Tax guide for Americans in Korea
Known for its vibrant culture, advanced technology, and dynamic economy, South Korea has become an increasingly popular destination for expatriates from around the world.
Whether you're considering moving to South Korea for work, study, or personal reasons, it's important to understand the nuances of its tax system and immigration policies.
Table of contents
- Residents vs. non-residents of South Korea
- Who can be considered a resident of South Korea?
- Types of taxes in South Korea
- Filing a tax return in South Korea
- Types of income in South Korea
- Social Security in South Korea
- Pension system in South Korea
- Tax deductions for expats in South Korea
- Tax credits for expats in South Korea
- US-South Korea Tax Treaty
- Most popular tax forms for US expats
Residents vs. non-residents of South Korea
In South Korea, the residency status of expatriates determines their tax obligations and access to social benefits.
- Residents, defined as individuals with a domicile or who are present for more than 183 days in a tax year, are taxed on worldwide income and are entitled to various tax deductions, credits, and social security benefits, including health insurance and pensions.
- Non-residents who are absent for less than 183 days are taxed only on South Korea-sourced income and have limited access to tax benefits and social security contributions.
Who can be considered a resident of South Korea?
South Korea has specific criteria for determining whether an individual is a resident or non-resident for tax purposes.
Residency criteria:
- Individuals who are present in South Korea for 183 days or more in a tax year are generally considered to be residents. This includes continuous or cumulative presence in the country.
- If you have a domicile in South Korea, you are likely to be considered a resident. A domicile is usually a place where an individual has a permanent or primary residence.
- If your occupation or business activities require you to be in South Korea for 183 days or more in a tax year, you may be considered a resident.
- Having close family members (such as a spouse or children) living in South Korea or having substantial assets or investments in the country can also contribute to being considered a resident.
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Types of taxes in South Korea
South Korea has a comprehensive tax system that includes various types of taxes, each with its own set of rules and rates.
Personal income tax rates
Income tax in South Korea is levied on an individual's income, including wages, business profits, interest, dividends and rent. The country has a progressive tax rate system and in 2024 it will be:
| Taxable income(KRW*) | Tax rate(%)** |
| 0-14,000 | 6 |
| 14,000-50,000 | 15 |
| 50,000-88,000 | 24 |
| 88,000-150,000 | 35 |
| 150,000-300,000 | 38 |
| 300,000-500,000 | 40 |
| 500,000-1,000,000 | 42 |
| 1,000,000 and above | 45 |
* Korean won
** Before local income tax.
Local income tax
In South Korea, local income tax is a surcharge on national income tax. Typically set at 10% of the national income tax, the tax is used by local governments to fund various community services and infrastructure projects.
It applies to all taxpayers, including residents and non-residents, ensuring that everyone contributes to the development and maintenance of local facilities.
Alternative Minimum Tax
The AMT, an integral part of South Korea's tax framework, ensures that both individuals and corporations, especially those with higher incomes, pay a basic amount of tax.
It acts as a safeguard against excessive reduction of tax liability through various deductions and credits.
Under this system, the AMT is calculated by taking the higher of 45% of the income tax liability (with a 35% rate applied to income tax liabilities up to KRW 30 million) before any exemptions and the actual tax payable after exemptions are taken into account.
The AMT applies to the business income of resident individuals and the Korean-source business income of nonresident individuals. However, it does not apply to employment income.
Capital Gains Tax
In South Korea, CGT applies to gains from the sale of assets such as real estate and stocks, and these gains are taxed separately from an individual's overall income. However, there are specific exemptions, such as gains from certain transfers of farmland and real estate, the sale of a household's primary residence under certain conditions, and the transfer of stocks listed on the Korea Stock Exchange.
In particular, major shareholders of listed companies (those holding 1% or more, or 2%/4% or more for KOSDAQ/KONEX listed companies, or where the market value of the shares held is KRW 1 billion or more, or KRW 4 billion for venture companies) are taxed on capital gains at a rate of 22% to 27.5%.
