Accountancy in South Korea

>> Employment in South Korea

Employment insurance

Employment insurance is a social security program which was adopted in July 1995 to enhance competitiveness by supporting unemployed workers, preventing unemployment resulting from industrial restructuring, and promoting reemployment as well as instituting various support programs for employers.

Any business employing one or more workers is obligated to purchase employment insurance (agricultural, forestry, fishery and hunting industries employing four full-time workers or less and construction sites where the total contract price is less than the amount announced by the MOL each year are exempt but may purchase the coverage of their own volition). The employer is required to file an Insurance Coverage Notice with the regional headquarters of the KLWC and an Insurance Eligibility Notice with the Employment Stabilization

Centre at the local labour office within  14 days. The employer must also notify  the regional headquarters and branch office of the KLWC of the estimated premium and pay it to any financial institution entrusted to transfer payments to the treasury within 70 days of the day on which the insurance is applicable.

Employment permit system

The Employment Permit System permits employers who have failed to hire native workers, to legally employ certain number of foreign workers. Under the System, the Government assumes the responsibility for attracting and managing foreign workers.

With the introduction of the Employment Permit System, small and medium businesses are able to minimize labour shortages and foreign workers will enjoy basic rights under labour relations laws.

Payroll taxes on non-residents

Wage and salary income in Korea tax

Class A

  • Wage, salary, remuneration, allowance, bonus, and any other allowance of a similar nature received in return for services
  • Income, other than retirement income, received due to retirement

Class B

  • Wage and salaries received from a foreign agency or from the U.N. Forces in Korea (excluding the U.S. Armed Forces)
  • Wage and salaries received from a foreigner of foreign corporation outside Korea, excluding those claimed as a deductible expense for a Korean place of business of a non-resident of a foreign corporation.

Non-resident who has class a wage and salary income only

Taxation methods applied for nonresidents who have Class A wage & salary Income only are the same as residents. That is to say, an employer who pays a monthly wage to their employees shall withhold a tax amount monthly based on the Simplified Tax Table issued by the National Tax Service, the total amount of which is regarded as a credit taken off for their ultimate tax responsibilities. When the employer pays wages in the next January of the taxable year, they shall calculate the gross tax liabilities of their employees on behalf of them, from which the withheld amount shall be deducted to bring forth the final tax amount to be paid. This is called the ‘Year-end Settlement’.

Non-resident who has class b wage and salary income only

A non-resident who has Class B Wage & Salary Income may organize or join a taxpayer association to settle their tax liability. In this case, the association withholds income tax monthly on the Class B Wage & Salary Income of its association members and pays the amount to the tax authority concerned by the 10th of the next month. Like Class A Wage & Salary Income, the Class B Income is subject to the Year-end Settlement and eligible for Taxpayer Association Tax Deduction but, as stated above, the basic deduction, additional deduction and special deduction are not generally allowed.

Latest version updated 1st November 2017

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