About this guide
Basic rules for the tax base
- Substance over form (Framework Act art. 14): tax-base rules apply to the real income, profit, property, act or transaction regardless of its title or form.
- Classified calculation: the tax base is computed separately for global income, retirement income and capital gains.
- Global income tax base = aggregate of taxable interest, dividend, business, wage & salary, pension and other income, minus global income deductions.
Not included in global income (art. 14)
- Non-taxable income under the Restriction of Special Taxation Act or Income Tax Act art. 12
- Daily workers' wage & salary income
- Withheld interest and dividend income not exceeding 20 million won a year
- Excess repayment from a workplace mutual-aid association (art. 16(1)10)
- Withheld other income of not more than 3 million won (art. 21(2))
- Separately-taxed pension income not exceeding 15 million won a year
- Residential-building lease income of 20 million won or less
Date of attribution of income (Enforcement Decree arts. 45–50)
| Income | Attribution date |
|---|---|
| Interest | Agreed redemption date, or the date of payment |
| Dividend | Date the surplus disposition is decided, or the date of receipt |
| Business — goods | Date of delivery |
| Business — services | Date services are completed |
| Business — asset lease | Agreed payment date, or the date paid |
| Wage & salary | Date service is provided |
| Other | Date of receipt |
| Retirement | Date of retirement |
| Capital gains | Date of payment in full |
Taxable period: normally the calendar year; Jan. 1 to the date of death where a resident dies; Jan. 1 to the departure date where a resident becomes a non-resident.
Calculating income by type
- Interest income = the total interest income.
- Dividend income = the total dividend income for the year (includes deemed dividends — e.g. assets received on stock retirement or capital decrease exceeding the investment amount, or stock received on capitalisation of surplus, excluding capital/revaluation reserves).
- Business income = gross revenue − necessary expenses − losses carried forward (15 years for losses from tax years starting on/after 1.1.2020; 10 years before that). Real-estate-lease losses carried forward are deducted only against real-estate-lease income.
- Wage & salary income = total pay (annual pay − non-taxable pay) − the wage & salary income deduction.
- Pension income = total pension (excl. separately-taxed) − the pension income deduction.
- Other income = gross revenue − necessary expenses. Aggregated in global income, but separate taxation is allowed for some (e.g. lottery); where the annual amount is 3 million won or less the earner chooses separate or global taxation.
- Retirement income = gross retirement benefits − non-taxable retirement benefits. Tax base = that amount − deduction by length of service − deduction of converted allowance.
Wage & salary income deduction (art. 47, ceiling 20 million won)
| Total pay | Deduction |
|---|---|
| Up to 5 million won | 70% of total pay |
| 5–15 million won | 3.5M + 40% of the excess over 5M |
| 15–45 million won | 7.5M + 15% of the excess over 15M |
| 45–100 million won | 12M + 5% of the excess over 45M |
| Over 100 million won | 14.75M + 2% of the excess over 100M |
Pension income deduction (art. 47-2, ceiling 9 million won)
| Total pension | Deduction |
|---|---|
| Up to 3.5 million won | The full amount |
| 3.5–7 million won | 3.5M + 40% of the excess over 3.5M |
| 7–14 million won | 4.9M + 20% of the excess over 7M |
| Over 14 million won | 6.3M + 10% of the excess over 14M |
Necessary expense of other income
- Betting-ticket refunds: the unit stake of the winning ticket
- Slot-machine winnings: the amount inserted at the time of winning
- 80% for public-interest prizes/rewards and move-in delay compensation; 60% for public-project easement/superficies income, transfer/lease of intangible assets, manuscript fees, one-off lecture fees, consulting fees (actual expenses count if higher)
- Religious persons' income: 80% up to 20M won, then 50% / 30% / 20% on higher bands
Retirement income — deduction by length of service
| Years of service | Deduction |
|---|---|
| 5 or less | 1,000,000 × years |
| over 5–10 | 5M + 2M × (years − 5) |
| over 10–20 | 15M + 2.5M × (years − 10) |
| over 20 | 40M + 3M × (years − 20) |
Business income — gross revenue and necessary expenses
Included in gross revenue (Enforcement Decree art. 51(3))
- Advance rents, apportioned as advance rent × (rental months in the year ÷ contract months)
- Deemed rental income on deposits (see Part 3)
- Incentives from a business counterpart; refunded tax previously expensed (e.g. customs drawback)
- Value of business assets received free; reduction of liabilities from debt forgiveness
- Other business-related revenue reverting to the operator
- (Sales returns and allowances are not included; early-settlement sales discounts are deducted)
Not included in gross revenue (art. 26)
- Income-tax or local-income-tax refunds
- Free assets / reduced liabilities appropriated to offset losses carried forward
- Value of own products used for one's own business
- Output VAT
- Additional dues on national-tax refunds
Deemed rental income on deposits
Applies where a resident owns three or more houses (small residence-only houses excluded until 31.12.2026) with deposits totalling over 300 million won. On books: (deposit − 300M won) × days × 60% × 1/365 × time-deposit rate, less interest/discount/dividends from financial assets acquired with the deposit; for non-housing real estate, (deposit-days − construction-cost-days) × 1/365 × rate, less the same. By estimation: the same without the financial-income deduction (and, for non-housing, without the construction-cost subtraction).
