[Income Tax in Korea] Non-global income

Non-global income

We will explore the concept of "retirement income" in the context of income tax in Korea. Retirement income refers to a lump-sum payment made by an employer to an employee upon their retirement after a considerable period of service. We'll discuss what is included in retirement income and how it is treated for tax purposes.

 

Non-global income

What is Included in Retirement Income?

Retirement income includes the following types of payments:

• A lump sum payment made under public pension-related Acts.
• Income received for actual retirement based on employer contributions.
• Similar types of income, such as:
  • 1. Interest on deferred payments of retirement income along with the retirement income.
  • 2. Science and technology development grants paid under the Korea Scientists and Engineers Mutual-Aid Association Act.
  • 3. Mutual-aid money for retirement paid under the Act on The Employment Improvement, etc. of Construction Workers.
  • 4. Income that a religious worker receives from a religious organization upon actual retirement.

Taxation of Retirement Income

Retirement income is not considered part of the individual's global income and is treated separately for tax purposes. This distinction is made because retirement income is earned over a long service period and paid as a lump sum, which could lead to an excessive tax burden if aggregated with global income.

The tax obligations on retirement income are fulfilled when the payer withholds taxes at the source. In other words, if a resident has only retirement income, they are not required to file a finalized return of tax base; the taxes are already withheld by the payer.

Conclusion

In conclusion, retirement income in Korea encompasses various payments made to employees upon their retirement after a considerable period of service. It is taxed separately from global income to avoid undue tax burden. The taxes on retirement income are collected by withholding at the source, reducing the individual's filing obligations.