This rate increases to 33% for holdings of less than one year. For small companies, the tax rate is 11%, including local income tax. As of January 1, 2025, capital gains from the transfer of shares will be classified as "financial investment income" and taxed separately.
Capital gains and losses are calculated annually by category, such as real estate and stocks, with a basic deduction of KRW 2.5 million and additional deductions for long-term holdings.
Gains from the sale of foreign assets are taxable if the seller has been a resident of Korea for five or more years at the time of the sale, and capital losses are only deductible against capital gains and cannot be carried forward.
Value-Added Tax
VAT is a widely used consumption tax applied to goods and services in South Korea.
The standard VAT rate is 10% and is applied at every stage of production and distribution. While most goods and services are subject to VAT, there are exemptions for essential goods such as basic foodstuffs, healthcare, and education.
Businesses above a certain turnover are required to register for VAT, and there are provisions for VAT refunds under certain conditions, particularly for tourists and certain businesses.
Net wealth tax
There is currently no net worth tax in South Korea. This means that individuals and entities are not taxed on the total value of their assets or net worth.
Inheritance tax
In South Korea, both inheritance and gift taxes are governed by the Inheritance and Gift Tax Act. Inheritance tax applies to the transfer of property without compensation due to death or in cases where a person is declared missing. Gift tax, on the other hand, is imposed when property is transferred with the intent to make a gift and the consideration received is less than the fair market value of the gift.
The tax rates for both estate and gift taxes vary from 10% to 50%, not including local income tax, and are based on the taxable value of the property or assets transferred.
Beneficiaries must file an estate tax return and pay any tax liability within a specified period after the decedent's death.
Estate tax
There is no separate estate tax in South Korea. Instead, the inheritance tax system is designed to tax the transfer of an individual's assets after death.
Gift tax
Gift tax in South Korea functions as a supplement to inheritance tax. Therefore, if estate tax has already been imposed, gift tax will not be imposed.
In situations where gift tax has been previously levied and inheritance tax is subsequently levied on the same property, including any gifted property, the amount of gift tax already paid is deducted from the inheritance tax due.
Property tax
Property tax in South Korea is a key element of owning property within the country. It is an annual charge that varies from 0.07% to 5% and is based on the statutory value of various assets such as land, buildings, houses, ships, and aircraft, although there are some exceptions.
The specific rate applied to a property is influenced by its nature and location.
In particular, manufacturing facilities that are either newly constructed or expanded in the Seoul metropolitan area or concentrated areas are subject to a property tax rate that is five times higher within five years of their registration.
Luxury and excise taxes
Luxury and consumption taxes in South Korea are levied on certain goods and services that are considered luxurious or non-essential. These taxes are part of the government's policy to regulate consumption patterns and generate additional revenue.
Luxury taxes are usually levied on high-end goods such as luxury cars, jewelry, and expensive watches.
Excise taxes are levied on items such as alcohol, tobacco, and certain energy products.
Filing a tax return in South Korea
Knowledge of when and how to file income tax returns, as well as the consequences of late or incorrect filing, is essential for compliance and avoiding unnecessary penalties.
When to file a tax return
The tax year in South Korea is the calendar year, running from 1 January to 31 December.
Generally, tax returns must be filed between 1 May and 31 May of the year following the tax year. For example, for the tax year 2024, returns should be filed between 1 May and 31 May 2025.
There may be special circumstances, such as leaving the country, that could change your filing dates. It's important to find out about these exceptions.
How to file a tax return
- Collect all necessary documentation, including income statements, financial records, and any documentation of tax-deductible expenses.
- Korea offers an online tax filing system that is efficient and user-friendly. This can be accessed through the National Tax Service website.
- For those unfamiliar with the process, the NTS assists its offices. In addition, tax professionals and accountants can provide valuable assistance.
Penalties for late or incorrect submissions
- If you miss the filing deadline, you may be subject to late filing penalties. These penalties are usually calculated as a percentage of the unpaid tax and increase over time.
- Filing an incorrect tax return can result in penalties, especially if it results in an underpayment of tax.
