Tax guide for Americans in Korea
South Korea is full of energy. The technology is cutting-edge, the culture is electric, and the economy is on the move. No wonder more and more people from all over the world are making it their new home.
Thinking of moving there for work, school, or just a change of scenery? Before you pack your bags, it's worth getting to grips with South Korea's tax rules - and what you can expect from its immigration policy.
Overview of South Korea
| Primary tax form for residents | Global Income Tax Return |
| Tax year | January 1 – December 31 |
| Tax due date | May 1 – May 31 of the following year |
| Criteria for tax residency | Domicile or 183+ days in Korea in a tax year |
| US tax filing requirements | Must file Form 1040 and report worldwide income |
| Eligibility for FEIE | Yes, if meeting bona fide residence or physical presence test |
| Methods of double tax relief | Foreign tax credit or treaty-based exemption |
| Tax residency for dual citizens | Subject to residency criteria; taxed on worldwide income if resident |
| Estate and inheritance tax | 10%–50% based on estate value |
| Overview of local tax rates | Progressive income tax rates from 6% to 45%. Local income tax is 10% of national tax. Corporate tax rates range from 10% to 25% |
Who can be considered a resident of South Korea?
South Korea has specific criteria for determining whether an individual is a resident or non-resident for tax purposes.
Generally, you're considered a resident if:
- You spend 183 days or more in South Korea during a tax year. It doesn't have to be all at once - just add up the days.
- You have a home or permanent residence there. That's called a "domicile".
- Your job or business keeps you in the country for at least 183 days a year.
- You've got close family (such as a spouse or children) living in South Korea or significant assets or investments there.
If you're planning to apply for permanent residency in Korea, factors such as length of stay, family ties, housing, and financial presence often come into play. It's best to consult a local immigration specialist.
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Types of taxes in South Korea
South Korea has a comprehensive tax system that includes various types of taxes, each with its own set of rules and rates.
Personal income tax rates
Income tax in South Korea is levied on an individual's income, including wages, business profits, interest, dividends, and rent. The country has a progressive tax rate system and in 2025 it will be:
| Taxable income(KRW*) | Tax rate(%)** |
| 0-14,000,000 | 6 |
| 14,000,000-50,000,000 | 15 |
| 50,000,000-88,000,000 | 24 |
| 88,000,000-150,000,000 | 35 |
| 150,000,000-300,000,000 | 38 |
| 300,000,000-500,000,000 | 40 |
| 500,000,000-1,000,000,000 | 42 |
| 1,000,000,000 and above | 45 |
* Korean won
** Before local income tax.
Local income tax
Local income tax is a 10% surcharge on your national income tax. So if you owe KRW 5,000,000 nationally, you'll pay KRW 500,000 more locally.
This money helps fund things like public services, schools, local infrastructure
It applies to all taxpayers, including residents and non-residents, ensuring that everyone contributes to the development and maintenance of local facilities.
Value-added tax
In South Korea, VAT is a 10% tax that is added to most goods and services. You'll see it built into the price of things you buy, whether it's a phone, furniture, or a service.
A few essentials are exempt, like:
- basic food
- healthcare
- education
Net wealth tax
There is currently no net worth tax in South Korea. This means that individuals and entities are not taxed on the total value of their assets or net worth.
Inheritance & gift tax
South Korea taxes property you receive, whether from a deceased person or as a gift.
- Inheritance tax applies when property is transferred after death (or when someone is legally missing).
- Gift tax applies when you're given something below market value or for free.
The tax rate? It ranges from 10% to 50%, depending on how much the property is worth. This doesn't include local taxes, which can add a bit more.
Beneficiaries must file an estate tax return and pay any tax liability within a specified period after the decedent's death.
Property tax
In South Korea, owning real estate means paying an annual real estate tax. The rate varies from 0.07% to 5%, depending on the type and location of the property.
This tax is based on the statutory value of assets such as land, buildings, houses, ships, and aircraft, although there are some exemptions.
Corporate tax rate in South Korea
In South Korea, corporate income tax rates are progressive, depending on taxable income:
| Earnings (KRW) | Rate applicable to income levels (%) |
|---|---|
| 0-200M | 10 |
| 200M-20B | 20 |
| 20B-300B | 22 |
| 300B and above | 25 |
Alternative minimum tax
South Korea's AMT ensures that high-income earners and corporations pay a minimum amount of tax, even if they use a lot of deductions.
It works like this:
- You calculate 45% of your income tax (or 35% if it's under KRW 30 million) before exemptions.
- Then, compare it with your tax after deductions.
- You pay the higher amount.
It applies to business income for residents and Korean-source business income for non-residents. It doesn't apply to regular employment income.
Capital gains tax
Capital gains tax In South Korea, capital gains are taxed separately from ordinary income.
Residents pay tax on:
- Real estate, stocks, and other assets
- Foreign assets (except stocks) if resident for 5+ years
- Large shareholders of listed companies pay 22%-27.5%
- Gains on shares held less than one year: 33%
- Small company shares: 11% (including local tax)
From January 1, 2025, stock gains will be taxed as financial investment income.
Non-residents will be taxed on Korea-sourced gains at the lower of:
- 10% of gross proceeds (11% with local tax)
- 20% of net gain (22% with local tax)
Exemptions apply to:
- Certain agricultural land and real estate
- Primary residence (if conditions are met)
- Listed stock (if you're not a major shareholder)
Capital losses can only offset gains and cannot be carried forward.
Annual gains and losses must be totaled by category.
Basic deduction: KRW 2.5 million per year. Long-term gains are subject to additional deductions.
Filing a tax return in South Korea
When to file a tax return
The South Korean tax year is based on the calendar year, running from January 1 to December 31.
Generally, you should file your income tax return between May 1 and May 31 of the following year.
