Last updated: September 27, 2026
Reviewed by Song I Yoon, USCPA, Director at STAR TAX & BPO
Korea taxes most employees under progressive national income tax rates from 6% to 45%. Eligible foreign executives and employees may instead elect a 19% flat national income tax rate. Local income tax is generally added at 10% of the national income tax, so the corresponding combined rates are 6.6% to 49.5% under the progressive method and 20.9% under the flat-rate method.
The better method depends on the employee’s taxable compensation, deductions, assignment structure and overseas-paid benefits. The 19% headline rate is not automatically the lower-tax choice.
2026 Korea Income Tax Rates
The progressive rates apply to taxable income after applicable deductions, not directly to gross salary. Each rate applies only to the portion of taxable income within that bracket.
| Taxable income (KRW) | National rate | Calculation |
|---|---|---|
| Up to 14 million | 6% | 6% of taxable income |
| Over 14 million–50 million | 15% | KRW 840,000 + 15% of the amount over KRW 14 million |
| Over 50 million–88 million | 24% | KRW 6.24 million + 24% of the amount over KRW 50 million |
| Over 88 million–150 million | 35% | KRW 15.36 million + 35% of the amount over KRW 88 million |
| Over 150 million–300 million | 38% | KRW 37.06 million + 38% of the amount over KRW 150 million |
| Over 300 million–500 million | 40% | KRW 94.06 million + 40% of the amount over KRW 300 million |
| Over 500 million–1 billion | 42% | KRW 174.06 million + 42% of the amount over KRW 500 million |
| Over 1 billion | 45% | KRW 384.06 million + 45% of the amount over KRW 1 billion |
Local income tax is generally 10% of the national income tax and is calculated separately.
19% Flat Tax for Foreign Employees
An eligible foreign executive or employee may elect a flat 19% national income tax rate on Korean employment income. Including local income tax, the combined rate is generally 20.9%.
Under the rule effective in 2026, the election may generally be available when:
- the individual is a foreign executive or employee and is not a daily worker;
- the individual first begins providing employment services in Korea on or before December 31, 2026;
- the relevant income is earned within 20 years from the individual’s first Korean employment service date; and
- the employee is not disqualified under the related-party employer restrictions.
The December 31, 2026 date is a deadline for first commencing qualifying work in Korea. It does not mean that an employee who already qualifies automatically loses the flat-tax treatment after 2026.
Progressive Rates vs. 19% Flat Tax
| Point | Progressive method | 19% flat-tax method |
|---|---|---|
| National tax rate | 6%–45% | 19% |
| Local income tax | Generally 10% of national tax | Generally 1.9%, for a 20.9% combined rate |
| Employment income deduction | Generally available | Generally unavailable |
| Personal deductions and tax credits | May be available if conditions are met | Generally unavailable |
| Typical outcome | Often preferable for lower compensation or substantial deductions | May be preferable for higher compensation with limited deductions |
When the flat-tax method is elected, ordinary exemptions, income deductions, tax reductions and tax credits generally do not apply, subject to limited statutory exceptions. This broader tax base is why the flat rate must be compared against the progressive method using the employee’s complete compensation data.
Korean Tax Resident or Nonresident?
Foreign nationality alone does not determine Korean tax residence. A foreign employee may be treated as a Korean resident based on facts such as having a domicile in Korea or residing in Korea for at least 183 days.
Foreign residents generally calculate wage income tax under rules similar to Korean residents, although the availability of particular deductions depends on each item’s requirements. A nonresident employee is still subject to Korean tax on Korean-source employment income, but access to deductions is more limited. Residence status, source of income and any applicable tax treaty should therefore be reviewed together.
Year-End Tax Settlement (YETS)
Monthly payroll withholding is provisional. After the calendar year ends, the Korean employer recalculates and finalizes the employee’s annual wage income tax through the employer-administered Year-End Tax Settlement, often called YETS.
During YETS, the employer generally:
- confirms annual Korean employment income;
- collects supporting documents for eligible deductions and credits;
- compares the progressive and flat-tax methods when the employee is eligible;
- calculates final national and local income tax;
- collects additional tax or processes a payroll refund; and
- issues the annual wage and salary income withholding receipt.
For many employees whose only income is properly included in YETS, the employer-administered settlement completes the annual wage income tax process. A separate Korean individual income tax return may still be required when there is other income, multiple employers that were not consolidated, overseas compensation, equity income or omitted payroll items.
Foreign Employee Payroll Risks
Foreign employees and their employers should identify compensation items that may not appear in the Korean payroll system automatically, including:
- salary or bonuses paid by an overseas headquarters;
- stock options, restricted stock units and other equity compensation;
- tax equalization or tax protection payments;
- housing, education and other expatriate benefits;
- shadow payroll obligations;
- multiple Korean or overseas payrolls; and
- changes in assignment or residence status during the year.
Incorrect treatment may remain unnoticed during monthly payroll and appear later during YETS, an individual income tax filing or a tax authority review.
Practical Takeaway for Employers
Before finalizing Korean payroll or YETS for a foreign employee, compare both tax methods using the employee’s full compensation package. Confirm the first Korean employment date, related-party restrictions, residence position, overseas-paid compensation and available deductions. Keep the employee’s flat-tax application and supporting records with the payroll file.
Need help with Korean payroll or foreign employee tax?
STAR TAX & BPO is a CPA-led boutique firm supporting foreign companies in Korea with payroll withholding, expatriate tax and Year-End Tax Settlement. New service inquiries are answered within one Korean business day.
Frequently Asked Questions
Is the 19% flat tax always better for a foreign employee?
No. The flat rate uses a broader income base and generally removes ordinary deductions and credits. The progressive method can produce a lower liability, particularly for employees with lower compensation or substantial deductions.
Does the foreign employee flat tax end after 2026?
Not automatically. December 31, 2026 is generally the deadline for first commencing qualifying employment services in Korea. An employee who qualifies may apply the regime to eligible income within the statutory 20-year period, subject to the other conditions.
Is local income tax included in the 19% rate?
No. Local income tax is generally added at 10% of the national tax, producing a combined rate of 20.9%.
Can overseas-paid compensation be left out of Korean payroll?
Not necessarily. Compensation connected with Korean employment may require Korean reporting even when it is paid outside Korea. The arrangement should be reviewed for Korean withholding, shadow payroll and YETS purposes.
Official References
- National Tax Service: employment income tax brackets and calculation
- National Tax Service: 2026 guidance for foreign workers’ Year-End Tax Settlement
- Restriction of Special Taxation Act, Article 18-2
- National Tax Service: withholding income tax calculator
This article provides general information as of the update date and is not a substitute for advice based on a taxpayer’s specific facts.