- To avoid penalties, it's a good idea to start the filing process well before the deadline and to seek professional advice if you're unsure about any aspect of your tax return.
Types of income in South Korea
In South Korea, income is categorized into different types for tax purposes. Understanding these categories is crucial for individuals working or doing business in the country, as it directly affects how their income is taxed.
Employment income
Employment income in South Korea is generally divided into two classes: Class A and Class B.
In addition, there are special tax concessions for foreigners and certain non-taxable items of earned income.
Class A
Class A earned income refers to income paid or incurred by a Korean company. It includes salaries, wages, bonuses, and other compensation received for services performed in Korea. It is subject to payroll withholding tax every month.
Class B
Class B employment income includes income paid by a foreign company that is not claimed as a corporate income tax deduction by a Korean company. This type of income is not subject to monthly withholding tax.
- Individuals who receive Class B income must declare it annually and pay income tax voluntarily.
- Individuals may elect to pay Class B income tax through a licensed taxpayers' association, which collects and remits taxes monthly.
Special tax benefits for foreigners working in Korea
Foreign expatriates working in Korea may be eligible for a flat income tax rate of 19% on their earned income, as opposed to the standard progressive tax rates.
This benefit is available to foreigners who start working in Korea by a certain date.
To benefit from this incentive, eligible individuals must apply to the Korean tax authorities.
Non-taxable items of earned income
Certain elements of employment income are exempt from taxation, providing tax relief for certain types of compensation.
- Reimbursements for business expenses incurred by an employee for business purposes are not taxable.
- The use of a company car and related expenses, such as maintenance and insurance, are not taxable if certain conditions are met.
- Housing provided by the employer may be exempt under certain conditions.
- Certain allowances, such as those for personal automobile use, relocation, and home leave travel expenses, may also be nontaxable.
Equity compensation
Equity compensation in South Korea refers to non-cash compensation provided to employees, including stock options, restricted stock units (RSUs), and other forms of equity-based compensation.
This type of compensation is becoming increasingly popular, especially in technology and startup companies.
For stock options, taxation typically occurs at the time of exercise. For RSUs, it's usually at the time of vesting.
The taxable amount is generally based on the fair market value of the equity at the time of vesting or exercise, less any amount paid by the employee.
Retirement income
Pension income in South Korea includes payments from the National Pension Scheme, private pension plans, and overseas pension plans.
- Contributions to the National Pension Scheme are mandatory for most employees and the self-employed. Pension income received on retirement is subject to income tax.
- Income from private pension plans and pensions received from abroad are also taxable. However, tax treaties may affect the taxation of foreign pensions.
Severance pay
Severance pay in South Korea is a form of compensation that employees receive when they leave their jobs.
Employees who have worked for a certain period are generally eligible for severance pay upon termination of employment.
Severance pay is subject to income tax. However, some special calculations and exemptions may apply, potentially reducing the tax burden.
Business income
Business income includes income from trade, commerce, manufacturing, or other business activities.
Business income is subject to income tax, and taxpayers must file an annual tax return detailing their business income and expenses.
Dividend income
In South Korea, dividend income, which includes income from stocks or mutual funds of both domestic and foreign corporations, is subject to taxation.
A withholding tax of 15.4% is levied at source on most dividends from Korean sources.
For foreign resident taxpayers who have resided in Korea for more than five years within the last ten years, dividends from non-Korean sources must be included in their worldwide income.
Taxes on these dividends are calculated based on the higher of the basic global income tax rates or a rate of 15.4%.
However, for those who have been in Korea for five years or less in the last ten years, dividends from non-Korean sources are included in their global income only if the income is paid by a Korean company or remitted to Korea.
Interest income
Interest income includes income from bank deposits, bonds, and other interest-bearing financial instruments.
Interest income is generally taxable in South Korea and must be reported in annual tax returns.
Similar to dividends, interest income is often subject to withholding tax.
