[Korean Tax Common Sense Series 3] Foreigners 19% flat tax rate simplifies taxes

19% Flat Tax Simplification for Foreigners

Missing this one line leads to additional payment.

Foreign workers can opt for a 19% flat tax rate (including local tax of 1.9%, totaling 20.9%).
Choosing this option means forfeiting most deductions and tax credits, with only certain tax-exempt items (e.g., meal allowance of ₩200,000/month) being maintained.
The flat tax rate can be applied for up to 20 years, provided the employment started before December 31, 2026.

Flat Tax Rate: A method of taxation where a single tax rate is applied regardless of income bracket (special provision for foreigners).
Progressive Tax Rate: The standard method where the tax rate increases as income rises.
Local Income Tax: An additional local tax levied at 10% of the calculated income tax (→ 1.9% under the flat tax system).
Withholding Application: Applying through the company to have the rate applied by the 10th of the following month.
Year-End Tax Settlement Application: Settling taxes at a flat rate once at the end of the year.

Your first employment in Korea started before December 31, 2026.
Compared to your annual income, you have few dependents and deduction items (e.g., medical, education, pension, housing).
You consistently receive tax-exempt benefits such as meal and car allowances.
👉 If you meet 3 or more of these criteria, choosing the flat tax rate is likely to be advantageous.

Instead of deductions, the calculation is simplified, and a predictable withholding tax is deducted from your salary.
For families with many deductions, the progressive tax system might be more advantageous for tax refunds.
Missing the application timing (withholding by the 10th of the following month, or opting out from the next tax period onwards) can lead to additional payments.

Applicable Range: Flat Tax (19%) vs Progressive Tax (6% to 45% depending on bracket)
Key Difference: The flat tax requires forfeiting most deductions and tax credits, but simplifies the total tax burden to approximately 20.9%.
Actual Impact: If deductions are minimal, the flat tax is advantageous. If deductions are substantial, the progressive tax system may be more beneficial for refunds.

Inquire with your HR/Admin department about the possibility of applying the flat tax withholding and submit the application by the 10th of the following month deadline.
On your payslip, ensure tax-exempt items (such as meal allowance of ₩200,000/month, car allowance of ₩200,000/month, etc.) are accurately reflected.
For year-end tax settlement preparation: Record your choice for this year (screenshots of application/payslip) and re-evaluate the advantages for next year.

A: Annual income ₩40,000,000, single, few deductions → Total flat tax burden approx. ₩8,360,000 (20.9%), making it simple and predictable.
B: Annual income ₩60,000,000, spouse + 2 children, many deductions → Choosing the progressive tax may allow for reduced burden with deductions (potentially more advantageous than the flat tax).

“With the flat tax, I only pay 19% and I'm done” → Local income tax of 1.9% is added, making the total 20.9%.
“I can get all deductions with the flat tax” → Most deductions and tax credits are not applicable; only certain tax-exempt items are maintained.
“Once selected, it's fixed forever” → You can choose/opt out for each tax period. Opting out takes effect from the next tax period onwards.

Flat Tax vs. Progressive Tax: A guide to the more advantageous choice based on combinations of annual income, family, and tax-exempt benefits.