Year-end Tax Settlement: Salary tax refunds are calculated once a year

The tax deducted every month (withholding tax) is a provisional calculation. In January-February, the full year is re-calculated to determine whether you get a refund or have to make an additional payment.

Key Summary 

• The standard is annual income and deductions. Monthly is an estimate, year-end is the final figure.

• Status is tracked throughout the year, while the settlement happens once a year (Jan-Feb of the following year).

• Gathering necessary materials now will lead to a faster refund.

Terminology at a Glance

• Withholding Tax: Provisional tax deducted in advance when salary is paid

• Year-end Tax Settlement: Re-calculating the year's income and deductions to finalize refund/additional payment

• Income Deduction: Items that reduce the taxable amount (e.g., private pension, portion of housing funds)

• Tax Credit: Items directly subtracted from the calculated tax (e.g., insurance premiums, medical, education, donations)

• Simplified Data: A collection of year-end tax evidence gathered by the National Tax Service

• Determined Tax: Finalized National Tax + linked Local Income Tax (10% of National Tax)

30-Second Check

• Did your spending on deductions (insurance, medical, education, donations, etc.) increase from last year?

• Did your taxable income, such as bonuses or overtime pay, change from last year?  

• Were there changes in employment (hiring/resignation), overseas stays, or the number of family members? 
  👉 If you answered 'Yes' to 3 or more, there is a high chance of change in settlement results (refund or additional payment).

Refund Potential Summary Table (Quick Win)

Key Changes

• Depending on changes in deductions and income, the refund amount can vary by tens to hundreds of thousands of won.

• Settlement is once a year (Jan-Feb). Organizing your evidence now will get it done all at once.

• If classifications or evidence are incorrect, additional payments or requests for supplementary documents may arise.

Case Comparison

• Scope of Application: A Documents complete (Refund) vs B Missing documents (Additional Payment) vs C Mid-year hire settlement

• Core Difference: The presence of documents and annual income changes are directly reflected in the determined tax.

• Actual Impact: Refund differences of tens to hundreds of thousands of won depending on evidence organization.

Action Items for Now

1. List your expenditures for insurance, medical, education, and donations according to the simplified data viewing period.

2. Note any changes in taxable income such as bonuses, allowances, and annual leave compensation this year.

3. Check for changes in dependents (marriage, birth, end of support) and verify resident/alien registration information.

4. Inquire with the HR team about mid-year hiring/resignation status and how to submit withholding tax receipts from your previous company.

5. Check the applicability of the foreign flat tax rate (19%) and prepare for the next guide.

Practical Examples

• A: Medical and education expenses increased compared to last year, annual income is similar → High possibility of a refund

• B: Bonus increased significantly, deduction expenses are low → Potential for additional payment

• C: Unsettled after resigning mid-year → Settlement through global income tax filing in May of the following year

Common Misconceptions

• “The tax deducted monthly is final” → Refund/additional payment is determined by re-calculating at year-end.

• “Foreigners living in Korea are excluded from year-end tax settlement” → Included if you are a wage earner; non-residents or special cases follow separate procedures.

• “Selecting the flat tax rate (19%) means no settlement” → This only limits deductions; an annual calculation (settlement) process still exists.