Income from the transfer of financial assets
Under the revised IITL, the separate taxation of income from the transfer of financial investment instruments, including stocks, bonds, and other securities, has been deferred until January 1, 2025.
This income is taxed separately from other types of investor income, such as employment income, interest on bank deposits, dividends, capital gains, and retirement income.
It is subject to an annual income tax return. The tax rates are set at 20% for an income tax base of up to KRW 300 million and 25% for any amount above this threshold.
However, this separate taxation does not apply to investment income from risk-free financial instruments, which include interest on bank deposits, time savings, savings insurance plans, bonds, and corporate dividends.
Other income
Other income in South Korea includes income that does not fall into the standard categories of employment, business, or investment income.
This can include rental income, royalties, lottery winnings, and freelance income.
These types of income are subject to income tax and must be reported on your annual tax return.
Exempt income
Exempt income refers to income that is not subject to income tax under South Korean law.
This may include certain types of government grants, certain types of interest or dividends, and other categories of income as defined by law.
Exemption usually depends on the source of income and specific conditions outlined in the tax law.
Social Security in South Korea
South Korea's social security system is a robust framework designed to provide essential benefits and protection, particularly for expatriates working in the country.
This system includes National Health Insurance, Employment Insurance, and Workers' Compensation Insurance, each of which plays an important role in ensuring the well-being and financial stability of individuals.
National Health Insurance
The National Health Insurance (NHI) program in South Korea, effective January 1, 2023, is a mandatory program that plays a central role in the country's healthcare system. It provides comprehensive medical coverage for both residents and expatriates, ensuring access to affordable healthcare services.
For employees enrolled in the NHI, the premium rate, including long-term care insurance, is approximately 7.998% of their monthly salary.
There is a cap on the total monthly contribution, which is currently set at KRW 8,824,598, but may be adjusted in 2025. The cost of these premiums is shared equally between employers and employees, with each contributing approximately 3.999%.
This system not only facilitates comprehensive medical coverage for expatriates and helps manage healthcare costs in a new country, but also allows employee contributions to the NHI program to be deducted when calculating taxable income.
Employment Insurance
Employment Insurance (EI) in South Korea serves as a critical support system for individuals facing unemployment. In addition to providing financial assistance during periods of unemployment, the program includes job training and job search assistance to facilitate re-entry into the workforce.
The requirement to contribute to EI varies depending on the individual's nationality and visa type. Typically, foreigners holding D-7, D-8, and D-9 (trade management) visas are required to participate in EI.
From July 2024, the employee contribution rate for EI will be set at 0.90%. For employers, the contribution rate ranges from 1.15% to 1.75%, depending on the number of employees and the type of business.
This means that in addition to the 0.90% EI contribution, employers must also contribute between 0.25% and 0.85% to Employment Insurance and Professional Development Insurance.
Workers' Compensation Insurance
Workers' Compensation Insurance (WCI) in South Korea is a vital government social security program designed to protect workers from work-related injury, illness, disability, or any hazardous situation that could result in death while on the job.
This program covers medical expenses and provides income replacement in the event of an accident or health problem resulting from workplace conditions.
Employers are solely responsible for enrolling employees in WCI and are required to make contributions.
The contribution rate, which is set by the Social Security Administration, varies depending on the work environment and ranges from 0.7% to 18.6% of total wages and salaries, depending on the type of industry.
Pension system in South Korea
The pension system in South Korea, a key component of the country's social security structure, is designed to provide financial security for individuals in their retirement years. This aspect is particularly important for expatriates who intend to work in South Korea for an extended period.
At the heart of this system is the National Pension Scheme (NPS), which is mandatory for all employees and self-employed individuals in the country. Under the NPS, employers and employees each contribute 4.5% of the employee's salary, for a total annual contribution rate of 9%. These contributions are shared equally, and employee contributions are tax deductible.
The national pension contribution is capped at a monthly salary of KRW 5,900,000. As a result, the maximum monthly pension contribution that an employee can make is KRW 265,500, which is subject to annual adjustment each July. For the period from July 2024 to June 2025, this is the current limit.
