No matter what your tax matter is,
our professional tax experts
serve for your business success.

Corporate Tax

home Local Compliance InformationCorporate Tax
Filing Non-resident Tax Returns for Income from Salary and Real-estate Rental Business

Filing Non-resident TaxReturns for Income from Salary and Real-estate Rental Business



Date: November 7, 2019


I. Introduction

Korea's taxation system aims the principle oftaxation on source at the place of origin. Thereby, a nonresident shall beimposed tax on Korea-source income only. In the case of double taxation, incometax shall be imposed according to the agreed principles of the tax treatyentered into between Korea and the Contracting party to the Double TaxationConvention. This paper is to give an overview of taxation system fornon-residents in Korea focusing on the cases about how income tax is imposed onincome from salary and real-estate rental business.


II. Overview

Income tax on a nonresident shall be calculatedby separating cases where it is imposed by aggregating relevant domestic sourceincome, from cases where it is imposed by separating such domestic sourceincome.


1. Global Taxation

For a nonresident having a domestic placeof business and a nonresident with income from real-estate rental businesstax shall be imposed by aggregating income as it follows below (excluding incometax to be withheld as special cases concerning withholding tax on income notgenerated from the domestic place of business). Income tax from retirementallowance and capital gains, however, shall be classified and imposed in thesame method as that for a resident


- Interest income


- Dividend income


- Income from rental real-estate


- Income from release of property


- Business income


- Personal service income


- Wage and salary income


- Pension income


- Royalty income


Income from transferring securities


- Miscellaneous income


2. Separate Taxation

For a nonresident having no domestic place ofbusiness, income tax shall be imposed separately by income source. The sameshould be applied for domestic income of a nonresident having a domestic placeof business not substantially related to or not belonging to his/her domesticplace of business.


3. Domestic Place of Business of a non-resident

Taxation of a non-resident is hugely affectedby whether he or she has a domestic place of business in Korea.


 (1) Thescope of domestic place of business

If a nonresident has a fixed place to carry outall or part of the business in the Republic of Korea, he/she shall be deemed tohave a domestic place of business.

- A branch, office or place of business


- A store or other fixed sales places


- A place of work, factory or warehouse


- A place of construction, site of construction, assembly or installation work, ora place where supervision is conducted in relation thereto, which continues toexist exceeding six months


- Any of the following places where services are provided by employees:


* A place where services are carried out for a period exceeding six months in totalamong 12 months during which services provided continuously.


* A place where similar kinds of services are carried out continuously andrepeatedly for two or more years, for a period not exceeding six months intotal among 12 months during which services are provided continuously.

* A mine, a quarry or a place where any submarine natural resources and othernatural resources are probed or gathered (including places located on the seabed and subsoil in the submarine area contiguous to the coast of the Republicof Korea where the Republic of Korea exercises its sovereignty outside theterritorial waters under international laws

(2) Places deemed domestic place of business


Where a nonresident having no domestic place ofbusiness conducts business by employing a person prescribed by PresidentialDecree in the Republic of Korea who is authorized to enter into any contract onhis/her behalf and repeatedly exercises such authority, or a person similarthereto, he/she shall be deemed to have a domestic place of business at theseat of such person's place of business (a domicile where there is no place ofbusiness, and the place of residence where there is no domicile).

* Persons who always keep the assets of a nonresident, and customarily delivers ortransfers them.


* Persons as intermediaries, dealers on general consignment and other independent agents,who conduct the activities of important parts of business such as conclusion ofcontracts, mainly for the specified nonresident only (including cases wherehe/she displays activity in the normal phases of his/her own business).


* Persons who collect insurance premiums or underwrite insurances on the insured articlein the Republic of Korea, for nonresidents who operate insurance business(excluding reinsurance business).


(3)Places not deemed domestic place of business


* A fixed place used by a nonresident only for purchasing assets


* A fixed place used by a nonresident only for storing or keeping any assets notfor sale.


* A fixed place used by a nonresident for any advertisement, publicity, collectionand furnishing of information, market survey, and other activities in thepreliminary and auxiliary nature for carrying on his/her business.


* A fixed place used by a nonresident only for having another person processhis/her assets.



Taxation Process and Taxation Method for Non-residents

Process 1


Where income of a foreign corporate occurs it should be decided whether the income is taxable under the Korean tax law. If it is international tax treaties also should be considered as the next step. However the income is not the subject to income tax if it is not taxable under the Koran tax law nor international tax treaties.


Decide whether  the income is taxable

Process 2


In case of taxable income the source of income should be considered. Where the income was generated from domestic place of business the income is the subject to composite income tax. Provided that the income did not come from domestic place of business the income is the subject to withholding tax under separate taxation. However, capital gains are not the case for this.



Decide how to levy taxes



Process 3


Where domestic tax rates are lower than those of international tax treaties tax should be levied based on domestic tax rates. In the case of the opposite, tax rates of international tax treaty should be applied.

Decide applicable rates under separate taxation system



III. Case Study

Case study about the taxation method when a Non-residentwith income from overseas has Income from salary and real-estate rental business.


   1. Determinate whether income is taxable


A nonresident shall be imposed tax onKorea-source income only. Thereby, income from overseas is not the subject toincome tax. However, income generated from salary and real-estate rentalbusiness is the subject to income tax. Tax shall be imposed according to theagreed principles of the tax treaty entered into between Korea and thecontracting party.



    2.Determination of taxation method


Once the income of a non-resident turned out tobe taxable taxation method should be decided based on the fact that whether theresident has a local place of business. For example, when a non-resident withUS citizenship has income from real-estate rental business the taxation methodis as it follows;

In this case, tax shall be imposed byaggregating income of the domestic source. The provisions concerning thecalculation of the tax base and tax amount of income tax of a resident shallapply to the calculation of the tax base and the amount of the tax on income ofa nonresident under Article 122. However, additional deductions for dependentand special deductions shall deemed nil under subparagraph 2-3 of Article 51and 52. In order to avoid double taxation, the income tax the non-resident (Americancitizen) paid in Korea will be deducted from the tax imposed in the US pursuantto Article 5 of the US-Korea tax treaty.



    3. Conclusion


The US citizen in this case study is anon-resident with income from real-estate rental business. Therefore domesticsource income including that of salary and real-estate rental business is thesubject to global tax. In this case income tax shall be imposed in the same waywith residents. In terms of calculation of tax base and tax amount innon-resident global taxation, tax shall be imposed in the same way with the residents.However, additional tax breaks including additional tax deduction, tax creditfor children, and special tax deductions deemed nil.


Learn more about Korean tax system by visiting our website:


Prev Capital gains tax for nonresidents
Next Taxation on House Rental Income