Filing and Paying Taxes for Foreign Workers in Korea
we will discuss the process of filing and paying global income tax in Korea for foreign workers. We will cover the locations for filing tax returns, payment methods, penalties for late filing, tax refunds, and reporting overseas income. Let's dive into the details.
Where and How to File and Pay Taxes?
Where to File Your Return
You can file your global income tax return at the district tax office (DTO) with jurisdiction over your "place for tax payment." For residents, this place is their domicile, or if they don't have a domicile, it's their place of residence (Article 6, Income Tax Act). If you submit your tax return to the wrong DTO, it will be transferred to the correct one based on your current domicile.
You have the option to submit the required forms and documents via post, and there's also the possibility of filing electronically through the Hometax website (www.hometax.go.kr). Please note that the Hometax service is available only in Korean.
How to Pay Your Tax
The global income tax for the year 2022 should be paid by May 31, 2023, which is the due date for filing the global income tax return. If businesses are required to submit a report of confirmation of compliant return, the payment due date is extended until June 30.
You can make the tax payment at the nearest bank or post office. Alternatively, there is an electronic payment system that allows payment through online banking, phone banking (ARS), or with a credit card. If the amount payable exceeds 10 million won, you may pay in installments for up to two months after the payment deadline has passed.
- For tax payable up to 20 million won, the amount over 10 million can be paid in installments.
- For tax payable over 20 million won, 50% of the tax amount can be paid in installments.
Penalties for Late Filing
If you fail to file your global income tax return within the statutory period, you will face penalties for non-compliant filing and late payment. For specific details on penalties.
For details, refer below
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Receiving Tax Refunds
After filing your final global income tax return and becoming eligible for a refund, the head of the relevant district tax office will remit the refund amount to your bank account or post office savings account by the end of June. When the due refund amount is 50 million won or more, you must submit a declaration of account opening/change (form no. 22 of the Enforcement Rules of the Framework Act on National Taxes) along with a copy of your bankbook.
In cases where account transfer is not possible, the taxpayer can receive the due refund in cash by visiting the post office and presenting the notification of national tax refund issued by the competent district tax office along with personal identification. If someone else collects the refund on behalf of the taxpayer, additional documentation is required.
Please note that certain foreign financial institutions, such as HSBC, are ineligible for receiving refunds. Also, bank accounts opened outside Korea cannot be used for receiving tax refunds.
Reporting Income Generated Overseas
The scope of taxable income and taxation methods differ for residents and non-residents under the Income Tax Act. Residents are taxed on their income from both Korea and abroad, while non-residents are taxed only on income from Korean sources (Article 3, Income Tax Act).
Foreign taxpayers who are residents of Korea must pay taxes on all income generated within and outside Korea. Income from foreign sources must be converted to Korean won using the applicable exchange rate on the date the income was generated (Article 16, Enforcement Rules of the Income Tax Act).
However, for income generated on or after January 1, 2009, only the income from foreign sources paid out or transferred to Korea is taxable for foreign taxpayers whose total length of residency or domicile in Korea is not over five years during the ten-year period ending on the final day of the tax year to which the income is attributable.
If foreign source income is included in a resident's global income or retirement income, and the equivalent tax has been paid or confirmed to be paid to a foreign tax authority, the taxpayer may receive foreign tax credit.