Year-End Tax Settlement (연말정산) for Foreign Residents in Korea

Every January, Korea asks every salaried foreign resident to reconcile a year of tax withholding against what was actually owed. The process is called 연말정산 (year-end tax settlement), and for most foreign workers it is the single largest annual money decision they make without noticing.

This guide walks you through the timeline, the flat rate versus progressive decision, the deductions that foreigners routinely leave on the table, and what happens if you leave Korea mid-year. All figures reflect the 2025 income year (the Jan-Feb 2026 settlement cycle).

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What 연말정산 is and who must do it

연말정산 is Korea's annual reconciliation of income tax withheld against the correct tax owed for the prior calendar year. Your employer compares the tax withheld from your monthly paychecks against the tax you actually owe after deductions, then refunds you or collects extra tax in your February paycheck.

Every foreign resident receiving Class A employment income (근로소득 갑종) must go through the process, regardless of visa or nationality. That covers E-2, E-7, E-9, F-2, F-4, F-5, F-6, D-8, and every other visa that allows employment with Korean payroll tax withholding.

Two exceptions:

• Freelancers and self-employed foreigners with only 3.3% Class B withholding do not use 연말정산. You file a 종합소득세 신고 (comprehensive income tax return) in May instead.
• Short-term contract workers are eligible if they have worked 3 months or more and are enrolled in the four major insurances (NHIS, NPS, employment insurance, industrial accident insurance).

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The annual timeline

연말정산 runs on a fixed calendar every year. For the 2025 income year (the 2026 settlement), the key dates are:

• January 15: Hometax 간소화 (simplified) service opens. Your Korean deduction evidence becomes downloadable.
• January 20 to late February: Submit deduction evidence to your employer's HR team. Each company sets its own internal deadline, so confirm in early January.
• By March 10: Employer files the final 지급명세서 (payment statement) with the NTS.
• February paycheck (or occasionally March): Refund paid or extra tax deducted from your salary.
• May 1 to May 31: Comprehensive income tax filing window for anyone who missed the employer cycle or has income beyond salary (freelance, rental, investment).

If you are leaving Korea before December 31, your employer must run a 퇴직연말정산 (early settlement) at your final paycheck. We cover that case in a separate section below.

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Progressive rates vs. 19% flat rate: the decision that locks in for the year

Korea gives foreign workers a choice unavailable to Korean nationals: pay standard progressive rates (6% to 45%, plus 10% local surtax) with full access to deductions, or elect a flat 19% national rate (plus 1.9% local = 20.9% total) with no deductions at all. The law is Article 18-2 of the Restriction of Special Taxation Act (조세특례제한법 제18조의2).

The flat rate election is available for 20 years from the date you first provided labor in Korea. This window was extended from 5 years to 20 years by a 2023 amendment. The choice is annual and locks in for the full calendar year, so you cannot switch methods mid-year.

The trade-off

Under progressive rates, your taxable income is reduced by: employment income deduction (근로소득공제), basic ₩1.5M per dependent, rent credit, medical, card, NHIS, NPS, education, donations, pension contributions, and roughly a dozen smaller items. The brackets then apply to what remains.

Under flat rate, none of that exists. You pay 19% on every won of Korean employment income. Worse, employer-paid NHIS and employment insurance premiums that are normally non-taxable lose that status and become part of your taxable base.

When each is better

• Progressive usually wins for: anyone supporting dependents, anyone paying Korean rent, families with medical expenses, workers with substantial card spending, and almost everyone earning under ₩100M. This is the large majority of foreign workers.
• Flat rate may win for: single earners above roughly ₩130M-₩170M with no dependents, no rent credit, and limited deductions. High-earning single executives, new arrivals without yet-registered dependents, or short-term assignees in their first year.

Run both numbers. The NTS publishes a free 2025 귀속 year-end settlement calculator at koreatax.org. Our net pay calculator also compares the two methods side by side. Do this before January 20, not after your employer has filed.

2025 bracket table (progressive)

Add 10% local income tax on top. Effective top rate 49.5%.

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The deduction foreigners routinely miss: overseas dependents

If you support family members living outside Korea, Korea will let you claim them as dependents on 연말정산, and almost no employer HR team mentions this to a foreign worker who does not ask.

