Extended application period of flat tax rate for foreign contractors
Under the revised tax law, a foreign worker who starts to work in Korea before December 31, 2021, can elect the flat tax rate, 20.9%.
Application of the flat tax rate election is limited to a maximum of five years including the first year he/she starts to work in Korea.
However, a foreign contractor who started working in Korea before January 1, 2015, is able to apply the flat rate until December 31, 2018,
not applicable from 2019.
2017 proposed tax law amendments
Currently, foreigners working in Korea may choose to be taxed at a flat 18.7% tax rate (including local income tax) without tax
deductions or credits; or progressive tax rates ranging from 6.6% to 41.8% (including local income tax) with applicable
tax deductions and credits. The flat rate is scheduled to expire on December 31, 2016.
The flat tax rate is proposed to increase from 18.7% to 20.9% (including local income tax).
According to the notice from NTS, the change will go into effect on salaries from January 1st of 2017.
183-day Rule in Korea
On 2 December 2014, Korea’s National Assembly approved several changes that will affect foreign individuals living in the country.
One of the most salient rules, which apply as from 1 January 2015, is the 183-day rule.
Under the new rule, an individual will be considered a Korean resident for tax purposes if the individual is present in Korea at least
183 days during the current year or during two consecutive tax years.