Korean Job Discussion Forums

[reactionary]

I thought only my employer was throwing this around to try to screw me out of pension, but after inquiring to the tax office about one aspect of my company's tax policy, I got this reply.


My Question:
I work for a hagwon which provides me an apartment. I did not choose the apartment and I do not receive a "housing allowance" payment - I simply live in it and they pay the rent and deposit.

I am being told that it is not my salary, but that I must pay income tax on it, raising my monthly tax significantly. Is this standard practice?

Response:

답 변 Dear Sir/Ma�am, Thank you for visiting the National Tax Service website. The following is the reply to your inquiry dated Jul. 10, 2007. If you are an employee, you have a tax liability for the income that is the consideration for the services you provided in Korea. Generally speaking, benefits such as housing, etc. that you receive in connection with the performance of your services are usually included in your employment income as consideration. However, if you receive a provision of house that your company possesses or rents, it can be exempted from income tax under Article 38 of the Enforcement Decree of the Income Tax Act. If you are an independent contractor, you have a tax liability for the income that is the consideration for the services you provided in Korea. Benefits such as housing, etc. received for services you provide are usually included in your income as consideration. Please contact us again or you may have your Korean employer contact us. We�ll consult your case with your employer and then let you know the details. Please visit our Q&A or FTAS webpage again or call 82- 2-397-1440 for further questions. Thank you. *** This reply has been based on the facts of your inquiry only and personal knowledge of a counselor. It does not have legal authority as an evidence for the tax return or appeal because it is not a legal interpretation or decision by the tax authority. Please file a written inquiry to the National Tax Consultation Center for a formal reply.

Seems like this is the catch-all cop-out of giving benefits. "Oh you're not a regular employee - you're an independent contractor."

[Fresh Prince]

Wouldn't an independent contractor have full control of their visa in order to do other contracts, and teach privately? Is it possible for someone on an E-2 visa to be classified as an independent contractor?

[Squid]

Remember if your employer has you classified as an "independent contractor" then you'll already be paying a base income tax rate of 3.3%...

* Ask your employer for a copy of your business registration papers- if you're self employed then your local government (gu) office will have you on record as such.

* Ask them where your registered office or place of business is...

* Ask them why they, and not you, are paying your income tax- it's the self employed individual's responsibility to pay their own tax- no-one else.

If they want to play then ask to be paid the full gross amount as stated on your contract each month... no deductions.

Self-employed is as self-employed does.

Weasel employers are still claiming this sh*t ("you're self employed") and you're 100% correct in the reason- it's to avoid their mandatory obligation to provide both National Pension and National Health Insurance contributions- regardless the number of full-time employees.

Add a housing (value) tax to the 3.3% and you'll be paying quite the tax bill for the month.

E2 holders must avoid employers claiming you're "self-employed" or a "consultant" or an "independent contractor"... any term indicating less than full-time employee.

>> not to say your contract won't state "full-time employee"- it probably will. The key is to look at the tax rate you'll be paying. If the contract doesn't give a percentage and says anything like "Income Tax will be paid in accordance with Korean Tax law"... get clarification.

There's a lot more to this issue but I'll save my breath... for now.

Suffice to say that if any part of your contract conflicts with prevailing law in Korea then your employer is (technically) in breach of contract. If you state this clearly and have the supporting documentation you'll have no problems getting agencies like the tax office, pension office or labor office to back you if things turn ugly.


Good luck

[reactionary]

But that's the weird thing, isn't it. Even the tax office in their reply to me is implicitly stating that independent contractors can exist at hagwons (ok, i didn't directly tell them i had an E-2 visa, but still, i would hope they could figure it out). Maybe what CDI does is legal after all -- but at least those cats get paid better than I do while not getting benefits.

But yeah, i've been given the runaround for three months now. I'd really like to have my insurance so I can at least go to a dentist. I guess it's time to just give the agencies a call.

[wylies99]

This is a VERY important thread. MANY hogwans are pulling this crap.

