[Korean Tax Common Sense Series 8] Freelancers: Even 3.3% (tax) will be refunded if you file.

Freelancers Can Get Refunds Too if They Report the 3.3%

The 3.3% is just an 'advance payment.' 

The final settlement is done once a year in May.

Key Summary

• 3.3% (3% national tax + 0.3% local tax) is a provisional payment. It will be recalculated as comprehensive income tax in May.
• The distinction between classification (business/other), proof (expenses), and family deductions determines whether you get a refund or have to pay additional tax.
• Organizing your structure now will yield repeated benefits next year.

Terms Explained in One Line

• Withholding Tax 3.3%: Tax withheld first when payment is made (3% national tax + 0.3% local income tax).
• Comprehensive Income Tax: Tax settled finally in May of the following year, after summing up income from January to December.
• Necessary Expenses: Expenditures incurred for work that can be proven. If recognized, the taxable income is reduced.
• Withholding Tax Receipt: A document issued by the payer (company) stating the payment amount and deducted amount (3.3%).
• Dependent Deduction: If you have a spouse or children, your tax can be reduced by tens of thousands to hundreds of thousands of won.

30-Second Check

• You received income subject to 3.3% withholding tax at least once last year.
• You performed work repeatedly/continuously (at least once a month or for over 3 months).
• You have accumulated several supporting documents such as credit card statements, bank transfer records, cash receipts, or tax invoices.
  👉 If you have 3 or more, the likelihood of a refund is high.

Points of Change

• Depending on proof, classification, and family circumstances, refunds can range from tens of thousands to hundreds of thousands of won.
• The settlement is done once a year (May 1-31). If organized in advance, it can be completed in 20 minutes.
• If the classification or proof is incorrect, you may have to pay additional tax or supplement documents.

Case Comparison

• Scope of Application: One-time service (other income) vs Recurring service (business income)
• Key Difference: If the service is recurring/continuous, the allowable expense range increases, thus increasing the possibility of a refund (proof required).
• Actual Impact: The refund can vary from 0 won to hundreds of thousands of won depending on whether expenses and family deductions are applied.

What to Do Now

1. Gather your withholding tax receipts and deposit statements (bank transfers/cash receipts) for the period of January to December of last year.
2. Categorize potential necessary expenses using the three types of proof (credit card, bank transfer, tax invoice/cash receipt).
3. Indicate whether your income is one-time (other) or recurring (business) based on the facts.
4. Check eligibility for basic and special deductions such as dependents, pensions, and insurance.
5. Proceed with the comprehensive income tax filing on Hometax/Sontax between May 1st and 31st.

Practical Examples

• A: University student received 3.3% deducted for a part-time job over 6 months, minimal expenses → Small refund (possibly under tens of thousands of won)
• B: Freelance designer worked for 1 year, total income 30 million won, expenses for equipment, software, communication etc. 6 million won, 1 dependent → Refund of hundreds of thousands of won possible

Confusing Points

• "Is the 3.3% all there is to it?" → No. It is recalculated as comprehensive income tax in May.
• "Foreigners can't get refunds, right?" → It is possible under the same resident regulations (differences may exist depending on the situation).
• "If I don't have proof, should I give up?" → Partial recognition is possible with alternative proof such as bank transfers or cash receipts.

Next Article

• Even if it seems like 3.3%, taxes differ based on income classification (Business Income vs. Other Income: A Comparative Overview)