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Tax refund procedures
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Ed Provencher



Joined: 15 Oct 2006
Location: Korea

PostPosted: Wed Nov 28, 2007 3:33 pm    Post subject: Tax refund procedures Reply with quote

I know how to get my pension refund, but I'm not sure if I am eligible for a tax refund too. I did a search and didn't find any specific information from anyone who has sought a tax refund from Korea.

Have any of the Americans here ever received a tax refund on their way out of Korea?
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ttompatz



Joined: 05 Sep 2005
Location: Kwangju, South Korea

PostPosted: Wed Nov 28, 2007 3:50 pm    Post subject: Re: Pension refund... Okay! Tax refund??? Reply with quote

Ed Provencher wrote:
I know how to get my pension refund, but I'm not sure if I am eligible for a tax refund too. I did a search and didn't find any specific information from anyone who has sought a tax refund from Korea.

Have any of the Americans here ever received a tax refund on their way out of Korea?


Contact the foreign tax advocate on the tax website.

http://www.nts.go.kr/eng/
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Ed Provencher



Joined: 15 Oct 2006
Location: Korea

PostPosted: Wed Nov 28, 2007 4:00 pm    Post subject: Reply with quote

Thanks. Do you know how to set up a password there?
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sjk1128



Joined: 04 Feb 2005

PostPosted: Wed Nov 28, 2007 7:05 pm    Post subject: Taxes in Korea Reply with quote

There are several threads about this. I learned a lot about the tax rules because I was in a dispute last year with my employer. In general, your employer should file your tax return for you. It's called a "year end tax settlement." At that point, any difference should be settled in your next paycheck. The year end tax settlement should be calculated immediately after the last pay period for the year (at the end of December or beginning of January). Because of lots of confusion about the tax rules and tax rates for foreigners -- and lots of fraud by employers, there is a guide written in English and Korean to clarify how taxes should be handled for foreign teachers. There is also an online calculator in English so the foreign teacher will have an idea if he/she is due a refund and how much it should be. You'll need to enter your information including your total salary, pension paid, taxes paid, health insurance paid etc. You can easily get these numbers by multiplying the amounts on your pay stubs by the number of months you worked during the year (or adding up individual months if they're different). The calculator will spit out a number at the end - which usually involves your employer owing you a chunk of change back because foreign employees get a 30% break on taxable income. The links below are to all the info for last year. This year should be similar or identical, but if anyone has seen new ones, please post them!!!! I'm assuming they'll be out by January 1, 2008.

Tax home page
http://www.nts.go.kr/eng/

Calculator
http://www.nts.go.kr/eng/front/jungsan2006/refer_2006jungsan_eng.asp

Guide for foreign English teachers
http://www.nts.go.kr/front/service/publish_book/valgan_book_view.asp?news_seq=5808
(Then click on the link to the guide.)

You can print the guide and the results when you run the calculator and give it to your employer so he/she will be aware that you are aware how much you should be getting back at the end of the year. Then, if it isn't in your account within a reasonable amount of time, you can - and should- file a complaint at the nearest tax office with the help of a Korean friend.

As I understand everything I read, the only time you may file taxes for yourself is if you are a resident of Korea or have several employers/ sources of income. This does not relieve your employer of his/her responsibility to file your taxes correctly. It is a supplemental form you may or may not need to file in May depending on your situation. If you are the typical E2 teacher who has one employer, it should all be done for you.

As for exemption, you can read about the rules in the guide to see if you are exempt. That depends on the treaty your country has with Korea and your specific employment situation. In many cases, it makes little difference: I could have claimed Korean tax exemption last year because I was a US citizen working for a public school who was not a Korean resident at the start of my contract. However, I was eligible for a refund of all but 30,000 won anyway, and chose to go that route as it was easier and cheaper for me in that it did not involve my paying for the form from the IRS and having it sent to Korea (more than 30,000).

