Korean Job Discussion Forums

[yingwenlaoshi]

How is the tax calculated on severance pay?

It's done differently. I know many of you will say that it's the same as your regular income tax, but it isn't. I've always been taxed as per my regular income tax, so that's why I'm asking the question.

And if I file taxes, do I have to include my severance pay? Seems I wouldn't, but I don't know for sure.

[tob55]

The booklet states that if you receive compensation past your employment period, the appropriate tax must be withheld by the employer and you must file a final composite tax return by May of the following year if you are planning on staying in Korea as a resident. (Pages 41 of the tax guide) Since the income was not part of your regular contract payments, it would be considered add on income and taxable in the next tax year. So, you would add it to your income for the following contract year.

[yingwenlaoshi]

[yingwenlaoshi]

[tob55]

Since your amount of "taxable income" would be less than the 12,000,000 KRW bottom end limit if your were going to leave and come back, it would simply be a break even proposition. In other words, you pay the 60,000 - 70,000+/- KRW and call it a done deal. The only time it would be reported would be if it was an amount over the 12 mil mark. One reason for this is that Korea operates on a flat tax system, which is good for situations like this. Of course I am assuming that your severance pay is less than 12 mil KRW

[yingwenlaoshi]

[tob55]

You can use the year end settlement feature on the Korean tax website to calculate the taxes that would be owed on the severance amount you receive. This way you can use the simplified version to figure your tax. After looking it over, you may not be responsible for any tax on the amount you receive in severance from your employer. I will do another check of the literature tomorrow. I know there is a form for it, but it is not in my literature. I might be able to find a download for it on the tax website.

[yingwenlaoshi]