[Whistleblower]

[reactionary]

I don't work for CDI, but this could be the same logic/loophole that they use. I work at a dinky operation that currently has two teachers and four students..yeah..i'm sure i'll be out of a job soon.

[PRagic]

Great. Just make sure that they know that they then MUST include that taxable figure into your severance!

[Voyeur]

People are somewhat misinformed here on several counts.

1. What CDI does would never be a problem with the TAX office. Being an independent contractor is a perfectly valid way to teach. The issue arises with the IMMIGRATION office - can you be on an E-2 Visa and be a contractor.

2. If you are a "contractor" and paid hourly at CDI then you will not receive any housing - so that one is a non-issue. If you get housing, then you are not a contractor and CDI treats you like any other Hogwon treats its employees in these respects - e.g. medical, pension, pays your taxes and deducts them, etc...

3. The CDI system may violate immigration laws. But it does NOT screw the teacher who in return for no holidays, pension, housing, medical gets a buttload of cash. Teachers get that choice and in the end, for those getting the good hourly wages, it is more than worth it. The CDI system has NEVER been about screwing the teachers - it is just about making things simpler for CDI. But they have always paid through the nose to it (though they seem to be offering more low-end slaries these days - but heh, if you sign the contract....).

CDI does lots of crap stuff to teachers - like most companies. But this contractor issue is not really part of that. OTOH not telling contrator teachers that they will OWE Korea ~US$2,000 a year or more in unexpected taxes is really crappy on their parts.

[reactionary]

I've asked about severance. They said no, the higher figure would not be used. Something about 2.3 is my "base salary" but the 2.85 is my "total income." Very convenient, right.

what's odd, though, is the higher figure is also used for my pension and health care. In the end, they pay more too...but you know the wonjangnim(rod)s. they always have to feel like they are winning at someone else's expense.

[reactionary]

OK, and sorry for bringing up CDI. I was just trying to find some logic and connections to my current situation. I was really talking more about the contractor issue rather than housing (which is talked about in a different thread) regarding CDI, which you seem to have claimed to be the case - you're an independent contractor. Maybe it was the vocabulary word of the week for the hagwon association.

[PRagic]

Collect your last month's salary, then inform them that you will be taking them to the labour board. You will win hands down. No contest.

[Squid]

People from countries without a reciprocal agreement for lump sum refund of pension payments will often sign "no pension" contracts willingly...thus "saving" themselves 4.5% of their gross pay. Sh*tty hagwon owners know this and use it to undermine those seeking legitimate payments.

But if you're from the US or Canada, and you sign without pension, you're doing yourself out of 4.5% of your gross salary for the year (employers contribution.)

Voyeur: On the "contractor" issue...I'm not familiar with CDI, but most schools practicing this deception are the one principal employer of the employee. The employee's workplace is unchanging and the employee does not engage in employment activities outside the single workplace.
In addition the school deducts Income Tax and *other* amounts from the employees monthly check. That's a full-time regular employee.

My questions to you then:

Does CDI register (or require to be registered) each and every one of its "contractors" with the local government office as a self employed person? My bet: No

What's the "contractor" place of business? Is it different or the same as that stated on the application for E2 status?
My bet: The CDI school & the same as the immigration application.

Does CDI deduct any monies from the paychecks of its "contractors?"
My bet: Yes.

Are these CDI "contractors" able to work outside of CDI without restriction? (See E2 status of sojourn.)
That's a No


Difficult to believe as it is, major hagwon chains in Korea still flout their own tax, pension, health and immigration laws, but only by creating uncertainty in the minds of foreign workers unfamiliar with local law and appealing to the ones specifically disadvantaged by lack of pension refund agreements.

[reactionary]

One problem in my case is the other foreign teacher, a Canadian, doesn't want pension and health - preferring to have more money in [pocket each month.

so basically I come out looking like the primadonna.

They keep making ridiculous claims though.

"Oh, you're not full time. You only teach here 5.5 hours and have one hour of prep. That's not 8 hours"

[wylies99]