Korean Job Discussion Forums

[gilgamesh]

The reason for this post is that I discovered I didn't have Medical Insurance, so I decided to dig deeper and see what else turned up. I am not going to touch on Pension or Med Insurance, so on to tax. When foreign English teachers (or anyone for that matter..) are taxed there are several considerations which I will outline. After the facts as far as I (with the aid of my wonderful Korean fiance) have been able to determine them, I will post a couple of comments and a little advice based on what's below:

1. Employee or Contractor??
Foreign English teachers are not hagwon employees, but contractors. I am not too sure of the exact whys and wherefores in this area, so someone might like to clarify...

2. Residency Status vs. Tax Rate
For tax purposes there are two types of residency status. Resident and Non-resident. This has nothing do do with immigration or visas or anything else - this is entirely for tax purposes only, it doesn't matter what your visa says.
Residents are taxed at 3.3% (3% income tax + 0.3% residents tax), Non-residents at a flat 20%.
The Resident tax rate is fixed at 3.3% to make calculating the monthly tax easier (see point 5 below).
Most foreign teachers fall into the Non-resident category and should be paying 20%. The reason for this is that foreign teachers are considered a tax risk (they might, and often do, skip out of Korea before their taxes are adjusted and paid/refunded in May.. see point 3 below), and most depart after their one year contract is complete.
Residency (as opposed to Non-residency..) is determined by two factors - duration of time in Korea and future plans. By far the most weight is placed on future plans, ie. do you intend staying in Korea for a considerable period of time, are you married to (or going to marry..) a Korean national etc.

3. When is tax paid??
Tax is paid either monthly or twice-yearly (either time it is paid by and in the institutes name), and in May (paid by or refunded to the salary earner). Every salary earner must go to their District Tax Office in May and declare their earnings, at which time the overpayments are refunded or underpayments caught up on.

4. How is Tax Paid??
The hagwon maintains their own records for each teacher and is legally obliged to supply the salary earner with an official tax reciept when the institute pays their tax (monthly or twice-yearly..).
Hagwon owners must supply the individual tax records for each teacher to the District Tax Office in December. The DTO then registers each individual and a personal Tax Certificate becomes available to the salary earner the following February.

5. A bit more detail on 3.3%
As mentioned in point 2, most teachers should be paying a flat 20% of their salary in tax.
For those that have Residency status, the actual tax rate varies from 3.3%. The tax rate for Residents has a sliding scale and depends on a few factors. The Income Tax Rate in Korea is graduated into 4 levels: 9%, 18% (with an exception), 29% and 36%. Basically most Resident teachers fall into 9% and '18% with the exception applied' categories. As an example, a salary of 1.8 million has an actual tax rate of 3.68% and 2.2 million works out to 4.68%. Because of the sliding scale within each category, the actual monthly tax rate would be a hassle to determine on an individual basis, ergo Resident teachers are taxed at 3.3% per month and the difference is made up either way in May.

Comments/Advice

1. An income tax rate of 5% (or for that matter, any other percentage..) on your salary is utter bunk, UNLESS you have Resident status AND are getting to the DTO for a refund in May.

2. Those who should have Non-resident status and are being taxed at 5% should let sleeping dogs lie, no matter if your hagwon is paying your tax or not.

3. Those who consider themselves Residents, grab a native Korean you can communicate with and head down to the local DTO and confirm (or otherwise) the above points.

3. If you have been here since before December last year you should have a Tax Certificate available at your local DTO registered under YOUR details (Alien Registration/Passport Number etc..).
If you arrived since December last year, you will have to wait until February to find out if your hagwon is actually paying tax on your behalf.

4. I qualify for Resident status (long term plans, Korean fiance etc..) and have NO Tax Certificate at the DTO. I am forced to conclude that my hagwon is not paying the 5% it has been deducting from my salary for the past 16 months.

5. Hagwons are a (suprise) scam of gigantic proportions in this country.

6. The Korean government is a grossly inefficient machine.

I have created an Excel spreadsheet to calculate the exact amount of income tax to be paid for a given salary and have a scanned sample of the tax reciept you should be recieving at least twice a year. Both are available if anyone wants them.

I am well aware of the vagaries of official advice in this country so welcome any other views/opinions/conflicting advice from your investigations in this area...

Have a better one...

[hellofaniceguy]

Great information. Thank you for taking the time to write and post it.