Foreigners working in Korea are generally required to contribute to the NPS.
Tax deductions for expats in South Korea
Expatriates working in South Korea can take advantage of several tax deductions that can significantly reduce their taxable income and, therefore, their tax liability.
Earned income deduction
The earned income deduction is a tax relief available to all employees, including expatriates, to reduce their taxable income.
This deduction is determined by subtracting a specified amount, capped at KRW 20 million, from the current year's gross income to arrive at adjusted gross income for individuals earning a salary or wage.
The actual deduction amount varies depending on the individual's income level.
| Gross income (KRW millions) | Amount to be deducted for the first value | Marginal rate of deduction (% on the excess) |
| 0-5 | 0 | 70 |
| 5-15 | 3,5 | 40 |
| 15-45 | 7,5 | 15 |
| 45-100 | 12 | 5 |
| 100 and above | 14,75 | 2 |
Personal deductions
Personal deductions in South Korea are another way for expatriates to reduce their taxable income.
Basic deductions
In South Korea, basic deductions play a crucial role in the tax system to reduce the taxable income of individuals. These deductions, which apply to all taxpayers, are deducted from their gross income, effectively reducing their tax burden.
Each taxpayer is entitled to a standard deduction of KRW 1.5 million per year.
The non-residents in Korea can only claim this personal deduction for themselves.
In addition, a deduction of KRW 1.5 million per year is available for a spouse living with the taxpayer, provided that the spouse's adjusted gross income is less than KRW 1 million per year.
Similarly, a deduction of KRW 1.5 million per year can be claimed for each eligible dependent living with the taxpayer and whose adjusted gross income is less than KRW 1 million per year.
Additional deductions
Under South Korean tax law, there are several additional deductions available to taxpayers under certain circumstances, in addition to the basic deductions.
- An additional deduction of KRW 2 million is available for each disabled person in the taxpayer's household. This includes the taxpayer, the taxpayer's spouse, or other dependents who are disabled.
- For elderly family members, there is an additional deduction of KRW 1 million for each person aged 70 or older in the taxpayer's household, whether it's the taxpayer, spouse, or dependent.
- Female taxpayers are entitled to an additional deduction of KRW 500,000. To qualify, the female taxpayer must be either a head of household with dependents but no spouse, or a married woman with an annual taxable income of KRW 30 million or less (approximately KRW 40 million in total annual compensation).
- Single parents are entitled to an additional deduction of KRW 1 million. However, if a single parent also claims the deduction for female taxpayers, only the single parent deduction of KRW 1 million is allowed.
Pension premium deduction
Contributions to the National Pension Scheme are deductible from taxable income. This not only encourages participation in the pension system but also provides immediate tax relief.
Mortgage interest deduction
For taxpayers with mortgages, the mortgage interest deduction offers a way to reduce taxable income.
This deduction is available to individuals who took out a mortgage to purchase a home. It allows them to deduct the interest paid on their mortgage from their taxable income.
There are caps on the amount of mortgage interest that can be deducted, and these caps may vary based on the taxpayer's total income and the value of the property.
Business deductions
In South Korea, business deductions play a critical role in reducing the taxable income of individuals and corporations engaged in business activities.
Key aspects of business deductions:
- A wide range of business expenses can be deducted from business income. These include costs such as rent, utilities, salaries, and office supplies that are essential to the day-to-day operation of the business.
- Businesses can also deduct depreciation on assets such as machinery, equipment, and vehicles. This takes into account the wear and tear of these assets over time.
- Marketing and advertising expenses, which are critical to business growth and customer acquisition, are also deductible.
- Fees paid for professional services, including legal, accounting, and consulting services, are also deductible.
- Interest paid on loans taken out for business purposes is deductible, reducing the financial burden of borrowing.
Losses
The tax system provides mechanisms for accounting for losses to ensure that businesses are taxed fairly.
In South Korea, companies can carry forward their losses to offset future profits. This means that if a company has a loss in one year, it can use that loss to reduce its taxable income in subsequent years.