BTW, lots of people will give you incorrect information and stupid advice about things like this here. My favorite was "They're your taxes, so you should file the return, right?" (...as if every process, government or otherwise, is handled the same in all countries/ cultures...) Do not listen to them - or me either for that matter. Read the guide and all the information on the tax page for yourself. You may be due a refund of 1m or more. It's worth it, right?
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Ed Provencher



Joined: 15 Oct 2006
Location: Korea

PostPosted: Wed Nov 28, 2007 7:23 pm    Post subject: Reply with quote

Thank you very much!
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Ed Provencher



Joined: 15 Oct 2006
Location: Korea

PostPosted: Wed Nov 28, 2007 8:35 pm    Post subject: Reply with quote

So it seems that, after reading the "Income Tax Guide For Foreigners", that I am not eligible for a tax exempt status. The guide gives two examples of teachers from the USA. The first example "John" gets a refund and the second example "Sara" does not. The main difference is that John works for a government-recognized educational institution such as a public school or university. Sara works for a private academy. I do too.

You should read it yourself if you are curious about the details, but here is the section that answered my question:

Quote:
In conclusion Sara is taxable according to Korean income tax law, because she doesn't meet all the requirements for income tax exemption which are described in the tax convention (between Korea and the US government). Even though Sara works for an English academy for a year and a half (not exceeding 2yrs), and for the purpose of teaching, the private English academy is not a government-recognized educational institution. She teaches English for the purpose of private benifit.
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sjk1128



Joined: 04 Feb 2005

PostPosted: Wed Nov 28, 2007 10:46 pm    Post subject: Reply with quote

You're right: as I understand it you're not eligible for an exemption if you work for a private academy. However, you may be eligible for a refund of almost all the taxes you paid. Plug your numbers in the calculator.

If you had more than one employer during the year or have items which qualify you for deductions that your employer may not know about (credit card expenditure, education or medical expenses, etc.), it is your responsibility to get that information to your employer before the end of the year. He or she will already know about the deductions for which virtually everyone qualifies: pension, medical insurance, etc. The employer you worked for the longest or are currently working for at the end of the year is responsible for doing the year end settlement and getting you your total refund once you supply him or her with all the information about your deductions.

If you're in the position of most E2 teachers in Korea for one year, you have nothing to submit but should receive almost a full refund the following January of any taxes taken out of your check. Don't let your boss cheat you out of 1,000,000 won!!!
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restless



Joined: 24 Oct 2007

PostPosted: Thu Nov 29, 2007 4:49 am    Post subject: Reply with quote

Hmm -- I wonder if a private elementary school would qualify. It's a government-recognized 초등학교 but it's still private.
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moosehead



Joined: 05 May 2007

PostPosted: Thu Nov 29, 2007 5:55 pm    Post subject: Reply with quote

do you know who we should contact if it's in regards to a public school? that is, who files the taxes, the district office, the school itself? SMOE? (seoul public school office)

this is excellent info - thanks for posting - i've asked about taxes before and never received good info.
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sjk1128



Joined: 04 Feb 2005

PostPosted: Thu Nov 29, 2007 7:22 pm    Post subject: Reply with quote

According to the NTS website, the employer has to complete the year end tax settlement by the first pay date in January. At a public school, it is done by the school bookkeepers/ accountants. At private businesses, it should be done by whoever does the bookkeeping: e.g. the owner, accountant, etc.

The dispute I had with the accountant at my school last year was because he first refused to show me the year end settlement he had done. He then showed me a year end settlement on which he had inexplicably declared me a part-time self-employed person -- who was therefore not due a refund. However, such a classification would have also meant he never should have been deducting taxes on me in the first place. Besides, there was no way to justify that classification because I was employed full-time there and could not have gotten my E-2 visa otherwise....

In the end, it got kind of nasty and I had to go to the district tax office to file a complaint. That office eventually wrote him a letter ordering him to file my taxes correctly and pay me my refund. Apparently, this kind of thing is a huge problem. The head of the NTS just resigned over corruption and bribes, right? (I read that in the news somewhere.) Frankly, I didn't get the impression that the main Busan tax office was any more honest than our school accountant. I think they just wanted me to go away and were willing to give me the 1m won the law said was mine to get me to shut up and leave them alone. I'm fully prepared to go through the same process this year if necessary. Dealing with 2-3 letters and 4-5 nasty, frowny Koreans for a total of 2-3 hours of my life is worth 1m won to me.

