Korean Job Discussion Forums

[philipjames]

Is it common practice for hogwans to take severance pay?

Thanks.

[quiksilver]

Do you mean tax sev. pay? You said "take". I'd like to know if you have to pay tax on it myself as I'm due to finish my contract next Tuesday and I want to know what kind of number I should be expecting the director to tell me. My contract says 1-2% tax but up until now my contract hasn't even been fit to line a bird cage so it'll be interesting to see what happens.

[peppermint]

You do pay taxes on severance, and if you get it combined with last month's pay, you'll end up paying a higher tax rate than normal because it will bump you to a higher tax bracket.
http://www.efl-law.com/kr.tax.sp.htm

[ontheway]

There is another tax discussion going on. Look for "I need to show my boss the correct tax rate" or something like that.

Yes. Your severance pay is taxable. However your "tax bracket" is annual. It is completely unrelated to what month your income is earned or paid in. This seems to be true all over the world. However, the amount withheld is based on withholding tables which employers (or primarily lazy bookkeepers) apply without factoring in temporary or one time payment factors. The amount of withholding should be based on the actual tax liability that will be payable when you file a return. It is generally a matter of government policy that the amount of additional tax due or refund due should be as close to zero as possible. This just makes life easier for the tax officials.

To find out what your tax liability will be, you need to get the tax laws for FY 2005. Where? I don't know. However, there was a posting for a website where you can calculate roughly based on 2003 tax rules. From this I have estimated that most Hagwon employees should be paying only 1% , if your employer actually pays it in. Large employers have to transfer withheld taxes monthly. Small employers semiannually. My wonjangnim got some different advice from an actual accountant. But although she asked him to tell her exactly what a hagwon should do "legally", I think he is so used to the usual way in Korea that it still came to "what you can get away with". She and I will be seeking further advice soon.

The rules are complicated. They are quite different if you are a legal "resident" for tax purposes or not. Since tax years are annual, and teacher contracts often straddle two years, it's not clear who is a resident or non-resident Korean under the law. Further, if you are leaving Korea soon, you probably started working here in 2004. Did you file a 2004 tax return. Are you legal? Is your school or hagwon legal?

waterbaby posted this site: http://www.nts.go.kr/eng/default.html

I suggest you check it out. Anyone know an honest, English speaking, Korean-tax expert who will give some advice?