The basic deduction is ₩1.5M per eligible dependent per year. To qualify, the dependent must be:

• Under 20, or 60 or older (spouses have no age limit)
• Have annual personal income under ₩1M
• Be genuinely supported by you (documented by remittances or transfers)

For a worker with a spouse and two parents living in Vietnam, the Philippines, Indonesia, Nepal, or anywhere else, that is ₩4.5M in basic deductions. At a 15% marginal bracket this is ₩675,000 in tax saved. At 24%, ₩1.08M. Every year.

What you need to claim them

• Birth certificate (parents, children) or marriage certificate (spouse)
• Apostille authentication or notarization plus Korean-language translation for each document. Your home-country embassy or a licensed translator can handle this.
• Proof of support: remittance receipts from Wise, WireBarley, SentBe, or a bank wire, showing regular transfers to the dependent over the year.

The Hometax simplified service will not auto-populate overseas dependents. You must register them yourself through your employer's HR team, or through a licensed tax agent (세무사).

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The other major deductions most workers can claim

Monthly rent tax credit (월세 세액공제)

If you are a non-homeowning renter with total salary under ₩80M, the rent you paid during the year becomes a tax credit:

• 17% of rent paid, capped at ₩10M of qualifying rent per year, if your salary is ₩55M or under. Maximum credit: ₩1.7M.
• 15% of rent paid, same ₩10M cap, if your salary is between ₩55M and ₩80M. Maximum credit: ₩1.5M.
• Housing must be 85 sqm or under, or have a market value under ₩400M. Officetels and 고시원 qualify.

The ₩10M cap on qualifying rent was raised from ₩7.5M for the 2025 income year. The credit is claimed at 연말정산 by submitting your lease contract, residential registration, and rent transfer receipts to your employer's HR team. Cash rent is not eligible, so pay your monthly rent by bank transfer or card.

Jeonse loan repayment deduction (주택임차차입금 원리금 상환액)

If you took a Korean jeonse loan (전세자금대출) for your primary residence, 40% of your principal and interest repayment is deductible, combined with housing savings up to a ₩4M annual ceiling. The loan must be from a Korean financial institution and registered within 3 months of your residential registration. Loans from your home-country bank generally do not qualify.

NHIS, NPS, and employment insurance premiums

Fully deductible. Your employer usually pre-fills these on the simplified service, so check they are on your deduction sheet.

Credit and check card spending (신용카드 등 소득공제)

Only spending above 25% of your annual salary counts. The rest is deductible at:

• 15% for credit card (신용카드)
• 30% for check card (체크카드) and cash receipts (현금영수증)
• 40% for traditional market and public transit
• 30% for books, performances, and sports facilities

Annual deduction cap: ₩2.5M-₩3M depending on salary, plus extra for dependents with children. This is an income deduction (not a tax credit), so the actual savings scale with your marginal bracket.

Medical expenses (의료비 세액공제)

15% of qualifying medical expenses over 3% of your salary. Capped at ₩7M/year for general dependents. No cap for yourself, dependents 65 and older, disabled, or for infertility treatment.

Foreigner edge case: medical expenses paid abroad for yourself (during a home visit) can qualify with original receipts plus Korean translation. Expenses paid for overseas dependents also qualify. This is operationally complex; call NTS on 1588-0560 before banking on it.

Education expenses (교육비 세액공제)

15% of tuition paid for yourself (uncapped) or dependents:

• ₩3M per year for K-12 dependents
• ₩9M per year for university dependents

Pension savings and IRP (연금저축, 퇴직연금)

12-15% tax credit on contributions up to ₩9M combined across 연금저축 (pension savings) and IRP (Individual Retirement Pension). Foreigners enrolled through Korean employers are eligible. If you plan to leave Korea permanently, note that IRP funds cannot be withdrawn until you terminate employment and cancel your ARC.

Child tax credit (자녀세액공제)

• ₩250,000 for one child
• ₩550,000 for two children
• ₩950,000 for three children
• ₩1,350,000 for four children

Increased by ₩100,000 per child for the 2025 income year.

