The National Tax Service on Jan. 7 announced the schedule for year-end tax settlement and major benefits for foreign workers. From this year, more such laborers are eligible for tax cuts on savings deposits for home purchases if they meet the requirements. (iClickArt) (Unauthorized reproduction and redistribution of this image is prohibited under copyright law.)
By Lee Jihae
Foreign workers from this year can claim tax breaks on saving deposits for home purchases amid expanded benefits for tax filing.
The National Tax Service (NTS) on Jan. 7 announced changes to major benefits for foreign workers in releasing the schedule for filing taxes for 2025.
First is a lower threshold for the tax deduction on savings deposits for home purchases. This benefit was previously off-limits to foreign workers because they could not be the head of a household under the Resident Registration Act.
This year, however, eligibility was expanded to include the spouse of the head of a household, giving this benefit to expats who meet the requirements.
A foreign worker who lives in Korea with an annual income not more than KRW 70 million and is married to the head of a household who does not own a home can claim a deduction of up to 40% (limit KRW 3 million per year) of the amount deposited the previous year into a savings account for home purchase.
Benefits will remain for outstanding talent from overseas. Foreign workers can receive 50% off income tax on salary and wages for up to 10 years if they provide technical services under an engineering technology licensing agreement, or hold a bachelor's degree or higher in science or engineering and have international experience in research.
They can receive 70% off for the first three years of employment if employed by a specialized leading enterprise per the Act on Special Measures to Strengthen Competitiveness and Stabilize the Supply Chain of the Materials, Components and Equipment Industry.
Since February last year, individuals classified as outstanding overseas talent per the Special Act on High-Tech Industry Talent Innovation are also eligible for such benefits.
Foreign workers may choose between the basic comprehensive tax rate or the flat rate of 19% for up to 20 years, starting from the tax year in which they started working in Korea.
The flat rate is more beneficial for those with high income but requires forfeiting other benefits such as tax exemptions, deductions, cuts and credits. So properly calculating and comparing the benefits based on income are crucial.
The flat rate, however, is not open to a foreign worker who owns at least 30% of the equities of the company he or she works for during the employment period.
Native teachers of foreign languages and professors whose home countries have tax exemption treaties with Korea and meet the requirements can receive income tax benefits on earnings from teaching and research activities.
Eligibility varies by nationality so referring to the original text of the relevant treaty is recommended.
The original treaty texts are on the website of the National Tax Law Information System (https://taxlaw.nts.go.kr/st/USESTC001M.do). The list of countries appears in Korean but the texts come in both Korean and English once the country name is clicked.
Annual tax settlement has also gotten more streamlined. Employers by Jan. 10 must upload their lists of eligible employees to the NTS site Hometax and can download the records in a single step for all employees who provide consent by Jan. 15.
After completion of the consent process, the NTS directly provides the simplified data to a company. Workers whose employers do not use this one-stop service can download their data from Hometax and submit them to their employers.
Access to the simplified service for year-end tax filing starts from Jan. 15. The deadline for submitting statements on withholding tax payments is March 10.
More information is on the Easy Guide of the official NTS website in the English-language section. Explanations in English, Chinese and Vietnamese are also available on the site (https://www.nts.go.kr/english/main.do).
Personalized assistance in English is available by calling 1588-1560, the NTS helpline for foreign taxpayers.
jihlee08@korea.kr