pension refund on departure

Depending on the social security agreement in place between Korea and their home country, some expats may be entitled to a lump-sum refund of pension contributions upon leaving. Foreign participants withdrawing from the NPS due to permanent departure are not entitled to a refund unless their home country has entered into a social security agreement with Korea or applies equivalent reciprocal treatment to Korean nationals.

Ongoing obligations after departure

Retaining assets in South Korea after your departure — such as real estate, shares, or bank deposits — may give rise to continuing Korean tax filing obligations in respect of income generated by those assets. Income from Korean sources remains subject to Korean tax for non-residents. From the 2026 filing season, tax residents who established or maintained an overseas trust at any point during 2025 are required to file an “Overseas Trust Statement” with the NTS by 30 June 2026. Always seek professional guidance on any residual Korean obligations before you relocate.

Practical tips for managing taxes as an expat in South Korea

• Monitor your days carefully. Korea tracks entries and exits closely, and breaching the 183-day threshold — or, from 2026, the cumulative two-year threshold — triggers worldwide tax obligations. Maintain a detailed log of every arrival and departure date throughout the year, including short overseas trips.
• Make the flat rate election promptly. Foreign workers are entitled to be taxed at a flat rate of 19% on their gross income. This simplifies the tax process and may produce a lower overall liability compared with the progressive rates for higher earners. The election must be made at the time of the first withholding tax return or year-end settlement — do not leave this decision until later.
• Use your DTA proactively. A South Korean tax residency certificate enables you to claim treaty benefits and may reduce withholding tax rates applied to foreign-sourced income. Where your home country also taxes your income, actively applying DTA provisions and claiming foreign tax credits in each jurisdiction can substantially reduce your combined tax burden.
• Disclose worldwide income accurately. Reporting obligations extend to global income, even where that income is ultimately not taxable in South Korea due to treaty protections. The NTS participates in automatic information exchange under the Common Reporting Standard, making it increasingly difficult to conceal foreign income from the authorities.
• Take advice before disposing of assets. Capital gains tax rules are intricate and differ depending on asset type, holding period, and residency status. The forthcoming changes to exit tax provisions from 2027 make advance planning around asset disposals especially important for anyone considering leaving South Korea.
• Understand how employer withholding works. Employers deduct tax from salary payments directly, which reduces the need for separate payments in many cases. However, if you receive income from additional sources — rental receipts, foreign dividends, or freelance earnings, for example — you will still be required to file a comprehensive annual return.
• Engage a specialist adviser. For the most authoritative and current information, the NTS website provides extensive resources and guidance for both residents and foreign workers navigating the Korean tax system. For complex scenarios — especially those involving cross-border income, trusts, or substantial assets — retain a Korean-registered tax adviser (세무사, semusa) with relevant expertise in expat and international tax matters.

Frequently asked questions

When does a foreign national become a tax resident in South Korea?

An individual becomes a tax resident if they are domiciled in Korea or have been present in the country for 183 days or more during the tax year. From 2026, the criteria have been broadened to include those who accumulate 183 days across two consecutive tax years, even without exceeding that figure in either year individually. Significant family ties or substantial assets held in Korea can also establish residency independently of the day-count threshold.

Is worldwide income taxable in South Korea?

Tax residents of South Korea are required to declare their worldwide income from all sources. Non-residents, by contrast, are only liable for tax on income arising from Korean sources. A separate short-term residency category also exists: individuals who have lived in South Korea for no more than five of the preceding ten years are taxed on foreign-source income only to the extent that it is remitted to or paid in Korea.

What is the filing deadline for income tax in South Korea?

South Korea’s tax year spans 1 January to 31 December. For example, for the 2024 tax year, the filing window runs from 1 May to 31 May 2025. Specific circumstances — such as permanently departing South Korea — may affect when your return must be submitted. Consult the NTS website to confirm the deadline applicable to your particular situation.

Can expats avoid paying tax twice on the same income?

South Korea’s network of more than 90 double taxation treaties in force covers the majority of major economies. Where a DTA exists between South Korea and your home country, its provisions — together with available foreign tax credit mechanisms — can be used to offset taxes paid in one country against the liability arising in the other. A tax residency certificate issued by the NTS enables you to access these treaty benefits.

How are foreign pensions taxed in South Korea?

Pension income received by Korean tax residents is ordinarily included in composite income and taxed at the progressive rates. Many of South Korea’s DTAs, however, contain specific provisions relating to pension and retirement income that may restrict Korean taxing rights or reduce the applicable rate. The outcome will depend on the terms of the specific treaty between South Korea and your home country, making professional advice essential. The NTS treaty database provides access to the relevant agreement texts.

Do expats need to pay into the Korean National Pension Scheme?

Expatriates employed in businesses that have at least one employee are generally required to participate in the national pension plan. Where Korea has a totalization agreement with the expatriate’s home country, the terms of that agreement take precedence over domestic pension legislation. Depending on their home country’s agreement with Korea, some expats leaving permanently may be entitled to claim a lump-sum refund of their accumulated contributions.

What happens if I miss the tax filing deadline in South Korea?

Late filing typically results in a penalty amounting to 20% of the tax assessed, and may be set higher in cases where the NTS regards the failure to file as deliberate. Filing with incorrect or incomplete information can also attract further penalties and interest. If you discover that you have missed a deadline, consult a Korean tax adviser without delay — voluntary disclosure made before an NTS audit generally results in reduced penalties compared with those imposed following enforcement action.

Is there a flat tax option for foreign workers in South Korea?

A flat tax rate of 19% is available to foreign workers employed in South Korea for up to five years, with the possibility of extension. For higher earners, this may represent a more favourable outcome than applying the progressive rates. The 19% flat rate is still subject to the 10% local income tax surcharge, producing an effective combined rate of approximately 20.9%. The election must be made at the time of the relevant payroll filing.

What taxes apply when I sell property in South Korea?

Gains arising on the disposal of capital assets are assessed separately from general income, though they remain part of total taxable income. The rates applicable to property-related capital gains depend on the type of property involved, the length of the holding period, and whether the property served as the taxpayer’s principal residence. Certain gains — including transfers of qualifying farmland and other specified real estate — are exempt from tax for both residents and non-residents. Capital losses may only be set off against capital gains and cannot be carried forward to future years. Given the complexity of the rules and the frequency with which rates and exemptions change, specialist advice should always be sought before completing a property transaction.