A leading driver and strong advocate for European Businesses in Korea
Roundtable meeting with the National Tax Service (NTS) & Foreigners’ Year-end Tax Return
On Jan 17, Wednesday, ECCK had a meeting with the National Tax Service, Director of International Tax Division, Jaehoon Bahn and his team. Main agenda of the meeting was highlight of Foreigners’ Year-End Tax Settlement as well as review of ECCK White Paper 2023. ECCK looks forward to continued cooperation with the NTS for fair and convenient tax paying environment of our member companies.
Please find below main changes for Year-end Tax Settlement attributable to 2023.
1. Application of flat tax rate for foreign employees (2023 Easy Guide for Foreigners’ Year-End Tax Settlement PDF 53)
Foreign employees, excluding cases where service was provided to a special related company1), can choose application of flat tax rate during the taxable period ending within 20 years from the first day2) of providing service in Korea.
However, in case of choosing application of flat tax rate, non-taxation, deduction, reduction, or exemption shall not be applicable.
1) In the case of an individual business, the criterion is the lineal ascendants and descendants, and in the case of a corporation business, it pertains to ownership of a stake exceeding 30%.
2) If a foreign employee who provided labor in Korea no later than 2013 departed Korea and re-entered Korea and provided labor in Korea again, “the first day of providing labor in Korea” means the first day of providing labor after re-entering Korea on or after Jan. 1, 2014. And in the case of foreign employees providing labor as of Jan. 1, 2014, Jan. 1, 2014 shall be deemed “the first day of providing labor in Korea” (legal interpretation by the Ministry of Economy and Finance, Feb. 21, 2023).
(Non-retroactive) It can be applied in this year’s year-end tax settlement due to its applicability to income accrued on or after Jan. 1, 2023. However, it cannot be retroactively applied to the income attributable to 2022.
2. Application of reduction/exemption for foreign engineers (2023 Easy Guide for Foreigners’ Year-End Tax Settlement PDF 107)
Foreign engineers who providing technology through engineering and technical contracts or meeting the requirements related to researchers shall be granted tax reduction equivalent to 50%* of the tax on wage and salary income from the offer of his/her services to a national of Korea for 10 years.
In case of foreign engineers working in the field of Materials, Components and Equipment up to Dec. 31, 2022, Industries income tax is reduced by 70 percent for wage & salary income incurred from the first day of providing labor in Korea until the month in which falls three years lapse from such date.
Foreign engineers qualified for tax reduction or exemption is who falls under any of the following: provide technology under engineering and technical introduction contracts or have bachelor’s degree or higher in the field of engineering and have worked for more than 5 years in overseas research institutions, and are currently employed in domestic corporate research institutes, etc.. so the relevant tax treaty should be checked. (Article 16 of the Enforcement Decree of the Restriction of Special Taxation Act)
Roundtable meeting with the National Tax Service (NTS) & Foreigners’ Year-end Tax Return
On Jan 17, Wednesday, ECCK had a meeting with the National Tax Service, Director of International Tax Division, Jaehoon Bahn and his team. Main agenda of the meeting was highlight of Foreigners’ Year-End Tax Settlement as well as review of ECCK White Paper 2023. ECCK looks forward to continued cooperation with the NTS for fair and convenient tax paying environment of our member companies.
Please find below main changes for Year-end Tax Settlement attributable to 2023.
1. Application of flat tax rate for foreign employees (2023 Easy Guide for Foreigners’ Year-End Tax Settlement PDF 53)
1) In the case of an individual business, the criterion is the lineal ascendants and descendants, and in the case of a corporation business, it pertains to ownership of a stake exceeding 30%.
2) If a foreign employee who provided labor in Korea no later than 2013 departed Korea and re-entered Korea and provided labor in Korea again, “the first day of providing labor in Korea” means the first day of providing labor after re-entering Korea on or after Jan. 1, 2014. And in the case of foreign employees providing labor as of Jan. 1, 2014, Jan. 1, 2014 shall be deemed “the first day of providing labor in Korea” (legal interpretation by the Ministry of Economy and Finance, Feb. 21, 2023).
(Non-retroactive) It can be applied in this year’s year-end tax settlement due to its applicability to income accrued on or after Jan. 1, 2023. However, it cannot be retroactively applied to the income attributable to 2022.
2. Application of reduction/exemption for foreign engineers (2023 Easy Guide for Foreigners’ Year-End Tax Settlement PDF 107)