Income tax is another common cause of complaint. Most foreign employees are required to pay Korean income tax, which is generally withheld from an employee’s salary and paid by the employer. The Korean income-tax rate is 5 to 10 percent.
Article 20 of the Korean Tax Code states: “An individual who is a resident of a contracting State and who, at the invitation of any university, college, or other recognized educational institution, visits the other contracting State for a period not exceeding two years solely for the purpose of teaching, or research or both at such educational institution shall be taxable only in the first mentioned State on his remuneration for such teaching or research.”
The Korean Tax Office in Seoul maintains a list of institutes where foreign teachers are tax-exempt. In principle, Article 20 applies only to teachers employed at universities, research centres or university-operated institutes. Teachers at hakwons and at private companies may have to pay tax. The general affairs section of the university or research centre can apply for the exemption. If the institute withholds income tax without reason, it is required to pay a refund.
For guidance on taxation matters contact the Korean Tax Office in Seoul, which has been helpful in arranging compliance with Article 20. The Office also publishes an English-language income tax guide for foreigners in April of each year; this is available free at any tax office.
The Korean tax year runs from June 1 to the following May 31. Usually employers file the appropriate tax forms but if they do not do so, individual employees may be penalized for failing to file.