Scope of necessary expense (Enforcement Decree art. 55)
Purchase cost of goods/materials sold and incidentals; book value of transferred real estate (construction/development businesses); employee salaries; repair, management, maintenance and rent of business assets; depreciation of business fixed assets; interest on debt used directly to earn revenue; bad-debt losses; asset valuation losses; geological-survey and mineral-development costs; advertising and sales-support costs; donations and business-promotion expenses within limits; reserves and allowances; at-work sports/entertainment for employees.
Business income — special expense rules
Reserves and allowances (within limits)
- Retirement benefit allowance (Enforcement Decree art. 57): lesser of (5% of total pay to employees with 1+ year of continuous service) and (0% of estimated retirement benefit − reserve balance + retirement-fund conversion).
- Bad-debt allowance (art. 56): year-end credit balance × the greater of 1% and the actual bad-debt ratio (= bad debt in the year ÷ prior year-end credit balance).
- Gains on insurance claims / national subsidies (arts. 31–32): can be expensed if used to acquire or improve fixed assets within 2 years.
Donations (art. 34) — note: since 2014, a business-income-only taxpayer's donations are a necessary expense, not a tax credit
- Statutory donations: ceiling = standard income amount. Gifts to government/local bodies, national-defence contributions, disaster relief, etc.
- Political-fund donations: ceiling = standard income − statutory donations (the first 100,000 won gives a 100/110 tax credit instead)
- Employee-stock-ownership-association donations: ceiling = (standard income − political − statutory) × 30%
- Designated donations: where religious-group donations exist, A×10% + min(A×20%, other designated donations); otherwise A×30%, where A = standard income − statutory − political − ESOP donations. Covers social-welfare foundations, schools, religious organizations, medical corporations, scholarship recommendations, and public-good purposes.
- Other donations are not deductible at all.
- Carry-forward: statutory 10 years (2014–2018: 5); designated 10 years (donations from 1.1.2013). Political and ESOP donations cannot be carried forward.
Business-promotion expenses (art. 35)
Deductible in principle, but not above the ceiling below, and a single entertainment over 30,000 won (200,000 for congratulations/condolences) needs a legal document such as a card slip. Ceiling = [12M won (36M for SMEs) × months÷12] + (gross revenue × applicable rate) + (specially-related-party revenue × rate × 10%). Applicable rate: 0.3% up to 10 bn won; 30M + 0.2% of the excess up to 50 bn; 110M + 0.03% of the excess over 50 bn. Cultural business-promotion expenses: the lesser of the actual amount and 20% of the general ceiling.
Depreciation (Enforcement Decree art. 62)
Within a limit based on the reported service life and method. Buildings: straight-line (SLM). Other tangible fixed assets: fixed-percentage (FPM) or SLM if filed, FPM if not. Intangibles: SLM. Mining rights: units-of-production (UPM). Non-filing default varies by asset. Original cost = purchase price + acquisition/registration tax + incidentals (or, for self-constructed assets, materials + labour + freight + insurance + fees + dues + installation). Residual value is zero, except FPM uses 5% of cost as residual. Limit: SLM = cost × rate; FPM = (cost − accumulated depreciation) × rate; UPM = cost × (year's output ÷ expected total). Revenue expenditure keeps an asset working; capital expenditure extends its life or increases its value.