For example, for the tax year 2024, the filing window is May 1 through May 31, 2025.
However, certain situations, such as leaving South Korea permanently, may change your filing deadlines. In such cases, it's advisable to consult the National Tax Service or a local tax professional to determine the appropriate filing date.
How to file a tax return
- Gather necessary documentation: Collect all relevant financial documents, including income statements and receipts for deductible expenses.
- Use the NTS online system: South Korea offers an efficient online tax filing system accessible through the NTS website.
Penalties for late or incorrect submissions
- Failure to file on time or providing incorrect information may result in penalties:
- Late filing: A penalty of 20% of the unpaid tax may be assessed for failure to file a return by the due date.
- Incorrect filing: Submitting inaccurate information may result in additional penalties and interest.
Types of income in South Korea
Employment income
In South Korea, earned income falls into two main categories: Class A and Class B. The tax rules differ depending on who's paying you and where they're based.
Class A income comes from Korean companies. This includes your salary, bonuses, and any other compensation for work performed in Korea. It's taxed automatically - your employer withholds taxes each month.
Class B income comes from foreign companies that aren't affiliated with a Korean company. There's no monthly withholding. Instead, you're responsible for filing and paying the tax yourself each year.
Special tax benefits for foreigners working in Korea
If you're a foreigner working in Korea, you may qualify for a flat tax rate of 19% on your earned income instead of the usual progressive rates.
You'll need to apply through the Korean tax office and meet the deadline for starting work in Korea.
Equity compensation
More and more companies, especially startups and tech companies, are offering equity instead of cash. Think stock options, restricted stock units (RSUs), and similar rewards tied to company stock.
How they're taxed depends on the type:
- For stock options, the tax is usually due when you exercise them.
- For RSUs, it's when they vest.
In both cases, you're taxed on the fair market value of the stock at that time, minus what you paid to get it.
Retirement income
Retirement income in South Korea includes payments from the National Pension System, private pensions, and foreign pensions.
Severance pay
In South Korea, severance pay is compensation you receive when you leave a job, usually after working for a certain period of time.
It's taxable, but there are special rules and exemptions that can reduce the amount of tax you owe.
Business income
If you run a business in South Korea - whether it's trading, manufacturing or other commercial work - your profits are considered business income.
It's taxable, and you must file an annual tax return showing both your income and expenses.
Dividend income
In South Korea, dividends - from both Korean and foreign stocks or mutual funds - are taxable.
Dividends from Korean sources are subject to a 15.4% withholding tax.
If you've lived in Korea for more than five of the past ten years, foreign dividends are considered part of your worldwide income and are taxed at either the standard income tax rate or 15.4%, whichever is higher.
If you've lived in Korea for five years or less, foreign dividends are only taxed if they are paid by a Korean company or brought into Korea.
Interest income
Interest from bank accounts, bonds, or other financial products is taxable in South Korea.
Like dividends, it's usually subject to withholding tax and must be reported on your annual tax return.
Income from the transfer of financial assets
Starting January 1, 2025, profits from the sale of stocks, bonds, and other securities in South Korea will be taxed separately from your regular income.
You'll have to report this income on your annual tax return. The rates are:
- 20% on income up to KRW 300 million
- 25% on anything above that
Other income
In South Korea, "other income" includes anything that doesn't fit into the categories of employment, business, or investment.
Think rental income, royalties, freelance work, or even lottery winnings.
It's taxable and must be reported on your annual tax return.
Exempt income
Some income in South Korea is not taxed at all - this is called tax-exempt income.
It can include government grants, certain interest or dividends, and other types of income defined by law.
Pension system in South Korea
South Korea's pension system is a core part of the country's social security framework - especially if you're working in the country for the long term.
The main program is the National Pension Scheme (NPS), which is mandatory for both employees and the self-employed. Employers and employees each contribute 4.5% of the employee's salary, for a total of 9%. These contributions are tax-deductible for employees.
There's a cap on monthly contributions, which is adjusted annually. Foreigners working in Korea are generally required to participate in the NPS, as are Korean nationals.
US-South Korea tax treaty
The US-South Korea tax treaty helps prevent double taxation for individuals and companies operating in both countries.
Tax treaty advantage
- It decides which country gets to tax what, so the same income isn't taxed twice.
- It can reduce withholding taxes on things like dividends, interest, and royalties.
- It defines residency rules and income types, making it easier to understand your tax obligations and plan ahead.
For US expats in Korea (and vice versa), this treaty provides real relief and clarity.
Connect with our experts in an introductory call to explore how we make tax filing easy for US expats.
Book free consultationImportant US tax forms for expats in South Korea
Even if you live abroad, the IRS still wants to hear from you. If you're a US citizen or resident living in South Korea, here are the main forms you're likely to encounter:
- Form 1040: Your basic US income tax return. Required every year, no matter where you live.
- Form 2555: Lets you claim the Foreign Earned Income Exclusion, so you can leave some of your foreign income off your US return.
- Form 1116: Used to claim a foreign tax credit for taxes you paid in Korea, reducing what you owe the IRS.
- FinCEN Form 114 (FBAR): If your foreign bank accounts total more than $10,000, you must report them.
- Form 8938: Required under FATCA rules if you hold significant foreign financial assets.
FAQ
Yes, South Korea has a comprehensive social security system, including programs such as the National Pension Scheme (NPS), National Health Insurance (NHI), Employment Insurance (EI), and Workers' Compensation Insurance (WCI).
Yes, US citizens must file a tax return annually, even when living abroad.
Capital gains are taxed separately from ordinary income. Tax rates vary by type of asset, holding period, and residency.
Yes, some expats may qualify for a lump-sum pension refund when leaving Korea, depending on their home country's agreement.
