Income tax in Korea: year-end settlement, the 19% flat rate and the treaty

If you're on a Korean payroll, your boss does most of the tax work for you. Your job is to make one smart choice each February and not get caught out by the treaty.

The short version

• Korean employers withhold income tax from every pay, then run a year-end tax settlement (yeonmal jeongsan) early in the year to square up. Foreign workers file it just like Koreans, whatever their nationality or length of stay [1].
• Rates run from 6% to 45%, with a local income tax of 10% of your income tax on top [2].
• Foreign workers can choose a 19% flat rate instead, for up to 20 years from the year they started working in Korea. The catch: no deductions or credits [1][3].
• Freelance, side or business income goes on a comprehensive income tax return in May.
• The 1982 Australia–Korea tax treaty has a two-year teacher clause [4], but it only helps if you stay an Australian tax resident, which means the ATO taxes that income instead.

How Korean income tax works

Korea taxes residents on income from wages, business, interest, dividends, pensions and other sources, and adds a local income tax collected for the city or province where you live, set at 10% of your national income tax [2]. In Seoul, that local tax goes to the Seoul Metropolitan Government and your district office, but you don't usually notice: it's withheld together with the national tax.

Who counts as a resident

A foreigner who lives in Korea, or stays there for 183 days or more, is generally treated as a Korean resident for tax. There's a useful extra rule for newcomers. If you've lived in Korea for five years or less in the past ten, Korea only taxes your Korea-source income, plus foreign income that's paid in or sent to Korea [2]. That's why your rent from a flat in Brisbane, or interest on your CommBank savings, usually stays out of Korean tax in your first years, as long as you don't send it to Korea.

The rates for 2026

These are the national rates on taxable income, in place since 1 January 2023 [2]. Add 10% of the result for local income tax.

Compared with Australia, the first brackets are low. Many English teachers and junior professionals in Seoul pay a lower share of salary in income tax than they would at home. The gap closes once you add National Pension and health insurance, which come out of the same payslip. See our guides to the National Pension and National Health Insurance.

The year-end tax settlement, step by step

Each month your employer withholds tax using a simplified table. It doesn't know about your medical bills, your credit card spending or your donations. The year-end settlement fixes that. For last year's income, it runs through February [1][3]. Any refund or extra tax usually appears in your February or March pay.

1. Get the forms from HR in January. Your employer will ask for deduction documents and, if you're eligible, whether you want the flat rate.
2. Download your data from Hometax. Hometax is the National Tax Service's online system. Its year-end settlement service pulls in card spending, medical and insurance records linked to your foreign registration number. You'll need Korean identity verification to log in, so sort out your phone and certificates early.
3. Check what you can and can't claim. The schedule, deduction categories and calculations are generally the same for foreign and Korean workers [1]. Some deductions don't fit foreigners well. For example, the housing savings deduction isn't open to people who can't be a household head under the Resident Registration Act [1].
4. Choose flat rate or standard rates (see below).
5. Hand everything to HR before their internal deadline. It's usually well before the end of February.
6. Check your February payslip. Look for the settlement line. If the result looks wrong, ask HR for the calculation sheet.

Be honest with deductions. The NTS warns that wrong deductions can lead to additional taxes of up to 40% [1]. Common mistakes are claiming a dependant who doesn't qualify, or claiming relatives overseas without proof.

The 19% flat rate: when it's worth it

Foreign workers can elect a single 19% rate on their employment income, instead of the progressive rates, for 20 years from the year they started working in Korea [1][3]. It isn't open to anyone who owns 30% or more of their employer's shares [3]. Local income tax still applies on top, so the true flat cost is about 20.9%.

The trade-off is big. Choosing the flat rate means no exemptions, deductions, reductions or credits under the Income Tax Act [1].

You choose each year during the settlement, so you can switch as your salary grows. Ask HR to run both scenarios. Most payroll software can.

There's a separate break for some foreign engineers and researchers: a 50% reduction on earned income tax for 10 years if they meet the degree and overseas R&D conditions [1][3]. Your employer handles the application.

Freelance and side income: the May return

The year-end settlement only covers salary from one employer. You file a comprehensive income tax return with the National Tax Service in May if, in the previous year, you had:

• Freelance income, such as tutoring, consulting or creative work, often taxed at source at a low rate before you file.
• Salary from two employers that wasn't combined in one settlement.
• Business income, including from your own company.
• Other income the year-end settlement didn't include.

You can file through Hometax, at your local tax office in Seoul, or through a Korean tax accountant (semusa). The NTS has a helpline for foreign nationals on 1588-0560 and English guides on its website [1].

A warning for E-2 teachers: private tutoring outside your contract usually breaks your visa conditions. A tax return won't fix an immigration problem.

The Australia–Korea tax treaty

Australia and Korea signed a double tax convention in Canberra on 12 July 1982 [4]. A few articles matter for most Australians in Seoul.

Teachers: the two-year clause

Article 20 covers professors and teachers. If you visit for no more than two years, solely to teach or do research, that pay is taxable only in your home country [4]. Gyeongsangnam-do's education office tells its English teachers that Australia is one of the eligible countries and that you need a certificate of residency from the ATO to give to your school [5].

Read that carefully. The exemption doesn't make your salary tax-free. It moves the tax to Australia. To get the ATO certificate you must be an Australian resident for tax purposes [6]. That means:

• Your Korean salary goes on your Australian tax return and is taxed at Australian rates.
• You're usually taxed in Australia on your worldwide income.
• If your plans change and you stay longer than two years, Korea may say you were never within the clause. Ask the NTS early, not in year three.

For many teachers in Seoul, paying Korea's lower rates is the better deal. Work out your Australian residency first. Our guide Are you still an Australian tax resident once you move? covers the ATO tests.

Everyone else

• Short trips: Article 15 lets someone work in the other country for up to 183 days in a tax year without being taxed there, if other conditions are met, such as being paid by a non-Korean employer [4].
• Pensions: Under Article 18, pensions are generally taxable only where you live [4]. Government service pensions follow Article 19.
• Students: Under Article 21, money from home for a student's maintenance or education is exempt in Korea [4].

What the ATO wants

If you stay an Australian tax resident and also pay Korean tax, you declare the Korean income in Australia and usually claim a foreign income tax offset for the Korean tax paid. If you become a non-resident, Australia generally only taxes Australian-source income. Keep your Korean withholding receipts (the NTS's wage income withholding receipt) for both sides. And if you have a HELP debt, you still need to report your worldwide income to the ATO.

Practical tips for Seoul

• Keep every payslip and your annual withholding receipt. You'll need them for the ATO, for visa renewals and for loans.
• Use Hometax early. Identity verification can take weeks to set up for a new arrival.
• Freelancers, find a semusa. A Korean tax accountant who works in English is worth the fee for your first May return.
• Ask the people who've done it. Join Cooee South Korea, our Facebook group for Australians in South Korea, and ask who chose the flat rate and why.

Sources

1. Year-end tax settlement for foreign workers – Korea.net (Ministry of Culture, Sports and Tourism), January 2025
2. Republic of Korea: taxes on personal income – PwC Worldwide Tax Summaries
3. Tax agency urges foreign workers to take advantage of exclusive benefits – The Korea Times, January 2026
4. Australia–Korea tax convention, synthesised text – Australian Taxation Office
5. Tax information for guest English teachers – Gyeongsangnam-do Office of Education
6. Certificate of residency and overseas tax relief form – Australian Taxation Office

Keep reading

• National Pension in Korea: what Australians pay and getting it back
• Working holiday and teaching English in Korea
• Are you still an Australian tax resident once you move?
• Your HECS-HELP debt when you live overseas