Not included in necessary expense (art. 33)
Income tax and local income tax and tax from non-compliance (incl. penalty tax); fines and administrative fines; delinquency charges and collection costs; fixed-asset valuation losses; non-business expenses; individual consumption/liquor tax on unsold goods taken out; construction-fund interest and interest on loans with unclear lenders; discretionary public charges or sanction-type imposts; over-depreciation; household expenses and prepaid expenses; input VAT.
Business-use passenger vehicles (art. 33-2)
For a double-entry taxpayer, vehicle costs not attributable to business use are not deductible. Excludes light cars (≤ 1,000 cc) and vehicles used directly in transport, car sales/lease, driving schools, mechanical security, facility lease, and hearses. Business-use amount = vehicle-related cost × business-use ratio (distance for business ÷ total distance) from a driving log. Without a log: 100% if costs are ≤ 15M won, otherwise 15M ÷ total costs. Depreciation is straight-line over 5 years, capped at 8M won per vehicle per year (excess carried forward); disposal losses over 8M won per vehicle are spread over later years (all remaining on business closure).
Global income deductions
Non-residents
Basic deduction (art. 50) — 1.5 million won per person
The filer, plus a spouse with income of 1M won or less a year (gross wage & salary 5M won or less), and dependents sharing a livelihood with income of 1M won or less:
| Dependent | Condition |
|---|---|
| Lineal ascendants | Aged 60 or older |
| Lineal descendants, adoptees | Aged 20 or younger |
| Siblings | Aged 20 or younger, or 60 or older |
| Others | National Basic Living Security recipients and disabled persons: no age limit; foster children raised 6+ months in the year |
Additional deduction (art. 51)
- Person aged 70 or older: 1,000,000 won each
- Disabled person: 2,000,000 won each
- Woman with global income ≤ 30M won who has no spouse and heads a household with dependents, or has a spouse: 500,000 won/year
- Single parent with a lineal descendant/adoptee dependent: 1,000,000 won/year (applied instead of the 500,000 won item if both apply)
Other income deductions
- Pension-contribution deduction (art. 51-3): contributions to public pensions are fully deducted from global income.
- Special deduction (art. 52, wage earners only, not daily workers): health/employment/long-term-care insurance premiums borne by the employee; housing-purchase funds — principal repayment on a housing-lease loan (non-homeowner household head, national-housing-size), and interest on a long-term housing-mortgage loan (own no house or one house; market price ≤ 600M won at purchase; restricted for owners of two or more houses).
- Donations (carried forward): since 2015 donations are a tax credit, but pre-2013 donations not yet deducted within 10 years remain an income deduction.
- Long-term collective investment security savings (Restriction of Special Taxation Act art. 91-16): for an employee with gross wage & salary ≤ 50M won who subscribed by 31.12.2015 — 40% of the annual payment for 10 years (annual limit 6M won).
Credit-card etc. deduction (Restriction of Special Taxation Act art. 126-2)
For a wage earner (not daily workers), the spouse with income ≤ 1M won, and lineal ascendants/descendants sharing a livelihood with income ≤ 1M won. Ceiling: 3M won (gross wage & salary ≤ 70M won) or 2.5M won (over 70M won). Deduction = basic + additional. Basic rates on spending over the minimum use amount (25% of total pay): credit cards 15%; cash receipts / debit / prepaid cards 30%; cultural & sports spending (gross wage ≤ 70M won) 30%; traditional markets 40%; public transport 40%. Additional deduction (traditional markets, transport, books/culture) up to 3M won/year (2M for gross wage over 70M won). Siblings' card spending is never included.
Tax rates (art. 55) — 2025 income
| Tax base | Tax |
|---|---|
| 14 million won or less | 6% |
| 14–50 million won | 840,000 + 15% of the excess over 14M |
| 50–88 million won | 6,240,000 + 24% of the excess over 50M |
| 88–150 million won | 15,360,000 + 35% of the excess over 88M |
| 150–300 million won | 37,060,000 + 38% of the excess over 150M |
| 300–500 million won | 94,060,000 + 40% of the excess over 300M |
| 500 million–1 billion won | 174,060,000 + 42% of the excess over 500M |
| Over 1 billion won | 384,060,000 + 45% of the excess over 1 billion |
Example: a foreign resident with a tax base of 15,000,000 won pays 840,000 + (15,000,000 − 14,000,000) × 15% = 990,000 won.
