Share with your friends

South Korea – Proposed Tax Revisions Aim to Better Tap Expatriates’ Wealth

South Korea – Proposed Tax Revisions Aim to Better Tap

This report covers several tax-related changes introduced in South Korean legislation currently under parliamentary review that affect particularly individuals with high income.




Partner, ATO

KPMG in South Korea


Related content


The 2017 Tax Law Amendment Bill (“the Bill”) announced by South Korea’s government on 2 August 2017, is currently under review in the National Assembly and is expected to be finally approved toward the end of year.

In this GMS Flash Alert, we provide a summary of the key features of the Bill
that could impact international executives and their multinational employers.


Notwithstanding the loosening of the criteria for tax residency, tax costs and budgeting for assignments to and from South Korea could be affected by the modification in income tax rates, which we discuss further below.  

Additionally, employers may need to make the necessary payroll adjustments and update hypothetical taxes for tax equalized assignees.

In order to mitigate surprises and risks, the changes we describe in this newsletter with respect to tax rate changes, withholding tax rates, and foreign account financial reporting should be taken into account when evaluating international assignments both into and out of South Korea.  

Loosened Tax Residency Condition

Currently, one of the criteria for tax residency is having a domicile in South Korea for 183 days or more starting from two years before the end of the relevant year.  However, effective from 1 January 2018, this rule is to be loosened to 183 days or more in one tax year with a view that this will induce more investment in the country from South Korean nationals residing abroad.

New Top Marginal Income Tax Rates

Effective from 1 January 2018, the new top marginal income tax rate of 42 percent (46.2 percent including local income tax) will be applied to taxpayers with an income tax base in excess of KRW 500 million and the second top income tax rate of 40 percent (44 percent including local income tax) will be applied to tax bases in excess of KRW 300 million up to KRW 500 million.  This step is intended to improve income redistribution in the country by asking those with higher incomes to pay a greater share of taxation. 

Currently, the highest marginal income tax rate is 40 percent (44 percent including local income tax) which is applicable to tax bases in excess of KRW 500 million and the second highest marginal income tax rate is 38 percent (41.8 percent including local income tax) which is applicable to tax bases in excess of KRW 150 million up to KRW 500 million.  (For prior coverage of changes to the rates, see GMS Flash Alert 2017-006, 12 January 2017.)  


  • Of interest to high-income earning international assignees, a foreign worker who starts to work in South Korea before 31 December 2018, can elect to have the flat tax rate of 20.9 percent (inclusive of local income tax) applied for five consecutive tax years, including the first year he/she starts to work in the ountry.
  • Foreign workers who had been “continuously” working as of 1 January 2014, will be able to apply a flat tax rate until 31 December 2018.  The tax costs for those who are not eligible for the flat tax rate will be affected by the changes in the top marginal income tax rate.

Increased Withholding Tax Rate for Employees Dispatched from a Foreign Entity and Extended Mandatory Withholding Agent

Under certain conditions, a South Korean company is required to file a payroll
withholding tax return at a flat rate of 17 percent (18.7 percent including
local income tax) on the service fee payable to a foreign entity dispatching
its employees.  (For prior coverage, see GMS Flash Alert 2016-057, 6 May 2016.)  However, according to the Bill, the withholding tax rate is to be
increased to 19 percent (20.9 percent including local income tax) effective
from 1 July 2018.  In addition, the conditions that apply to South Korean companies are being extended since the government wishes to exercise greater fiscal control over expatriates subject to tax in the country.  The conditions are:

1) The annual service fee payable to the foreign entity exceeds KRW 2 billion
(currently, KRW 3 billion).

2) The business of the South Korean entity falls under one of the following “mandatory” industries: aviation transportation, construction, professional, scientific or engineering services and the following newly-added industries, ship-building and financial services.

3) Prior year’s gross sales of the South Korean entity are KRW 150 billion or more, or the prior year’s total assets are KRW 500 billion or more.


  • The assignee-related withholding obligation is applicable to domestic
    corporations.  A South Korean branch of a foreign headquarters is therefore exempt from this rule.
  • The assignee-related withholding tax rate is increased in conformity
    with previous amendment to the flat tax rate effective from 1 January 2017.  Ship-building and financial services are newly added to the categories of businesses falling under this regulation.

Toughened Requirement for Reporting Foreign Bank and Financial Accounts (FBAR)

Tax residents in South Korea that have financial accounts opened with foreign financial institutions are required to file a Report of Foreign Bank and Financial Accounts (FBAR) by 30 June if the aggregate balance in those foreign financial accounts (securities, derivatives, or other financial instruments) exceeds KRW 1 billion on the last day of the month during the year.  However, effective from 1
January 2018, the balance that triggers the reporting obligation is being reduced to KRW 500 million.  Penalties can be imposed for non-compliance.


A foreign resident who has or had his/her domicile or place of residence in the Republic of Korea for not more than five years in total starting from 10 years prior to the end of the relevant year is exempt from South Korean FBAR reporting.

KRW 1 = EUR 0.00074 

KRW 1 = USD 0.00088 

KRW 1 = GBP 0.00676 

KRW 1 = AUD 0.0011 

KRW 1 = JPY 0.096  

The information contained in thisnewsletter was submitted by the KPMG International member firm in South Korea.

© 2021 KPMG Samjong Accounting Corp., a Korea Limited Liability Company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.


For more detail about the structure of the KPMG global organization please visit

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Connect with us


Want to do business with KPMG?


loading image Request for proposal