If you are a foreign resident in Korea, it's important to prepare for the year-end tax settlement. Year-end tax settlement is the process where you adjust the taxes you’ve paid throughout the year, receiving a refund if you’ve overpaid or paying additional taxes if there’s a shortfall. However, if you're not familiar with Korean tax laws, the process can seem complicated. In this post, we’ll explain everything foreign residents need to know about year-end tax settlement, including the types of visas eligible for tax settlement, frequently asked questions, and useful tips in a Q&A format.
1. What is Year-End Tax Settlement?
Year-end tax settlement is the process of reviewing the taxes paid on your income over the year, confirming whether the amount is correct, and adjusting any overpaid or underpaid taxes. It typically occurs in January, and individuals are required to calculate their final tax liability and settle any discrepancies.
2. Do Foreign Residents in Korea Need to File for Year-End Tax Settlement?
Yes, foreign residents in Korea are required to file for year-end tax settlement. If you are employed in Korea, you are subject to income tax, and you must complete the year-end tax settlement to adjust your taxes. However, whether you are eligible for tax settlement depends on your visa type.
3. Which Visa Types Are Eligible for Year-End Tax Settlement?
The following visa types are eligible for year-end tax settlement:
- E-1 to E-7 Visas (Employment-related Visas): These visas are issued to foreign workers in Korea, and if you hold one of these visas, you are eligible to file for year-end tax settlement. Examples include E-2 (foreign language instructors), E-5 (specialized professionals), E-7 (specific activities).
- F-2 Visa (Resident Visa): Foreign residents who have lived in Korea for a certain period can obtain an F-2 visa, which allows them to participate in year-end tax settlement.
- F-5 Visa (Permanent Resident Visa): Foreigners with permanent residency in Korea are also required to complete year-end tax settlement.
- D-8 Visa (Corporate Investment Visa): Foreigners who are running a business or making investments in Korea under a D-8 visa must file for year-end tax settlement.
- D-10 Visa (Job-Seeking Visa): Foreigners on a D-10 visa who have worked for a certain period while job-seeking are eligible for year-end tax settlement.
4. Which Visa Types Are Not Eligible for Year-End Tax Settlement?
Visas such as C-3 (Tourist Visa), C-4 (Short-Term Visit Visa), and D-2 (Student Visa) are typically not eligible for year-end tax settlement. These visa types are not intended for employment purposes, so individuals holding these visas do not usually generate income subject to tax settlement in Korea.
5. What Documents Are Required for Year-End Tax Settlement?
To prepare for year-end tax settlement, you will need the following documents:
- Income Tax Return: This document is required for tax adjustment.
- Pay Slips: You will need your pay slips to verify your income during the year.
- Foreign Registration Card: Foreign workers are required to submit a copy of their foreign registration card.
- Documents for Tax Deductions: If you plan to claim deductions (e.g., medical expenses, education expenses, donations), you’ll need to provide the relevant documentation.
6. Can Foreigners Receive Tax Deductions?
Yes, foreigners can claim various tax deductions just like Korean residents. Some common tax deductions include:
- Basic Deductions: Deductions for yourself and any dependents.
- Earned Income Deduction: You can receive a deduction based on your earned income.
- Insurance Deductions: Deductions for health insurance, national pension, unemployment insurance, etc.
- Other Deductions: You can claim deductions for medical expenses, education expenses, donations, and more.
7. Frequently Asked Questions (FAQ)
Q1. Do foreigners in Korea have to file for year-end tax settlement?
- Yes, foreign residents in Korea are required to file for year-end tax settlement if they have earned income subject to taxation.
Q2. Can foreigners receive a tax refund?
- Yes, if you’ve overpaid taxes throughout the year, you can receive a tax refund after completing the year-end tax settlement.
Q3. What happens if I don’t file for year-end tax settlement?
- If you don’t file for year-end tax settlement, your taxes may not be properly adjusted, and you could face penalties or missed opportunities for a tax refund.
Q4. Which visa types are eligible for year-end tax settlement?
- Foreign workers holding E-1 to E-7, F-2, F-5, D-8, and D-10 visas are eligible for year-end tax settlement.
Q5. Where can I do my year-end tax settlement?
- Year-end tax settlement is usually done at the company where you are employed. Most companies handle the year-end tax settlement for their employees, so employees just need to submit the required documents, and the company will take care of the tax calculations and adjustments, including issuing refunds or requesting additional payments. In other words, the company usually handles the year-end tax settlement process for you.
- For Self-Employed Individuals or Freelancers : Self-employed individuals or freelancers need to handle their own year-end tax settlement through the National Tax Service (NTS). Freelancers and self-employed people must file their comprehensive income tax return every year, and they can use the NTS HOMETAX system to complete the tax filing and settlement.Therefore, year-end tax settlement is typically processed at your workplace or directly through the National Tax Service or HOMETAX if you are self-employed. ( HOMETAX Website )
8. Conclusion
For foreign residents in Korea, preparing for the year-end tax settlement in 2025 is crucial. By filing correctly, you can receive a refund if you’ve overpaid taxes or pay any additional taxes if needed. It’s important to understand which visa type you hold, what documents are required, and which deductions you can claim. By staying informed, you can make the tax settlement process much smoother.
If you have additional questions, feel free to leave a comment below, and I’ll be happy to help!