Korean Job Discussion Forums

[Weigookin74]

[meangradin]

So let me come at this from a different perspective. I own a small hagwon with 5 employees and try to do everything as honestly as possible. When I had a foreign teacher working with me, we charged him 3.3% because that is what we were told by the relevant government agencies. When I read on here that the tax rate should be lower, I, through my wife immediately asked the government officials if this was correct. Again, they came back and quoted 3.3%. To ease my conscience and make sure we were following the law, I asked our accountant and a lawyer to look in to it and I gave him the link the OP posted. Once again, they came back with the 3.3% figure. The accountant told me that the 3.3% covered income tax and a foreign workers tax, whatever that is. I can assure you that none of that money went in to my pockets but went to the government. With all due respect, I think I have to follow what the government has repeatedly told me over a poster from daves.

[big_fella1]

[meangradin]

The point is a little moot now as I know longer hire foreigners, but rather hire the best korean teachers I can find (who, btw, are taxed at 3.3%). Actually, that could be a topic in and of itself, but i'll save that for another day. Also, for the record, we paid pension and provided health insurance to the teachers who worked with us.

[nicwr2002]

Well this goes to show you that Koreans have no clue about the law. My first year here I was deducted the same tax rate of 3.3%, but I still received health and pension. I changed schools and told the boss at my new school, who had never hired a foreign teacher before, that the tax rate was 3.3%. Well this year I'm signing on again with the same school and when the tax season came up, the government workers told my boss that 3.3% is not the correct tax rate. So, go figured that one out. Meangradin is saying that they contacted government offices and they told him 3.3%, but my boss was told that 3.3% isn't correct. Just like immigration, I don't think anybody knows what they are really doing.

[Beeyee]

I think that a lot of this is government incompetence and not 'the evil boss ripping off the foreigner'.

Like the story above, our finance department recently requested information on the correct tax rate for foreign teachers. We are classed as employees and pay pension and healthcare. Guess what the reply was.

Yep... 3.3%

[big_fella1]

3.3% is the tax withholding rate for contractors. If you're an employee you should get a refund with your February or March paycheck. If you're a contractor you must file your return in May. You will then either get a refund or pay the extra tax you owe in June.

There's a private university in Busan that claims every year that due to the recent (2010) ending of the 30% tax deduction for foreigners they didn't take enough tax and need to withhold a million won which they'll split and take over 2 months. The crazy thing is the correct tax for the year is 420,000 on the salary they pay without accounting for deductions like for insurance, cash, and credit card spending.

[Skippy]

I can attest to the ignorance about taxes. Discussing with a freind who worked nearby to me. He mention his tax rate was 3.3%. Asked him if he got pension and health. Surprise! He was getting them. Later when he mention to the school of the mistake, they checked on it and found out they had messed up. He got a little refund and his salary was adjusted for next time.

So I think some schools do what they think is normal rate and continue on. Of course, a good chunk of the schools just out right lie and cheat.

[ontheway]

As far as the 3.3% withholding rate for foreigners, this is a common mistake. It is a common belief and many people "know" that the rate should be 3.3%.

My wonjangnim was told by some public accountant years ago that the rate should be 5%. I insisted that this was wrong. On the next call, the accountant said that 5% was to be "safe" but 3.3% was the legal requirement. So, the wonjangnim called the tax office. They said to use the NTS withholding calculator (see the FAX). The public accountant was irate when the wonjangnim informed him that he was wrong.

More recently when the 30% exemption was ended for foreign workers, meaning that taxes for teachers would be higher, I asked the wonjangnim to call the tax office again. Once again the tax office said to use the NTS withholding calculator, that this would still give the best estimate of your actual tax.

Many accountants don't know the real rate to use. Others are used to providing cover for what their clients actually want to do, which is overwithhold and then hang on to the extra cash. It also appears to me that some accountants, who do all the paperwork for their clients, collect the money from the school at the 3.3% rate and then they pay in the lower correct amount to the tax office, scooping up the cash for themselves.

It also is no surprise that Meangradin got incorrect information from some government official. Government officials all over the world are full of wrong information and other Bogus Stuff. In performance audits, the IRS has been found to give incorrect information in response to taxpayer questions a majority of the time. 3.3% is not the correct rate for Meangradin's Korean employees either, unless that happens to be where they fall on the progressive income tax schedule in Korea.

The best withholding rate for employees in Korea who have only one source of income is the NTS calculator rate. It isn't totally correct, it may slightly underwithhold or overwithhold, but Korea's actual, progressive income tax rates run from 0% to 36% for everyone including Independent Contractors. The rate is only 3.3% when your income falls at the 3.3% tax rate on the progressive scale.

The reason the IC rate is a standard 3.3% is because the business that hires an IC can't know all of the IC's other income. It is assumed that the IC's rate will be above the rate that would apply to a low income level that may represent only part of the IC's total income. Because of the possibility of other income from other sources in unknown amounts, a level of 3.3% was established.

[Wildbore]

[World Traveler]