What is the flat tax rate option for foreign workers in Korea?

Korea gives foreign employees a special choice: instead of the normal progressive income tax, which runs in brackets from about 6 percent up to 45 percent, you can elect a flat tax rate on your employment income. The flat rate is 19 percent, and with the added local income tax (10 percent of that), the effective rate is about 20.9 percent. The big trade-off is that choosing the flat rate means giving up essentially all deductions, exemptions, and credits, so it is 19 percent applied to your gross salary with nothing subtracted. It is available to qualifying foreign workers for a limited window from your first day of work in Korea, and the eligibility period has been extended over the years, so confirm the current limit for your start date. You elect it through your employer's year-end settlement (연말정산) or when you file, and you can choose per year.

How to decide comes down to your income and deductions. The flat rate tends to win for higher earners, since the top progressive brackets exceed 20.9 percent, and for people without many deductions to claim. The progressive system tends to win for middle and lower incomes and for those with substantial deductions and credits, such as dependents, housing, pension, insurance, medical, and education costs, because after those your effective progressive rate can drop below the flat 20.9 percent. The practical approach is to calculate it both ways for your actual salary and deductions each year, which your company payroll or a tax accountant can do quickly. The National Tax Service Hometax site has an English section, and for a clear answer on your own numbers, a short consult with a 세무사 (tax accountant) who handles foreign taxpayers is well worth it, especially in your first year.