Individual Income Tax and Benefit Guide for Foreigners 2018

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Individual Income Tax and Benefit Guide for Foreigners 2018
(For use in preparing 2017 returns)

General Information

1. Who should file a return?
A foreign resident with global income in the relevant year has to file a tax return to the head
of the competent district tax office in the same way as a Korean resident.
A non-resident who has a business place (generally referred to as "permanent establishment"
in tax conventions) in Korea or real estate income from Korean sources is also obligated to
file and pay global income tax for domestic source income.
Income tax is a tax imposed on an individual's income on an annual basis. An individual's
income is classified into global income, retirement income, and transfer income, and global
income refers to interest income, dividend income, business income, wage and salary income,
pension income, and other income.

☞ Exemption from Filing Finalized Return of Global Income Tax Base Any resident falling under any of the following may choose not to file a finalized return of the tax base of the relevant income (Article 73 (1) of the Income Tax Act): 1) A resident with only wage & salary income 2) A resident with only retirement income 3) A resident with only public pension income 4) A resident with only business income subject to year-end settlement ☞ Insurance solicitors, door-to-door salespersons and door-to-door salespersons under sponsorship with only business income generated from insurance solicitation, door-to-door sales, or door-to-door sales under sponsorship, respectively, whose income in the immediately preceding year is less than 75 million won (limited to cases where income tax is paid through year-end settlement) 5) A resident with only wage & salary income and retirement income 6) A resident with only retirement income and public pension income 7) A resident with only retirement income and the income mentioned in 4) 8) A resident with only interest income, dividend income, pension income or other income which are subject to separate taxation 9) A resident who falls under 1) to 7) and has interest income, dividend income, pension income or other income which are subject to separate taxation

2. When should I file a return for 2017?
The taxable period is the period prescribed by the Income Tax Act for calculation of the
amount of income, and the period for filing an income tax return for the relevant taxable period
is the filing period.
The taxable period for income tax is one year, from Jan. 1 to Dec. 31, and the filing period
for income accrued during the tax year concerned is from May 1 to May 31 of the following
year. When the due date for filing a tax return falls on a Sunday or a legal holiday, the next
business day shall be the due date.
Therefore, the due date for filing a 2017 global income tax return is May 31, 2018. However,
if business operators subject to confirmation of compliant return submit a confirmation report,
the period for filing shall be extended to July 2.
If a resident becomes a non-resident by leaving Korea (i.e., change of address or domicile
to overseas), the taxable period is from January 1 to the day of departure. In this case, the
due date for filing shall be one day before the day of departure.

3. What should I include with my return and what records should I keep?
Which form to file
There are two forms you can choose when you file your tax return: Form 40 (1) and 40
(4). Form 40 (1) is for the final return of global income tax base and self-assessment. In the
case of business operators subject to the simplified expense rate with only one business place
that generates business income who file a return by estimation, form 40 (4) should be used.
What supporting documents are needed
The finalized return of global income tax base and self-assessment form provides the list of
supporting documents to be attached, such as certificates, forms, statements, and official
receipts.
If you make a claim for tax deductions, tax credits or tax reduction/exemption without the
required receipt, certificate, statement, or form, the claim may be rejected. It can also delay
the processing of your return.
Even the supporting documents that are generally not required to be submitted should be kept
for at least five years in case they are requested for tax audit, etc.
The following documents should generally be attached to your tax return:
• Copy of alien registration card issued by the local immigration office
• Application form for tax deductions, credits, and tax reduction/exemption, and certifying
documents
• Documents necessary for calculating the total gross income amount and necessary
expenses - balance sheet, income statement, compound trial balance and supporting
documents, and statement of adjustment where there is business income
• Other necessary documents as may be requested by the tax authority according to the
relevant provision of the Income Tax Act.

Alien registration requirement A foreigner who is planning to stay in Korea for more than 90 days is required to obtain an alien registration card from an immigration office, which issues an alien registration number. This number should be recorded on tax-related documents because it is also used as the alien's identification number for tax purposes during his or her stay in Korea.

4. Where do I file and pay?
Where to file your return
You can file your return at the district tax office (DTO) having jurisdiction over your ‘place
for tax payment’. The place for tax payment is the place that determines the competent tax
office for the purpose of taxpayers’ filing and payment of income tax and the tax authority’s
assessment and reassessment of income tax. In principle, a resident’s place for income tax
payment is his/her domicile, or the place of residence where he/she does not have a domicile.
A tax return submitted to the wrong DTO will be transferred to the competent DTO that has
jurisdiction over your current domicile.
Submitting your return can be done via post. You may also file electronically, through the
Hometax website (www.hometax.go.kr).
※ Hometax service is available only in Korean. A foreign worker who chooses to apply the flat tax
rate under the special taxation for foreign workers shall submit a report of income deduction and
tax credit from wage & salary income and an application for flat tax rate for foreign employees
to the competent tax office when he/she files a final return of global income tax base.
Where to pay your tax
Global income tax attributable to 2017 should be paid by May 31, 2018, the due date for
filing global income tax return. In case taxpayers with business income submit a report of
confirmation of compliant return, the due date for payment is extended by July 2. The tax can
be paid at the nearest bank or post office, or through the electronic payment system by phone
(phone banking: ARS) or on-line banking.

5. What penalties are charged?
Penalty tax is imposed for failure to file and pay if filing or payment is not completed by
the due date. For details, refer to Part Ⅱ. Tax Penalties.
6. How can I receive tax refund?
When you have filed your final global income tax return and are due for a refund, the head
of the relevant district tax office will remit the due amount to your bank account or post office
savings account by the end of June.
Therefore, when a refund is due, the taxpayer should write down his/her account number to
which the due amount shall be remitted in the tax return form. When the amount of the due
refund is 20 million won or more, the taxpayer must submit a declaration of account
opening/change and a copy of the bankbook.
When the head of the competent district tax office is not able to pay the due refund through
account transfer, payment can be made in cash. In this case, the taxpayer can collect 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 and his/her personal ID. When someone else collects
the due refund on behalf of the taxpayer, a notification of national tax refund, the personal ID
of both the taxpayer and the person acting on behalf of the taxpayer, and a letter of attorney
prepared and sealed by the taxpayer are required.

※ Bank accounts that cannot be used for receipt of refunds

account for purpose of receiving the claimed refund.
cannot be made to bank accounts opened at banks outside Korea. Therefore, foreign taxpayers
scheduled to leave Korea right after claiming a refund are advised to keep their Korean bank
account for purpose of receiving the claimed refund.

7. Should I report income generated overseas?
Under the Income Tax Act, individuals are categorized as either a resident or non-resident
for tax purposes, depending on which the scope of taxable income and method of taxation
differs. Residents are subject to income taxation for all income that have accrued in Korea and
abroad (income from all countries), whereas non-residents are subject to income taxation only
for income from Korean sources.
Therefore, if a foreign taxpayer is a resident of Korea, he/she must pay taxes on all income
that was generated both within and outside Korea. The income derived from foreign sources
must be converted to Korean won using the basic currency exchange rate or arbitrage rate of
exchange that was applied on the date the income was generated.
However, for income accrued on or after January 1, 2009 for the first time, only the income
from foreign sources that was paid out in Korea 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.
Where foreign source income is included in a resident’s global income or retirement income,
and tax equivalent to Korea’s income tax has been paid or confirmed to be paid to a foreign
tax authority for the foreign source income, the taxpayer may receive foreign tax credit.