Korean Job Discussion Forums

[Atavistic]

[dogshed]

[Colorado]

Based on this definition of tax treaty:

"A tax treaty is an agreement formed between countries for the
avoidance of double taxation and the prevention of fiscal evasion."

as stated in "An Income Tax Guide for Foreign English Teacher"

http://www.nts.go.kr/front/service/publish_book/valgan_book_view.asp?news_seq=5808

one could reasonably infer that not paying taxes in either country would be "fiscal evasion," something that the tax treaty is intened to avoid.

[sjk1128]

Not filing your taxes or lying about what you earned would be evasion. But filing your taxes and owing little to no tax is a different matter.

I filed my taxes in the US last year. I just didn't owe any tax because I earned no income there, was not present for more than the required number of days, and did not earn more than $80,000. I listed all of my income in Korea, but because it was less than $80,000, I owed no tax. It's that simple.

My employer also filed my taxes for me in Korea (after I twisted his arm and forced him to do so). I was due a refund of all but 30,000 won according to Korean law. Actually, I could have claimed to be tax exempt, but because the form from the US IRS and sending it here would have been more than 30,000 won, and the accountant at my school was being so difficult anyway, I chose not to.

Why do people get so riled up about this? Do you want to pay more tax or something? Does it make you feel better to give more of your money to the government, even when it's not requiring you to? I paid enough money to my government when I lived and worked there, that I assure you I do not feel guilty at all about keeping every penny or won I legally can.

[Colorado]

To be exempt from Korean taxes, you need to claim US residency for tax purposes. But if you claim US residency, how can you then claim a US tax exemption based on residency in a foreign country? I don't think you can have it both ways.
The purpose of the tax treaty is to help people avoid paying taxes in two countries on the same income. It is not intended to help them avoid paying any taxes at all.

[Atavistic]

...

[SuperFly]

Haven't read this thread yet, but wanted to give you guys what I copied down last year when I had some questions, sorry if it's not exactly on topic, hope it helps:


There are two statuses you might choose to use if you are an American working in Korea.
Foreign Earned Income
or
Foreign Tax Credit

It is usually more advantageous in Korea to file Foreign Earned Income if you qualify because Korean taxes are lower than American taxes. (In Europe where taxes are higher, the tax credit is sometimes better.)

To qualify for foreign earned income you must have one of two things: You must be considered a resident of Korea (this means you must have already lived and worked in Korea for 1 full year prior to the start of the tax year you are filing for).
or
You must pass the physical presence test (this means that you have not, do not intend to and will not spend more than 30 of the first 365 days you are working in Korea, in the US --- and if you do, you have to ammend your tax filing later and change the status).

Usually if you are working a job with little or no vacation, you will qualify for Foreign Earned Income status from the day you arrive because you won't have 30 days to spend in the US.

If you go home to the US frequently, then you must file Foreign Tax Credit until you meet the residence test for Korea. I don't remember the exact details of the residence test, but I started working on an ARC in Korea in fall of 2005 (I had different sojourn status before that) and go home to the US 2 or 3 times a year and I know that I won't qualify for Foreign Earned Income until the 2007 tax year because I go home too much and can't pass the physical presence test.

The only way you would need to worry about it (ie might have to file the Tax Credit) with most teaching jobs is if you are a uni prof just off the boat who is planning to go home for breaks.

[sjk1128]

I was eligible to file for an exemption but chose not to take it because it was cheaper for me to pay my Korean tax for the year, 30,000 won, than to request the form from the IRS and have it sent. Tax had already been deducted every month at a rate of about 3.5% - which means I had overpaid almost 1,000,000 won. I got it all back, except for the 30,000.

I don't pay taxes in the US because of the "foreign earned income exclusion." It has nothing to do with legal residency. I am still a legal resident of the US, but my tax home is in Korea. The exclusion is based on where the income is earned (outside the US), how much it is (less than $87,500), and physical presence (or, rather, absence for 330 days) in the US. The requirements are listed on this website:
http://www.irs.gov/publications/p54/ch04.html#d0e2292

Claiming a foreign tax home to be eligible for this exclusion has nothing to do with legal residence. This is straight from that link:
Tax Home
Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a �tax home� in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes.

If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work.

You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. However, your abode is not necessarily in the United States while you are temporarily in the United States. Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling.

�Abode� has been variously defined as one's home, habitation, residence, domicile, or place of dwelling. It does not mean your principal place of business. �Abode� has a domestic rather than a vocational meaning and does not mean the same as �tax home.� The location of your abode often will depend on where you maintain your economic, family, and personal ties.


I do not have to pay taxes in Korea because I was not a legal resident here when I entered for this public school job [invited by the government]and Korea has a tax treaty with my country. However, as I said, I chose not to file for the exemption because it was cheaper for me (not to pay for the form and have it mailed to Korea). The information about filing for the exemption in Korea is here:
http://www.nts.go.kr/front/service/publish_book/valgan_book_view.asp?news_seq=5808

This is straight from that link:
To be exempted from Korean Income Tax, one must meet the requirements
which are described in Tax Conventions. Tax Conventions are different for
different countries, and some countries have no tax convention. So, it is
important to first check whether there is a tax treaty between Korea and
your country of residence.
To be exempt from Korean Income tax, foreign teachers should meet the 3
requirements described below.
The requirements below are general explanations of eligibility for tax
exemption, therefore, please refer to the proper Tax Convention of your
home country.
* Tax Treaty : A tax treaty is an agreement formed between countries for the
avoidance of double taxation and the prevention of fiscal evasion.
�� �� �� �� �� �� �� �������������������� ���������� ������ ������������ ������ ��������
Invitation of work must be extended by the Government, a political subdivision, or a local
authority thereof, or by a university or other recognized educational institution.
* At the time of entrance into Korea, he/she should be of non-resident status according to Korean
Income tax law.
���� ���� �� �� �� �� �� �������������� ������ ��������
Income received from teaching or research at such university or educational institution (as
noted in A) shall be exempt from tax, for a period not exceeding 2 years from the date of
his/her arrival in Korea.
���� ������ �� �� �� �� ��������������
The purpose of stay should be teaching or engaging in research in an educational
organization (as noted in A). Exemption shall not apply to income from research, if such
research is undertaken not in the public interest but primarily for the benefit of private
persons or organizations.


It seems clear to me if you read all the regulations carefully that it is indeed possible for me to claim a foreign earned income exclusion in the US (based on my income being, well, foreign) and an exemption in Korea (based on not being a resident when I entered for this job). Obviously, not everyone can do that. It depends on what country you're from, if you have other income - rental, interest, etc. - and what kind of job you have in Korea. Still, many people can if they wish to, and it isn't skirting the law. It's how the laws are explicitly written.

[dogshed]