Should you report income generated overseas?
Under the Income Tax Act, individuals are categorized as either a resident or non-resident for tax purposes, depending on which the scope of taxable income and method of taxation differs. Residents are subject to income taxation for all income that have accrued in Korea and abroad (world-wide income), whereas non-residents are subject to income taxation only for Korean-source income.
The income derived from foreign sources must be converted to Korean won currency using the basic currency exchange rate or arbitrage rate of exchange that was applied on the date the income was generated.
However, for income accrued on or after January 1, 2009, for the first time, only the income from foreign sources that was paid our in Korea or transferred to Korea is taxable for foreign taxpayers whose total length of residency or domicile in Korea is not over five (5) years during the ten (10) year period ending on the final day of the tax year to which the income is attributable.
Where foreign source income is included in a resident’s global income or retirement income, and tax equivalent to Korea’s income tax has been paid or confirmed to be paid to a foreign tax authority for the foreign source income, the taxpayer may receive foreign tax credit.