Again, I suggest that anyone reading this who feels likewise read the foreign English teacher's guide and the tax return guide on the main NTS website. Then plug your numbers in the calculator. If you're due a refund and don't get one by the end of January, give 'em hell -- with a slight smile and the nicest possible attitude of course. I find endless politeness and never losing your temper - while firmly demanding the money owed you - a potent combination when dealing with crooked Korean employers.

(BTW, I don't think a private elementary school would qualify as a government organization and would therefore not allow you to claim an exemption. You will probably, however, be due a refund of most fo the money you paid in taxes all year anyway.)
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jadarite



Joined: 01 Sep 2007
Location: Andong, Yeongyang, Seoul, now Pyeongtaek

PostPosted: Thu Nov 29, 2007 8:29 pm    Post subject: Reply with quote

I saw many job offers for 2.2 million won/month. Can someone who knows the tax refund guidelines post what the refund should be taking into account the average amount deducted at each pay?

This way, others would have a yardstick of comparison. If you have more taken out, you can then expect a refund. If there was less taken out, then maybe you won't qualify.

Fighting this with simple, direct, and upfront info is the best way I think to stop bad employers from taking advantage of naive employees.

Let's get the averages out there people. Post the numbers!!
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jadarite



Joined: 01 Sep 2007
Location: Andong, Yeongyang, Seoul, now Pyeongtaek

PostPosted: Thu Nov 29, 2007 8:33 pm    Post subject: Reply with quote

"She teaches English for the purpose of private benifit."

LOL, and the one who works for the government is doing it for the betterment of society?
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sjk1128



Joined: 04 Feb 2005

PostPosted: Thu Nov 29, 2007 10:31 pm    Post subject: Reply with quote

According to the NTS webpage, if you earn 2.2 million, your monthly tax withheld should be 45,140. That works out to about 2 %. I usually hear that hagwons withhold 3.5 % "standard tax." Your pension withheld should be 4.5%, or (in this case) 99,000. My health insurance costs me about 55,000 per month, so I'll just fly with that number - and the higher tax because I've never heard of a Korean employer deducting that little for tax (even though that number comes right off the NTS webpage). Assuming you have no other deductions (for credit card spending, education or medical expenses, dependents, etc.) and worked the whole year, the calculator - for which there is a link above - yields this


Salary 26,400,000 (2,200,000*12)
Tax Pre-paid 924,000 (3.5%, or 77,000*12)
Pension Premium 1,188,000 (4.5%, or 99,000*12)
Medical Insurance Premium 660,000 (55,000*12)

Final Tax Liability 135,720
Taxes Due -788,280

In this scenario, this is how much your boss would owe you back in your first month's paycheck the following year. Obviously, that will change if you have more deductions or more tax has been withheld. Just plug your numbers in the calculator. It takes all of 1-2 minutes to see what you should be getting back. There's also a calculator on the main webpage that tells you how much your boss should be withholding to start with....
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Ed Provencher



Joined: 15 Oct 2006
Location: Korea

PostPosted: Fri Nov 30, 2007 12:08 am    Post subject: Reply with quote

Salary 39,500,000 (I added up my pay stubs)
Tax Pre-paid 1,593,000 (I added up my pay stubs)
Pension Premium 1,777,500 (4.5% of 39,500,000)
Medical Insurance Premium 660,000 (55,000*12)

Final Tax Liablity 551,025
Taxes Due - 1,041,970

I'm wondering... do we pay taxes on the year-end bonus? Should that be included in the calculations?


Last edited by Ed Provencher on Fri Nov 30, 2007 6:28 am; edited 1 time in total
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jadarite



Joined: 01 Sep 2007
Location: Andong, Yeongyang, Seoul, now Pyeongtaek

PostPosted: Fri Nov 30, 2007 2:53 am    Post subject: Reply with quote

Thanks for both of your replies.

Does "Final Tax Liability" represent how much is estimated?
Does "Taxes Due" represent the actual amount?

Does this mean Ed owes 490,945?
Does this mean sjk1128 is owes...

Well, I don't know why it is negative, so I'll stop there. Can either of you guys spell out the bottom 2 figures regarding taxes?
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