Where a foreign executive or employee (other than a daily worker) first began working in Korea on or before 31 December 2026, the tax on employment income received up to the tax year ending within 20 years of the first day of work may be 19% of that income (Restriction of Special Taxation Act, Art. 18-2(2)). Non-taxation, deductions, reductions and credits then generally do not apply (Art. 18-2(3)).
Who qualifies: foreigners who first started work by 31 December 2026
Article 18-2(2) of the Restriction of Special Taxation Act applies where a foreign executive or employee first begins providing work in Korea on or before 31 December 2026. Daily workers are excluded from the outset. The reference point is not the date of joining the current employer but the first day work was ever provided in Korea, so someone who worked in Korea before and has returned must count from that original start. The provision covers employment income received for working in Korea, and excludes work for a related company specified by Presidential Decree (with a further exception for certain foreign-invested companies specified by decree). The date matters most right now. The current text covers only those whose first work in Korea began on or before 31 December 2026, so for a foreign national arriving and starting a job around the turn of the year, the first working day can decide whether the special rule is available at all. The law may be amended, so where a start date falls in the new year, check the provision in force at that time.
The 19% applies to total employment income, not to the tax base
The flat rate is not always the better option. The progressive rates in Article 55(1) of the Income Tax Act apply from 6% to 45% to the tax base for global income, that is, the amount after deductions: 6% up to KRW 14 million, 15% up to KRW 50 million, 24% up to KRW 88 million and 35% up to KRW 150 million. Article 18-2(2), by contrast, makes the tax “the amount obtained by multiplying that employment income by 19/100”. In other words, 19% is applied to the whole of the employment income before deductions. For a high earner with a large slice of income in the upper brackets, 19% can come out lower; for someone on a more modest salary, or with substantial family deductions and credits, the progressive calculation may produce less tax. The only reliable answer comes from running both calculations with the actual pay structure and deductions. Rather than judging by salary level alone, put the two computations side by side using the previous year’s withholding records or the expected annual salary.
Deductions fall away, and the income is not aggregated
Article 18-2(3) provides that, when the flat rate is applied, the provisions on non-taxation (other than non-taxation of certain welfare-type benefits specified by decree), deductions, reductions and tax credits under the Income Tax Act and the Restriction of Special Taxation Act do not apply. Familiar year-end items, such as personal deductions for oneself and dependants and deductions or credits for insurance premiums, medical and education expenses, are therefore generally lost. The employment income is also not aggregated into the tax base for global income. That matters for anyone with other income. Because the employment income is computed separately at the flat rate, other global income is taxed on its own without being stacked on top of salary. Where a person also has rental or business income in Korea, this can avoid pushing the combined income into higher brackets, but it comes at the cost of the deductions that would otherwise reduce tax on employment income. The size of the deductions forgone and the bracket effect avoided need to be compared together.
Two routes to apply: monthly withholding and year-end settlement
Article 18-2(5) requires a foreign employee who wishes to use the flat rate to apply as prescribed by Presidential Decree, and Article 16-2 of the Enforcement Decree sets out two routes. First, to have 19% withheld from monthly pay, an application for flat-rate withholding is submitted through the withholding agent to the competent tax office by the 10th of the month following the month in which work was provided (paragraph 6). Without it, the employer withholds using the simplified withholding tax table under Article 134(1) of the Income Tax Act. Second, an application for the flat rate can be attached to the employee’s income and tax deduction return at year-end settlement or when filing a final return of global income (paragraph 4). Both routes are open only to a person without Korean nationality at the relevant time. To stop monthly flat-rate withholding, a waiver application must be filed, and it takes effect from the tax year following the year in which it is filed (paragraph 7). A change of mind during the year does not switch the withholding method for that year.
Keep the 20-year window and the leaving-month settlement in view
The flat rate applies to employment income received up to the tax year ending within 20 years of the first day of work in Korea. The same 20-year window applies to work at a regional headquarters specified by Presidential Decree (proviso to Article 18-2(2)). Because the count starts from the first day of work, a period spent outside Korea in between does not move the starting point. Timing of the settlement also matters. Article 137(1) of the Income Tax Act requires the withholding agent to carry out the year-end settlement when paying February’s salary for the following year, or when paying the salary for the month in which an employee leaves. For a foreign employee who resigns mid-year and leaves Korea, the settlement happens in the final month’s pay, so the application must reach the employer before that settlement if the flat rate is to be used. Deciding the withholding method on joining, and comparing both methods again before each year-end settlement, reduces the risk of missing it.