Korean Job Discussion Forums

[4024anna]

Im just about to finish my contract and get my final paycheck plus the severance and money for a flight, and was wondering if I should be paying tax on all of this? Obviously I expect to be paying it on the paycheck part but wasn't sure about the bonus or flight money...

[Ramen]

[4024anna]

OK cheers...

[andriabr]

In the u.s., they make you pay taxes on tips.

[4024anna]

Thanks for the replies guys. I got taxed on the bonus but not the airfare.

[interestedinhanguk]

Tax on the bonus, as stated. However, there are rumors swirling that airfare is now considered income and thus it is taxed.

[West Coast Tatterdemalion]

Yes, they will tax you on the bonus. One of my previous schools also deducted my medical insurance from the bonus, so at least you probably didn't have that done to you. It sucked, but I was on the way to Indonesia, so I decided to just say, "Eff it."

[cyui]

Next time, take it in the first month.

[interestedinhanguk]

[cyui]

What is the total percentage of tax each time?

[Andyc24_uk]

Korean taxes are applied in bands. So, if you earn around 2million, you pay about 3.5% tax; if you earn 4million a month (which is how it appears when you get your severance), you'll be taxed at about 8-10%.

If you have a nice boss, ask them if it's possible to either pay your severance split over 2 months (so, your 11th and 12th month you're paid 3million each) or, if you really trust them and can afford it, especially if your contract ends at the end of the month, get the bonus paid the following month (so you actually receive 13 pay packets.) This way, you'll be taxed in a lower band. Another way, of course, is to ask for your severance in a brown envelope.

[tophatcat]

[SeoulNate]

[jeremysums]

Government tax on just about every income.

[Andyc24_uk]

I was under the impression that tax on 2million was at 3.3%. If it's 1.2%, then awesome. I stand corrected. But that doesn't change the point of my post.

Plug the figures into the tax calculator you linked to - tax on 2million won = 25,000 (rounded up). Tax on 4million won = 260,000! (6.5% - Ok, my 8% figure was off the top of my head, too high - I apologize). Why the difference? Because income of 4million in a month is taxed in a higher tax bracket, as I said initially.

The fact remains that, if your final paycheck shows up as 4million (2million wages plus 2million severance all lumped in together - possibly with a further chunk for airfare), then that WILL be taxed at a significantly higher rate, because as far as the tax office employee can see, you've earned 4m+ that month.

Are they going to bother checking all your previous tax records and figure out that you've been there a year so it must be severance pay and airfare? No, realistically, they probably aren't. They have better things to do, so they'll just assume you got paid 4million that month and charge you the relevant amount of tax.

It's far better to have that extra 2million spread over four months, IF you can do it. Here's the math :

(regular tax on 2m for 3 months plus 4million for the last month)
25,000 +25,000 + 25,000 + 260,000 = 335,000 total.

(Get the severance split over 4 months,making 4 paychecks of 2.5m each)
55,000+55,000+55,000+55,000 = 220,000 total.

Saving you 115,000 in tax, or about $100. This obviously increases for anyone earning more than 2million a month.

I fail to see how spreading the payment over several months to keep each month in a lower tax band and therefore minimize the amount of tax you pay - IF your employer is trustworthy and happy to do this - is 'the worst advice ever'. $100+ for the 5 minutes it would take to ask your employer if they'd be willing to do this sounds like a good deal to me.