Korean Job Discussion Forums

[thegadfly]

Ttompatz,

First of all, thank you very much for the time you take to answer numerous questions on the board -- your posts are quite informative, accurate, and helpful.

I have seen you state in several different threads that if one is being charged 3.3% - 4.5% tax, that the tax rate is incorrect, or it is a "bad" sign. I understand that being claimed by the school as in independent contractor is not desirable, but what is the "proper" tax rate that a person should be paying, if the school is "doing right?"

I know we should go here:

http://www.nts.go.kr/eng/

Do you mean to say if you have 3.3%-4/5% deducted, with no tax refund in March, then that is the problem?

I am asking more on behalf of the newer folks -- what tax rate should they be looking for -- I am pretty sure my own situation is on the up-and-up, as my taxes look like the above site indicate they should...but isn't the "right" thing a sliding scale, with very little withheld near the basic starting rate, and quite a bit more held back as one's salary increases? And aren't the days of exceedingly-low taxes coming to an end with the end of the 30% exemption method (I have read that in 2010, foreigners will all use the 15% flat rate method)?

From what I understand, prior to 2010, paying 3.3%-4.5% on a basic salary (say 30 million a year, 2.3 million a month + severance) meant you overpaid taxes by almost a million won, but in 2010, with the discontinuation of the 30% exemption, if you are charged only 3.3%-4.5% on the same salary, you will pay 3 million LESS in taxes...so while not exactly proper, wouldn't this improper tax rate actually benefit the teachers?

...so, to recap -- if 3.3%-4.5% is wrong, what is "right?" More specifically, what will be "right" in 2010?

Again, thank you ttompatz for the time and effort you put in to answering questions -- it always makes me feel better when the information I find/have been given matches up with the information you provide....

[OculisOrbis]

Go to the site you posted and click Resources on the top bar.

Then click publications on the left side bar.

click on #26 on the list of publications is a simplified tax withholding table (excel file) from 2008. you can download the file when the message opens.

you can find what should be your monthly witholding there based on your monthly salary and number of dependants. the rates will not have changed much, if at all, since they published this.

[ttompatz]

Short answers (if you want complex ones, ask the tax advocate for foreigners at the NTS)

The tax rate for the average teacher (salary in the 2.3 million won range) with NO dependents (no wife or kids in Korea) is about 1.6%.

It is changed from previous years and you need to input your complete salary in won (2300000). Withholding tax should be ~37k won.

http://www.nts.go.kr/eng/help/help_56.asp?top_code=H001&sub_code=HS05&ssub_code=HSE4#

The problem with being classified as a contractor is that you get taxed at double the rate of an employee but you don't get the deductions that a real contractor would get. (think self employed plumber as an example of a contractor).

Additionally you get screwed out of your pension and medical benefits if you are classed as a contractor.

Truth is, ALL E2 teachers in Korea are Employees by nature and definition of the job. Anyone who tells you different is either blowing smoke up your ass or just outright lying to you to save themselves money or put your cash in their pocket. This includes a LARGE MAJORITY of hagwons (personal, empirical evidence collected over the last 8 years).

.

[thegadfly]

thanks occ and ttom.

Occ -- I did play with the site, and my own taxes fell close enough to the 3.3%-4.5% that I was wondering about ttom's declaration...however, when I put in a newbie salary of 2.2 - 2.5 million, the tax rate seemed closer to .8% (under the 30% exemption allowance), and I was asking for confirmation of the ~1% number. I used the 2009 tax calculator in the bottom left corner of the page to get that figure....

Ttom -- thanks for the rule of thumb figure -- the 1.6% was what I was looking for (though, like I said, when I played with the site myself, I got closer to .8%, so was wondering if I was doing something wrong).

Ok, my main question has been answered -- thanks!

[OculisOrbis]

There is no 30% exemption anymore. That ended on Jan 1, 2010. Withholding and taxes are calculated on your full gross earnings from that date - no special reductions, other than the regular deductions for things like cash receipts, supplemental insurance, health care expense, etc.. at tax settlement time.

I dont know how you got those percentages on the excel spreadsheet file I directed you to, prob because you applied the 30 reduction that doesnt exist anymore, but I just checked and:

2.2 mil monthly salary, the withholding would be 39 930 with no wife or other dependents.

2.5 mil per month under the same conditions, the withholding was 61 440.

The percentages were 1.815 and 2.45%, respectively. Monthly salaries in within that range would have withholding percentages somewhere in between.

[thegadfly]

Again, thank you Occ.

The figures I was quoting were from 2009 quick calculation with the 30% exemption, and yes I am aware it doesn't exist any more, but I was thinking about people who are currently on contract, rather than new folks coming in -- a mistake I will stop repeating. I'll get my head current.

The school I work at has a starting base salary of 3 million won a month, which puts the starting tax rate at 4.4% on that spreadsheet, which is within the 3.3%-4.5% range that ttompatz was warning against.

I was asking for independent clarification of sources and amounts because a quick and dirty "you are getting skrood" at 3.3%-4.5% isn't quite accurate -- it is a sliding scale that goes from very low at the lower salaries, and ramps up noticeably as you get away from the lower salaries, and "good" salaries DO fall within the range that was warned against. I was looking at how/why, and wanted to ask the fellow that put a conflicting idea in my head (ttom). As he has been accurate and helpful in the past, I thought perhaps he knew something I didn't (safe bet). In this case, however, it seems a higher starting base salary contradicts the rule of thumb.

I do appreciate the responses. Thank you.

[ttompatz]

A quick clarification on my statements about taxes in the 3.3-4.5% range:

When the contract quotes a fixed percentage of anywhere in the 3.3-4.5% range (for the average ESL teacher in Korea) then you can rest assured that the potential teacher is getting screwed.

Yes, the income taxes here are on a sliding scale and yes, the amount (as a percentage of income) does rise as income rises (especially if you have no dependents (wife or kids)).

This does however mean that the tax rate cannot be fixed by your employment contract and is subject to change should you get married or have kids.

.