Korean Job Discussion Forums

[wylies99]

Taxes on expats to increase this year

http://joongangdaily.joins.com/article/view.asp?aid=2916877

Officials cite budget deficit and issue of fairness in decision to up burden
February 20, 2010
Expats earning less than 100 million won ($86,133) a year will likely pay more taxes this year than last year because the government is ending a special tax benefit that foreigners had received.

A temporary tax benefit for foreigners enacted in 2004 had enabled foreigners to choose either to have 30 percent of their annual taxable income exempted from taxation or paying tax on only 15 percent of their total annual income including non-taxable income. Either way, most foreigners paid lower taxes than Koreans earning the same income. The revision in the tax act, however, ruled out the 30 percent tax exemption. A rule of thumb is that getting 30 percent of taxable income exempt is a better option for foreigners earning less than approximately 100 million won a year.

An example introduced by the National Tax Service was that of a 38-year-old foreigner who earns 50 million and pays 1.58 million won in taxes when he chooses the 30 percent exemption. If he chose the 15 percent rule, he would have to pay 7.5 million won.

�It varies from person to person, but it is likely that foreigners with less than 100 million won in income will pay more taxes from this year,� said an NTS official.

The government said the 30 percent exemption expired as planned. It said it is also in line with its move to expand the tax base in reaction to the rising fiscal deficit stemming from the expansionary policies last year.

�The tax break for foreigners was introduced temporarily to attract foreign talent here, and the government is seeing it is O.K. to close one of the breaks now,� said an official of the Finance Ministry. The 15 percent rule is scheduled to expire in 2012, the ministry said. The ministry said the decision was also made out of consideration for Koreans who feel it�s unfair to pay higher taxes than foreigners.

Expats, however, say the news is disappointing. A Canadian working at a local company, who identified herself by her first name, Pamela, said she recently heard about the change from her company. �It doesn�t make a whole lot of sense,� she said. �It is the country, trying to attract qualified foreigners, focusing on being international and host of the G-20 summit, and is at the same time doing something that could dissuade foreigners from coming to Korea.�

The ministry official denied the claim, saying the government still has many other policies to attract foreign financial and human capital. He said the government may extend the remaining 15 percent rule beyond 2012 if judged to be necessary.


By Moon Gwang-lip [[email protected]]

[naturegirl321]

Maybe some employers will start to pay the taxes.

[supernick]

I have no problem as long as foreigners are entitled to the same benefits as Korean nationals.

[Captain Corea]

I wonder if this will change much for many teachers.

Many teachers in hogwons are employed as 'independant contractors'... and those tax rates are low for both Koreans and foreigners.

[Mr. Pink]

I am pretty sure this article isn't speaking for most of the foreigners out there working on E2s.

From 2004-2006 my taxes went UP, not decreased, so I doubt that exemption applied to me.

Last year I paid 3.3% tax, just like most foreigners do...

[Globutron]

I went to stay with my Dad in Malta for a couple of weeks in December. He explained that basically nobody there ever pays tax, because the government, like the rest of the country, can't be bothered to enforce it.

Which is why everybody in Malta is rich, but it sure doesn't look it.

Can you get away with such things in SK?

Oh also, is the 2 year exemption rule still applying these days? I heard something about that disappearing too.

[Konglishman]

[pkang0202]

Is pension deduction going to be calculated based on 100% of our salary now?

[wylies99]

The tax rate should be set so that it results in maximum revenue for the government while it doesn't harm economic growth. There are many factors involved with gaining this result, but everyone should understand that "higher taxes" don't bring in more revenue. Raising taxes in the middle of a recession can bring negative results. Yes, raising taxes can actually result in less revenue coming in. You'd think that a conservative government would understand this.

[World Traveler]

[wylies99]

[big_fella1]

Try to get a credit card if not a check card and buy everything on it. This spend is a tax deduction in Korea.

Many Hagwons tax the employee at 3.3% and pocket the money as the National Tax Service (NTS) doesn't expect money from foreign employees at the moment.

If your Hagwon is taking 3.3% time to talk to them. If they don't remit the tax, you will have to pay it.

Also don't take contractor jobs unless the hourly rate is very good. If your employer makes you a contractor, you must pay the whole 9% for pension yourself and also the health insurance (4.05% +6.2% of that). The opportunity to work part time for w25,000 per hour reduces to 21500 per hour not accounting for travel or preparation time.

As for those out there not paying tax, I hope you are ready to return home.

[wylies99]

If the Korean government is serious about increasing tax revenue, it could start by enforcing its own laws with real estate taxes- http://joongangdaily.joins.com/article/view.asp?aid=2916140

[ChilgokBlackHole]

[wylies99]