How South Korea Income Tax Works — 소득세
South Korea uses a progressive national income tax (소득세) with rates from 6% to 45%, plus a 10% local income tax (지방소득세) on top of the national tax — making the effective combined marginal rate up to 49.5%. Salaried employees benefit from a generous employment income deduction (근로소득공제) that significantly reduces taxable income before brackets are applied. Year-end tax settlement (연말정산) in February reconciles the withholding with actual liability.
| Taxable Income (KRW) | National Rate | Combined (incl. 10% local) |
|---|---|---|
| ₩0 – ₩14,000,000 | 6% | 6.6% |
| ₩14M – ₩50,000,000 | 15% | 16.5% |
| ₩50M – ₩88,000,000 | 24% | 26.4% |
| ₩88M – ₩150,000,000 | 35% | 38.5% |
| ₩150M – ₩300,000,000 | 38% | 41.8% |
| ₩300M – ₩500,000,000 | 40% | 44.0% |
| ₩500M – ₩1,000,000,000 | 42% | 46.2% |
| Over ₩1,000,000,000 | 45% | 49.5% |
- →Employment income deduction (근로소득공제): 100% of first ₩5M, 50% on ₩5M–₩15M, 15% on ₩15M–₩45M, 10% on ₩45M–₩100M, 5% above ₩100M — capped at ₩20M total deduction. This alone eliminates tax on lower salaries.
- →Basic personal deduction (인적공제): ₩1,500,000 per person (taxpayer + dependents such as spouse, children, elderly parents living together).
- →National Pension (국민연금): 4.5% employee share on monthly salary up to ₩590,000/month = ₩7,080,000/year maximum contribution.
- →National Health Insurance (건강보험): 3.545% employee share. Long-term care (장기요양보험): additional ~12.95% of health premium.
- →Employment Insurance (고용보험): 0.9% employee share. Employer pays separately.
- →연말정산 (year-end settlement): January–February, employers reconcile annual withholding against actual tax — most employees receive a refund or pay a small top-up.
- →Self-employed file 종합소득세 (comprehensive income tax) return in May on Hometax (홈택스).
Frequently Asked Questions
What is the employment income deduction (근로소득공제) and how much does it save?
The employment income deduction (근로소득공제) reduces taxable income before brackets are applied — it acts like a progressive standard deduction. For a salary of ₩50,000,000: deduction = ₩5M + (₩10M × 50%) + (₩30M × 15%) = ₩5M + ₩5M + ₩4.5M = ₩14.5M. Add the ₩1.5M basic personal deduction and taxable income is ₩34,000,000, not ₩50,000,000. This is why South Korean effective tax rates are significantly lower than the top bracket rate suggests.
How does 연말정산 (year-end tax settlement) work?
연말정산 happens in January–February each year. Your employer recalculates your exact income tax liability for the previous year, comparing it against the withholding already deducted from your monthly payslips. You submit supporting documents for deductions: medical expenses, education costs, insurance premiums, credit card spending, charitable donations, etc. If too much was withheld, you receive a refund in February or March. If too little, you pay the difference. Most employees get a refund — it is often called '13th month salary' in Korean culture.
What social insurance contributions do Korean employees pay?
Korean employees pay four main social insurance contributions deducted monthly: (1) National Pension 국민연금: 4.5% on salary up to ₩590,000/month base — total 9%, split equally employee/employer. (2) National Health Insurance 건강보험: 3.545% employee share (no income ceiling). (3) Long-term Care 장기요양보험: 12.95% of health premium ≈ 0.459% of salary. (4) Employment Insurance 고용보험: 0.9% employee share. Combined, employees pay roughly 9.4% of gross salary in social contributions before income tax.
Do foreign residents in Korea pay the same income tax?
Foreign residents who have lived in Korea for more than 183 days in a tax year are treated as tax residents and pay the same progressive rates. However, new foreign residents can elect to pay a flat 19% on employment income (foreigner flat tax, 단일세율) for up to 20 years instead of the progressive rates — this can be beneficial for high earners. Foreign residents should also check tax treaty provisions between Korea and their home country to avoid double taxation.