Tax Base and Tax Rates for Personal Income Tax in Korea

Overview of Korean Salary System

In Korea, generally the annual salary contract is common and is paid by monthly basis. The incentive system is recently introduced from the foreign investment company and now spread most of Korean Company based on their annual or half-yearly performance. However the measurement method are quite diversified according to the industry type or individual contract. In addition to their annual salary and incentive bonus, company have to pay the severance (“Retirement Allowance”) according the Korean Labor Standard Act. Company have to reserve or pay the one (1) month salary each year when they served more than one (1) year.

When company pay their employee's salary, company have to withhold any kind of income tax and social security insurance and then file and return to National Tax Service(”NTS”) on 10^th of next month each month. The reconciliation of annual income tax have to prepare by company on behalf of each staff and each staff have to prepare their evidence of deductible expenses.

Tax Rates

The Tax Base or Taxable income is calculated by followings;

(= Wages & Salary Income – Personal Deduction – Personal Contribution Deduction – Special Deduction – other Income deduction + Amount Exceeding the Limit of Income Deduction)

l  The Tax rates is effective from 1^st January 2012

l  The resident tax will added 10 % of Income tax.

For the detailed information, please contact your advisory office with your service contract information.