Tax credits
| Credit | Amount | Ceiling / note |
|---|---|---|
| Dividend income (art. 56) | grossed-up dividend income × 11% | computed tax − separate-taxation tax; not applicable if not subject to gross-up |
| Bookkeeping (art. 56-2) | computed tax × (bookkept business income ÷ global income) × 20% | 1 million won; not for double-entry taxpayers; lost if 20%+ omitted or books not kept 5 yrs |
| Foreign tax (art. 57) | foreign income tax paid/payable | computed tax × (foreign-source income ÷ global income); per country; carry forward 10 yrs |
| Casualty loss (art. 58) | income tax × asset-loss ratio | where 20%+ of assets (excl. land) are lost to disaster |
| Wage & salary income (art. 59) | 55% of computed tax (30% on the part over 1.3M won) | 740,000 / 660,000 / 500,000 won by pay band |
| Children (art. 59-2) | 1 child 250,000; 2 children 550,000; 3+ 550,000 + 400,000 per extra child (per year) | children/grandchildren aged 8+; birth/adoption: 300,000 / 500,000 / 700,000 won for 1st/2nd/3rd |
| Pension accounts (art. 59-3) | payments × 12% (15% if global income ≤ 45M won or gross wage ≤ 55M won) | up to 9M won incl. retirement pension (6M base) |
| Taxpayers' association (art. 150) | computed tax on that wage & salary income × 3% | for earned income not subject to withholding |
| Marriage (Restriction of Special Taxation Act art. 92) | 500,000 won | year of marriage registration, once per lifetime, 2024–2026 |
Wage & salary income tax credit ceiling
| Gross wage & salary | Ceiling |
|---|---|
| Up to 33 million won | 740,000 won |
| 33–70 million won | 740,000 − [(pay − 33M) × 0.008]; floor 660,000 |
| 70–120 million won | 660,000 − [(pay − 70M) × 1/2]; floor 500,000 |
| Over 120 million won | 500,000 − [(pay − 120M) × 1/2]; floor 200,000 |
Special tax credit (art. 59-4, wage earners; also compliant businesses for medical/education)
- Insurance premium: 12% of indemnity-insurance premiums (15% for disabled-only insurance), ceiling 1M won each
- Medical expenses: for the amount over 3% of gross wage & salary — 15% (20% for premature/birth-defect babies; 30% for infertility treatment). No limit for the filer / aged 65+ / disabled; 7M won/year limit for other dependents. Cosmetic surgery and health supplements excluded
- Education expenses: 15% — filer's own tuition (incl. graduate school, vocational, loan repayment) in full; pre-school and elementary/middle/high 3M won/capita; university 9M won/capita; disabled rehabilitation education in full
- Donations: 15% (30% on the amount over 10M won) within limits, for a resident (not business-income-only, but year-end-settled business income counts) and basic-deduction dependents. Political-fund and hometown-love donations: 100/110 for the first 100,000 won, then 15% (25%/30% above). Religious organizations 10% of wage & salary income; other designated groups 30%
Standard tax credit and others
- Standard tax credit (art. 59-4(9)): 130,000 won for employees who claim no special credit/deduction; 70,000 won for business operators (120,000 for compliant businesses)
- Compliant-filing verification cost (Restriction of Special Taxation Act art. 126-6): 60% of the cost, up to 1.2M won
- Dividend tax credit (art. 56): where grossed-up dividend income above the 20M-won global-taxation threshold is included, 11% of it is credited (ceiling = computed tax − separate-taxation tax)
- Foreign tax credit (art. 57): foreign tax (excl. penalties/surcharges) converted to won at the payment-date rate; excess carried forward 10 years; apply with Form 11 at the finalized return or year-end settlement (within 3 months of a delayed foreign assessment notice)
- Marriage tax credit void-marriage rule: on annulment, file an amended/late return within 3 months to have non-filing/under-reporting and late-payment penalties waived; interest (500,000 × days × 22/100,000) is still added