1.    What is the flat tax rate regime eligible for foreign workers in Korea?

To support the inducement of talented foreign workers, eligible foreign workers can choose between the ordinary individual income tax calculation method (maximum tax rate of 49.5%) and the flat tax rate (20.9%) method.

The flat tax rate is applied to gross salary income, which is different from the ordinary individual income tax base calculation where non-taxation, tax-exemption, deduction, or tax credit is applied.

Because of the taxable income base calculation difference, in practice, the flat tax rate is not beneficial to all foreign workers in Korea. It is typically beneficial to high-income earners.

2.   Who is eligible, and what has changed?

Before the change, foreign expatriates and employees may be eligible for a flat tax rate on income earned in Korea during the first five (5) years of employment if they start work no later than December 31, 2023.

The application period for the special tax concession has been extended from five (5) years to twenty (20) years, effective from January 1, 2023. 

The extended period also applies to foreign workers who have worked in Korea for less than 20 years as of January 1, 2023 from the date the foreign worker first started their work in Korea.

3.     Application examples

      1)  A foreign worker who has been working in Korea for less than five (5) years

      In case of a foreign worker who started to work in Korea from year 2021.

      They are eligible to apply the flat tax rate until the year 2040.

 2)  A foreign worker who has been working in Korea for more than five (5) years

     In the case of a foreign worker who started working in Korea in year 2016 and is continuously working in Korea.

          From 2016 to 2020: Eligible for the flat tax rate

          From 2021 to 2022: Not eligible for the flat tax rate

          From 2023 to 2035: Eligible for the flat tax rate

 3)  A foreign worker who started to work in Korea in the year 2023 

Eligible to apply the flat tax rate until the year 2042.

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