If I hire a native-speaker instructor, is their income tax automatically exempt?
No, it is not. A native-speaker teacher from a country that has a tax treaty with Korea (the US, UK, France, Australia, and many others) can have their income tax exempted for the period set by the treaty (mostly 2 years, varying by country) if they meet the requirements — but this is not applied automatically. The academy, as the withholding agent, must file with the proper supporting documents. Misjudging the requirements and treating income as exempt can lead to a later assessment for missed withholding, so we recommend confirming the country-specific requirements accurately at the time of hiring.
The most important issue — do not miss the native-speaker instructor tax treaty exemption
This is a tax matter unique to foreign language academies, not found in other academy types
Income tax exemption is possible for instructors from treaty countries
A native-speaker teacher from a country with a tax treaty with Korea — the US, UK, France, Australia, Japan, and many others — can have their income tax on teaching income exempted for the period set by the treaty (mostly 2 years, varying by country) if they meet the requirements.
It is not automatic; an application and verification process is required
Exemption requirements vary by treaty country, and the academy, as the withholding agent, must file with proper supporting documents for it to apply. Misjudging the requirements and treating income as exempt can lead to a later assessment for missed withholding, so it is important to confirm the requirements accurately at the time of hiring.
Instructor composition characteristics of a foreign language academy
Key expense categories
Must-read for foreign language academies
Sort instructor type, support payments, and textbook costs by category to save on taxes
Sorting native-speaker/domestic instructors and support payments correctly, item by item, prevents missed withholding
Long-term fixed assets — language-lab practice equipment
Practice equipment: language-lab headsets/recording equipment, electronic whiteboards
Anything over 1,000,000 KRW per unit is classified as a depreciable asset and must be expensed gradually over its useful life.
Consumables — textbooks/language content
Textbooks and language-content subscription fees are expensed in full at the time of purchase/payment. Since the academy business is VAT-exempt, you cannot claim a separate input VAT credit.
Personal service costs — native-speaker vs. domestic instructors
Native-speaker instructors are mostly employment contracts (review tax treaty exemption if requirements are met); domestic instructors are reported differently as either freelance 3.3% or employment income.
Native-speaker support payments — airfare/housing
Airfare and housing support provided to native-speaker instructors need review as to whether they should be included in employment income and withheld, since they may substantively be compensation for labor.
| Category | Examples | Tax treatment |
|---|---|---|
| Long-term fixed assets | Language-lab headsets/recording equipment | Depreciated if over 1,000,000 KRW |
| Consumables | Textbooks, language-content subscriptions | Expensed in full at payment (no input VAT credit) |
| Personal services | Native-speaker (employment) vs. domestic (3.3%/employment) | Tax treaty exemption reviewed separately |
| Native-speaker support payments | Airfare, housing | Review whether it counts as employment income |