February is the Month of Year-End Tax Settlement... 500,000 Foreign Workers Also Eligible

Same as domestic residents in terms of schedule and deduction items
Tax incentive regulations applicable to foreigners also available

Next month, not only domestic workers but also foreign workers must complete year-end tax settlements for their income earned last year.

According to the National Tax Service (NTS) on the 3rd, the schedule, deduction items, and tax calculation methods for year-end tax settlements for foreign workers are, in principle, the same as those for domestic workers.

However, the income deduction for housing subscription savings payments does not apply to foreigners who cannot be household heads under the Resident Registration Act, even if they are residents.

Starting from the 2023 income subject to this year's year-end tax settlement, the period for applying the 19% flat tax rate has been extended from 5 years to 20 years, and the exemption for technicians has been extended from 5 years to 10 years, allowing foreigners who have worked in Korea for a long time to benefit from these special provisions.

Foreign workers with domestic employment income in 2023 (excluding daily workers) must complete their year-end tax settlement by the time they receive their February salary this year, regardless of nationality, length of stay in Korea, or income level. Based on the year-end tax settlement results, the final determined tax amount will be compared with the tax withheld monthly by the withholding agent (company), and any difference will be either additionally paid or refunded.

The number of foreign workers filing year-end tax settlements (based on the income year) temporarily decreased in 2020 (545,000 people) and 2021 (505,000 people) due to the COVID-19 pandemic and other factors. However, in 2022, the number increased to 544,000, showing an upward trend. The reported tax amount also reached a record high of 1.1943 trillion KRW.

Looking at foreign workers who completed year-end tax settlements for 2022 by country (top 5 countries), China accounted for the largest share at 34.5% (187,000 people), followed by Vietnam at 8.2% (44,000 people), Nepal at 6.2% (34,000 people), Indonesia at 5.1% (28,000 people), and the United States at 4.9% (26,000 people).

The country with the highest reported tax amount from foreign workers’ year-end tax settlements is the United States, accounting for 40% (477.1 billion KRW), followed by China at 13.6% (162.8 billion KRW), Japan at 6.0% (72.2 billion KRW), Canada at 5.8% (69.8 billion KRW), and Australia at 2.7% (31.8 billion KRW).

The National Tax Service provides various guidance services to help foreign workers complete their year-end tax settlements without difficulty. English-language guides and year-end tax settlement manuals (in English, Chinese, and Vietnamese) are available on the NTS website, and a dedicated consultation phone line for foreigners is also operated. Especially this year, a new year-end tax settlement guidance video for foreigners (in English) has been produced and is provided through the NTS YouTube channel.

This content was produced with the assistance of AI translation services.