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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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 Posted: Mon Sep 09, 2013 10:16 am Post subject: |
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| Mike410 wrote: |
So what is the actual tax rate that should be stated on a contract for an employee?
Is it not 6% for up to 12 million won?
I do see a lot of contracts that have the 3.3% income tax... |
Income tax rates in Korea are progressive as in the US, Canada and many other countries. They start at 0% and go up to 36%. For most newbie ESL teachers your withholding should be under 2%.
For a quick easy estimate of what your withholding should be you should use the Withholding Tax Calculator:
http://www.nts.go.kr/eng/help/help_52.asp
I call this an estimate because that's what the withholding tax is. It's an estimate of what your final actual tax bill will be based on your monthly earnings. No one can know the future, what your future earnings and deductions will be, or your particular circumstances, so the Tax Service provides this best guess. Look up your income on the calculator and find your proper withholding rate.
The best contract language will be that taxes will be withheld according to the Korean tax laws - if your school will actually follow the rules that will be fine.
3.3% is the standard rate of withholding for Independent Contractors. My guess is that you do not want to be an IC.
Some employers and accountants actually believe that 3.3% is the standard rate for all foreign teachers even as employees. It is not and they are misinformed. They may be honest and fine to work for. If they withhold too much and actually pay it in to the Tax Office, you can file for a refund. You might even be able to show them the correct withholding rates on the calculator and get them to withhold the lower amount.
The rest of the contracts you see with 3.3% withholding are schools planning to register you as an IC. If they pay the whole 3.3% to the Tax Office you can still file for a refund. You might even end up paying less income tax than an employee on the same salary. Some schools will over withhold and keep the difference, however, and some will overwithhold and keep it all. These are contracts you want to avoid.
Anyone who sends you a contract with over 3.3% as the withholding rate is probably a crook - 6% yikes! - unless you are being paid far more than the standard ESL newbie in Korea. Again, check your salary on the tax calculator and see. (At 3 million won per month salary you'd still be just under 3% withholding with 88,100 won as your correct monthly income withholding tax assuming you are single with no dependents.)
You can read more in the FAQs here:
http://forums.eslcafe.com/korea/viewtopic.php?t=38559&start=45 |
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