Marriage tax credit (결혼세액공제)

A new ₩1M one-time credit (₩500,000 per person) for marriages registered 2024-2026. If you married during the year, check your 혼인신고 date is on file.

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How to log into Hometax and download your simplified service record

Foreign residents access Hometax using their ARC number (외국인등록번호, 13 digits, same format as a Korean resident registration number). Authentication methods:

• 공동인증서 (joint certificate): issued by Korean banks; install on your browser or USB.
• 금융인증서 (financial certificate): cloud-based, issued by most banks including KB, Shinhan, Woori.
• 간편인증 (simple authentication): use Kakao, PASS, Samsung Pass, Naver, or Payco. Easiest option for most foreign residents.

Once in, navigate to 연말정산 간소화. Select the categories you want (medical, insurance, donations, card spending, rent, education), then download the PDF or data file. Upload to your employer's HR portal.

If you cannot authenticate because you do not have 간편인증 set up, visit any Kakao-linked bank branch with your passport and ARC, or activate PASS on your phone through your carrier.

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Leaving Korea mid-year: 퇴직연말정산

If you resign and leave Korea before December 31, your employer must run a 퇴직연말정산 (early year-end settlement) at your final paycheck. This is based on the deductions available at that moment (basic dependents, card spending, medical), since the Hometax simplified service does not yet have full-year data.

In practice, the employer's settlement is preliminary. You can file a comprehensive return the following May to claim any deductions your employer could not use, such as a late-arriving donation, overseas dependent evidence, or additional medical. A refund is paid to a Korean bank account (keep one open until the refund clears) or to a home-country bank via international wire.

Before your last day, get these documents from your employer:

• 근로소득 원천징수영수증 (withholding tax receipt), certified by the employer
• 지급명세서 copy (payment statement)
• A PDF copy of your 연말정산 deduction sheet

You will need them for your home-country tax filing, for any US FBAR or FATCA reporting, and for any Korean pension refund claim.

If you also had Class B (freelance, rental, self-employment) income for the year, you must file a pre-departure tax return before physically leaving Korea, not in May. Engage a 세무사 (licensed tax agent) if that applies.

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Common mistakes and penalties

• Missing the employer window and forgetting the May backup. If you did not submit deduction evidence to HR in time, file a 종합소득세 신고 in May to recover it.
• Double-claiming the rent credit and rent income deduction. You can only use one. The tax credit (세액공제) is almost always better.
• Over-reporting overseas dependents without documentation. NTS audits these. You need apostilled family documents plus remittance proof. If questioned and you cannot produce evidence, you owe back-tax plus penalties.
• Forgetting that the Hometax simplified service misses foreign income. If you have foreign rental income, foreign investment dividends, or US 401(k) distributions, those are not on Hometax and may still be taxable in Korea for residents over 183 days.
• Paying rent in cash. Not deductible. Always pay by bank transfer, card, or 월세 deposit auto-debit.

Penalties

• Late filing: 20% of the unpaid tax (40% for fraudulent non-filing)
• Underreporting: 10% of the underreported tax (40% for intentional)
• Late payment interest: roughly 8% annualized, accrues from the original due date

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What to do next

1. Before December 31: confirm your dependents (domestic and overseas), gather remittance records, and check that your rent is being paid by traceable transfer.
2. January 5-14: ask your employer's HR team about the internal 연말정산 deadline, and whether they are defaulting you to progressive or flat rate.
3. January 21: log into Hometax 간소화, download your data, and review for errors.
4. Before your HR deadline: upload the simplified service file plus any evidence Hometax did not capture (overseas dependents, foreign medical, donations).
5. February paycheck: verify the refund or extra tax landed, and ask HR if it does not match your expectation.

For pre-filled answers on the flat rate vs. progressive question, the overseas dependents math, or the full deduction stack, use the net pay calculator to model your situation before you commit for the year.

If your situation is unusual (Class B income, split year of residency, US tax overlap, retroactive claims), hire a Korean tax agent (세무사) or call the NTS English helpline on 1588-0560. This is a process where an hour with a professional can pay for itself many times over.

What's changed

• 2026-04-21: Guide first published covering the 2025 income year, 19% flat rate election, overseas dependent deduction, and 퇴직연말정산 for mid-year departures.