There are limits on how long these losses can be carried forward. Typically, losses can be carried forward for a certain number of years, after which they can no longer be used to offset income.
Tax credits for expats in South Korea
Expatriates in South Korea can take advantage of various tax credits that can significantly reduce their tax liability.
These credits are designed to provide financial relief in specific areas such as family support and charitable donations.
Special tax credits
Special tax credits in South Korea are targeted reliefs that reduce the amount of tax payable, rather than simply reducing taxable income.
Tax credits for dependants
Expatriates who have dependents, including children, a non-working spouse, or elderly parents, may benefit from dependent tax credits in South Korea.
The value of these tax credits is set at KRW 150,000 for each child 8 years of age or older, applicable to up to two children. For the third and subsequent children, the tax credit increases to KRW 300,000 per child.
Tax credit for charitable contributions
Expatriates can receive a tax credit for their contributions to approved charitable organizations.
To qualify for this credit, they must provide evidence of their donations, such as receipts or bank transfer confirmations.
The amount that can be claimed as a tax credit is subject to certain limits.
The tax credit rate is set at 15% for donations up to KRW 10 million, and any amount above this threshold qualifies for a higher tax credit rate of 30%.
Tax credit for education expenses
Expatriates in South Korea have access to an education tax credit to help reduce the financial burden of educational expenses incurred for themselves or their dependents.
This credit applies to various educational expenses, including tuition fees at schools and universities.
To qualify for this credit, taxpayers must substantiate their educational expenses by providing documentation, such as receipts or bank statements, showing payments made to educational institutions.
The tax credit rate for these educational expenses is set at 15%. However, there are specific limits depending on the level of education: up to KRW 9 million for each dependent attending a university or college, and up to KRW 3 million for each dependent attending a preschool to high school. There is no limit to the taxpayer's education expenses.
Tax credit for insurance premiums
This tax credit applies to premiums paid for various types of personal insurance, including life insurance, health insurance, and certain other types of insurance.
To claim the credit, taxpayers must provide documentation of the premiums paid.
The tax credit rate for qualifying insurance premiums is set at 12%. This rate applies to premiums paid for life insurance, disability insurance, casualty insurance, fire and burglary insurance, and similar types of insurance.
The beneficiary of these insurance policies can be either the taxpayer or family members who have no income for the year.
The maximum tax credit available is limited to KRW 120,000 per year. In addition, premiums paid for National Health Insurance and Unemployment Insurance are fully tax deductible.
Tax credit for medical expenses
The Medical Expense Tax Credit provides significant financial relief to expatriates facing significant healthcare costs in South Korea.
This credit covers out-of-pocket medical expenses, including certain treatments, prescription drugs, and medical procedures not covered by insurance.
To qualify for the credit, the medical expenses must exceed a certain threshold. The tax credit rate is set at 15% for medical expenses up to KRW 7 million, but only if the expenses exceed 3% of the total earned income.
The KRW 7 million tax credit limit does not apply to medical expenses incurred by taxpayers who are 65 years of age or older or who are disabled.
Individual premium tax credit
Expatriates in South Korea who contribute to an individual pension plan may be eligible for a tax credit on these pension contributions.
This credit is specifically for contributions to qualified individual pension plans.
The tax credit rate for pension contributions is set at 12% for contributions up to KRW 7 million per year. However, for taxpayers with an annual income of less than KRW 45 million, the tax credit rate is increased to 15%.
This credit is subject to certain limits, which are determined based on the amount contributed to the pension plan and the taxpayer's total income level.
Credit for Class A and Class B wages
In South Korea, the tax system provides specific credits for Class A and Class B wages to reduce the tax burden on employees based on the type of income they earn.
- Class A Wage Credit
Class A wages typically consist of income paid by a Korean company, including regular salaries, bonuses, and other forms of compensation. Employees who receive Class A wages are entitled to a tax credit. This credit is calculated based on their income level and the amount of tax they have paid. - Class B Wage Credit:
Class B wages are income paid by a foreign company that is not claimed as a deduction by a Korean company. As with Class A, a tax credit is available for Class B wages to reduce the overall tax liability on this type of income.
