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The NTS: Bringing some clarity to a taxing question

 

The NTS: Bringing some clarity to a taxing question

 

Posted Mar. 29, 2010

Taxation is a subject that brings tears and groans to many, but it is an inescapable part of life. Benjamin Franklin once wrote, “in this world nothing can be said to be certain, except death and taxes.”


But while it is true that taxes are certain, tax laws do change from time to time, and it is imperative for every worker in Korea, both foreign and local national, to keep up-to-date with the latest regulations (or, if you can afford it, hire a personal accountant who does) in order to receive the most pleasing tax return at the end of the financial year.


Now that it is late March and those whose employers submitted their tax return documents early are starting to see their refunds come in, it makes us all the more interested in making sure that we claim every possible deduction due us come next end-of-year tax season.


Your first port of call should be the English version of the National Taxation Service (NTS) website. This is the official webpage, and all notices are put up here. Granted, there is sometimes a delay between information being uploaded in Korean and then translated into English, but this is still the place to check. On the front page you will see the “What’s new” and “Announcements tabs.” Make it a habit to check here each quarter in case any new information has been added.


What’s new in 2010?
Currently the top item in the “What’s new” list is a short release outlining the three major changes in individual income tax filing, as of January 2010.


The first piece of news relates to engineers from overseas working in Korea. In the past, 100 percent of engineers’ salary income was exempted from income tax for the first five years. From 2010, only 50 percent of their salary income is exempted from income tax, and only for the two consecutive years after the first arrival in Korea. For example, if an engineer arrives in May 2010, 50 percent of his income is tax-free until May 2012, regardless of whether he/she is here for the duration of that time. Any income earned after those two years will be taxable at whatever his/her appropriate income tax bracket is. (Any engineers who arrive before 2010 are still 100 percent tax free for the duration of the five-year period, as under the previous system.)

To apply for this exemption, engineers should talk to their employer’s accountant or accounting department and submit an “Application for Tax Exemption on Wage/salary Income of Foreign Engineers” (외국인기술자의근로소득세액면제신청서 in Korean) to the relevant tax office by the

10th day of the month following the month in which he/she started working. The form (Korean version only at the moment) can be downloaded from the NTS website. Scroll down to the second grouping of links under the heading 세무서식 (taxation forms), and click on the [저장하기] link to save the form to your computer. Be advised that the form is in Hangeul .hwp format, not MS Word.

 

 

The second piece of news relates to foreign workers who are resident in Korea. Until January 2010, foreign workers could select one of two tax exemptions – either they could choose for 30 percent of their salaried income to be tax-free, or they could choose to have a flat rate of 15 percent applied to all their salaried income. From this year, that first option is no longer available, and the second, flat rate option of 15 percent is scheduled to run out at the end of 2012.

In order to apply for this flat rate, foreign workers must submit an “Application for a Flat Rate Taxation for Foreign Workers” form (외국인근로자단일세율적용신청서 in Korean) to their withholding agent (소득지급자 in Korean – usually the finance/accounting team of their employer).  The form (Korean version only at the moment) can be downloaded from the NTS website. Scroll down to the second grouping of links under the heading 세무서식 (taxation forms), and click on the [저장하기] link to save the form to your computer. Be advised that the form is in Hangeul .hwp format, not MS Word.

The third piece of news regarding income tax in 2010 is that Korean nationals with foreign permanent residency are no longer entitled to either the special taxation exemption for engineers or the flat rate of income tax for other foreign workers.

 

Some other general hints and tips for income tax
To find a map and direct phone number your local NTS office, visit this part of the website where you can select the area nearest you. If you call there and ask in English or Korean, you can receive telephone interpreting services in one of many languages: English, Chinese, Japanese, French, Russian, German, Spanish, Vietnamese, Mongolian, Indonesian, Thai, Bengalese, Urdu, Nepalese, Khmer, Burmese, Arabic and soon Sinhalese.

For those who are still confused about things, call the central NTS taxation hotline on (02) 1588-0560. This line is serviced in English and Korean only.

As it gets closer to the end of the 2010 financial year (financial year is the same as the calendar year – Jan. 1 – Dec. 31) and tax returns are due (last filing date is Mar. 10, but each employer may file any time before that, and most employees submit their tax returns through their main employer), the NTS will add an instant income taxation calculator on the website. At the moment you can only see the calculators for 2008 and 2009 there.


In order to download the most recent version of the Foreign Taxpayers´ Guide to Korean Taxes, click here and then on the “Resources” tab  and then on “Publications.” Scan down until you find the title and save it to your desktop. It is a comprehensive 281-page PDF file in both Korean and English side by side.


By Jacco Zwetsloot and Lina Kwon
Korea.net Staff Writers

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