Korean Job Discussion Forums

[Burke]

I am curious as to what I should be looking for with regards to taxes. Specifically, I know what I expect to be paying in health care and pension, but income tax and the residence tax tied to it seems to be up in the air.

The contract review sticky, and a number of other topics, reference a calculator on the Korean government tax website. However, that information is old. I know this, because they have a newer version for 2012 located here (http://www.nts.go.kr/eng/help/help_53.asp?top_code=H001&sub_code=HS05&ssub_code=HSE3). This seems to not work for me on multiple terminals, thus why I cam here.

I know that the 3% tax rate for income is a contract rate and thus illegal, but the 1% that seems to be reference here on the forums does not seem to be the case. Based on my research, it is 6%. I think it had something to do with a tax break for foreigners being quietly cut on 2011/2012. What I don't get, is how does this figure into end-of-year taxes in Korea? Does that 15% total take into account the premium paid every month?

I have been turning down contracts that don't clearly state these terms and it seems to be wearing thin with the recruiters I've been using, so I would love to get a definitive answer.

Thanks.

[Wildbore]

[ttompatz]

The real tax for employees is progressive; the more you earn the higher your tax bracket.

In real terms, the actual tax paid (withholding tax) over the course of a year for employees earning about 2.2 million won per month is about 1.7%. Depending on deductions that can vary at your year end settlement between 1.6 and 1.9% with a balance due or balance refunded from your monthly withholding tax contributions. http://www.nts.go.kr/eng/help/help_53.asp?top_code=H001&sub_code=HS05&ssub_code=HSE3
For taxation purposes, if you have an ARC you are deemed to be resident and are treated no differently than a Korean national.

15% flat tax is only for those in VERY HIGH tax brackets or who are non-resident.

Pension is 4.5% and is matched by your employer.
If you are from Aus, Can or the USA you can get a refund of ALL contributions in your account. If you are from S.Africa you are exempt from contributing to the NPS. If you are from NZ, Ireland or the UK then the money is gone until the time of your retirement at age 65. http://english.nps.or.kr/jsppage/english/main.jsp

Medical (NHIC) premiums cost just under 3% (2.945%) of your gross monthly salary and is again, matched by your employer for a total of 5.89% of your monthly salary. If you don't get the NHIC booklet from your employer then you do NOT have NHIC insurance coverage - in spite of what you may be told. http://www.nhic.or.kr/static/html/wbd/g/a/wbdga0404.html

If you work for a public school the above is pretty much a given.

If you work at your average hagwon you can pretty much forget all of the above. It isn't going to happen. You can expect 3.3% and no NPS or NHIC. That is a simple fact of life and fighting over it won't get you anywhere but unemployed and unable to get another visa till your year ends.

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[ontheway]

Try this. Assume that you make 2.2 million per month plus a 2.2 year end severance payment. That would be 26.4 million for the year. Now plugging those numbers (with no other deductions) into the site* you have cited, using the progressive method for automatic computation, shows a total tax for the year of 554,340 won. That would be 46,200 won per month, which is 2.1 %.

This is higher than the monthly tax calculator which hasn't been updated, however it is quite a bit lower than the oft cited 3.3% or higher rate.

3.3 % is used for Independent contractors and also by many accountants, hogwans and public schools that just don't know any better. Korea has a progressive tax system, so your rate could be anywhere from 0 % to 36% depending on your income. It isn't illegal to withhold at a higher rate than the tax calcuator rate as long as all of the money withheld is actually paid in the the National Tax Service. It just means that if your employer overwitholds, you'll have to file to get a refund.

Contrary to the baised view of some, however, most hogwans do enroll their teachers in both National Health Insurance and National Pension, even if they don't get the withholding done at the most appropriate rate. You do not have to take a job that does not enroll you in Health Ins and Pension.


* version for 2012 located here http://www.nts.go.kr/eng/help/help_53.asp?top_code=H001&sub_code=HS05&ssub_code=HSE3

[Burke]

Ah, thank you all for the clarification.

I have been rejecting contracts with terms that are terribly unfavorable, as I am in no particular rush to walk into another situation like I experienced in China. The 3.3% rate has been noted, but I have largely turned down those contracts for other reasons.

Some favorable contracts, however, seem to make little mention of rates. They simply state that there will be a deduction of the national pension and national healthcare. The same can be said of income tax. Is this normal for Korea?

I am from the United States and can thus work to get the pension back, so it being there is of interest to me. As for healthcare, about 1/3 of the contracts I have seen go the NHIC route, 1/3 go private, and the remaining 1/3 make no mention. I'm guessing this is normal.

I would be going the public school route, but my known experience would likely be hard to verify given that I now know much of the work I ended up doing in China was illegal or at least not fully above board. Therefore, I am just going the Hagwon route and being picky about it. I can afford to do that for a few more months at least.

Once again, I would like to thank you all for the answers provided.

[ttompatz]