The maximum credit available for both Class A and Class B wages is KRW 740,000 per year. The details of this credit are as follows:
- If the calculated tax amount is KRW 1,300,000 or less, the credit amount is 55% of the calculated tax amount.
- If the calculated tax amount exceeds KRW 1,300,000, the credit is KRW 715,000 plus 30% of the calculated tax amount exceeding KRW 1,300,000. However, the credit is limited to a maximum of KRW 740,000 per year if the annual salary does not exceed KRW 70 million.
- For annual wages over KRW 70 million, the annual credit threshold will be reduced to KRW 660,000, KRW 500,000, or KRW 200,000 depending on the income bracket, with higher incomes receiving a lower tax credit.
Credit for Class B wages through a licensed taxpayer association
Expatriates and residents in South Korea who earn Class B wages have the option of streamlining their tax management by joining a licensed taxpayer association. These associations offer the convenience of calculating and paying taxes for their members.
Members who choose to report their monthly earnings and pay their Class B income tax through a licensed association have an additional benefit.
They are entitled to a tax credit of 5% of their income tax, with an annual limit of KRW 1 million. This tax credit can further reduce their total tax liability.
Credits for business
Business owners and the self-employed in South Korea can also benefit from special tax credits that recognize various business-related circumstances.
Dividend income credit
This tax credit is designed for individuals who receive dividend income from their business investments.
It is designed to reduce the tax due on such dividend income, thereby providing a beneficial arrangement for business owners and investors.
Specifically, shareholders are entitled to an 11% tax credit on certain dividends they receive.
This credit is applied against the individual income tax calculated on their worldwide income. To determine the taxable amount, global income is grossed up by adding 11% to the dividends received.
Credit for casualty losses
This tax credit is specifically designed to assist businesses that suffer significant losses due to unexpected events or disasters.
It provides financial relief by taking into account the magnitude of the casualty loss suffered by the business.
In cases where a business income earner loses assets amounting to 20% or more of the total value of its business assets due to disasters within a given year, a deduction is made from its income tax.
This deduction is calculated based on the ratio of the loss to the business's total assets, providing significant financial assistance during difficult times.
US-South Korea Tax Treaty
The tax treaty between the United States and South Korea is an important agreement that helps prevent double taxation for individuals and businesses operating in both countries.
This treaty outlines tax obligations and provides mechanisms for tax relief, ensuring fair taxation for U.S. expatriates in South Korea and vice versa.
Tax treaty advantage
- The treaty specifies which country has the right to tax various types of income, preventing the same income from being taxed by both countries.
- The treaty often reduces the rate of withholding tax on dividends, interest, and royalties, benefiting expats and international businesses.
- It provides clear definitions and frameworks for residency and income categories, helping taxpayers understand their obligations and plan their finances accordingly
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Book free consultationMost popular tax forms for US expats
For U.S. expatriates living abroad, including those in South Korea, complying with U.S. tax laws involves navigating a variety of tax forms.
Key tax forms for US expats:
- Form 1040 (U.S. Individual Income Tax Return): This is the standard form used by U.S. citizens and residents to file their annual income tax returns, regardless of where they live.
- Form 2555 (Foreign Earned Income Exclusion): This form is used to claim the Foreign Earned Income Exclusion (FEIE), which allows expats to exclude a certain amount of their foreign-earned income from their US taxable income.
- Form 1116 (Foreign Tax Credit): Expats use this form to claim a credit for income taxes paid to a foreign government, which can reduce their US tax liability.
- FinCEN Form 114 (FBAR): The Report of Foreign Bank and Financial Accounts (FBAR) is required if a U.S. taxpayer has foreign financial accounts that exceed certain thresholds.
- Form 8938 (Statement of Specified Foreign Financial Assets): This form is part of the Foreign Account Tax Compliance Act (FATCA) requirements for reporting foreign financial assets.