[Income Tax in Korea] A Guide to Filing Your Global Income Tax

A Guide to Filing Your Global Income Tax

we'll discuss the essential aspects of filing global income tax, providing valuable insights and guidance to help you navigate through the process effectively.

 

A Guide to Filing Your Global Income Tax

1. Who Should File a Return?

If you are a foreign resident with global income in the relevant year, you must file a tax return to the head of the competent district tax office, just like a Korean resident. Additionally, non-residents with a business place or real estate income in Korea are also obligated to file and pay global income tax for domestic source income. Global income encompasses interest income, dividend income, business income, wage and salary income, pension income, and other income. 

Exemption from Filing Finalized Return of Global Income Tax Base

Any resident falling under any of the following may choose not to file a finalized return of the tax base of the relevant income ( Article 73, Income Tax Act):

• 1) A resident with only wage & salary income
• 2) A resident with only retirement income
• 3) A resident with only public pension income
• 4) A resident with only business income subject to year-end settlement
  • Business income earned by ① insurance solicitors, ② door-to-door salespersons, ③ door-to-door salespersons under sponsorship, ④ beverage delivery salespersons whose income in the immediately preceding year is less than 75 million won (②-④: limited to cases where income tax is paid through year-end settlement)
• 5) A resident with only religious persons' income as other income subject to withholding
• 6) A resident with only wage & salary income and retirement income
• 7) A resident with only retirement income and public pension income
• 8) A resident with only retirement income and the business income mentioned in 4)
• 9) A resident with only retirement income and the religious persons' income mentioned in 5)
• 10) A resident with only interest income, dividend income, pension income or other income which are subject to separate taxation
• 11) A resident who falls under 1) to 9) and has interest income, dividend income, pension income or other income which are subject to separate taxation
• 12) A resident where no additional income is generated after the occasional imposition

2. When Should I File a Return?

The taxable period for income tax is one year, running from January 1 to December 31. The filing period for income accrued during the tax year is from May 1 to May 31 of the following year. If the due date for filing falls on a Sunday or a legal holiday, the next business day becomes the due date. For the 2022 global income tax return, the due date is May 31, 2023. However, if business operators subject to confirmation of compliant return submit a confirmation report, the filing period extends to June 30. In case a resident becomes a non-resident by leaving Korea, the taxable period is from January 1 to the day of departure, and the filing due date is one day before the day of departure.

3. What Documents Should I Submit When Filing?

Which Form to File

When filing your tax return, you can choose from four forms: Form 40 (1), 40 (4), 40 (5), and 40 (6).

• Form 40 (1): Final return of global income tax base and self-assessment.
• Form 40 (4): For business operators subject to the simplified expense rate that generates business income and file a return by estimation.
• Form 40 (5): To be used by religious workers having religious persons' income (other income) only.
• Form 40 (6): For those with only income subject to separate taxation.

What Supporting Documents Are Needed

The finalized return of global income tax base and self-assessment form, along with the instructions, provides a list of supporting documents to be attached, such as certificates, forms, statements, and official receipts. Ensure that you have all the necessary documentation for tax deductions, tax credits, or tax reduction/exemption. Failing to provide the required documentation can lead to a rejection of your claim and delay the processing of your return. It's advisable to keep even the supporting documents generally not required to be submitted for at least five years (seven years for offshore transactions) from the statutory report period's expiry. 

The following documents should generally be attached to your tax return:

• Copy of alien registration card issued by the local immigration office
• Application form for tax deductions, credits, and tax reduction/exemption, and certifying documents
• Documents necessary for calculating the total gross income amount and necessary expenses - balance sheet, income statement, compound trial balance and supporting documents, and statement of adjustment where there is business income
• Other necessary documents as may be requested by the tax authority according to the relevant provision of the Income Tax Act.

Alien registration requirement

A foreigner who is planning to stay in Korea for more than 90 days is required to obtain an alien registration card from an immigration office, which issues an alien registration number. This number should be recorded on tax-related documents because it is also used as the alien's identification number for tax purposes during his or her stay in Korea.

Conclusion

Filing global income tax is a crucial responsibility for foreign residents and non-residents in Korea. Understanding the filing period, appropriate forms, and supporting documentation is essential for a smooth and accurate tax filing process. Be sure to meet the deadline and comply with all the necessary requirements to avoid any potential issues.