Do Foreign Employees Need to File Income Tax in Korea in May? A 4-Step Check

외국인 근로자, 5월 종합소득세 신고를 해야 할까? — 신고의무 판단 4단계

 

1. Question

"I'm on an E-7 visa and work for a Korean company. My employer did the year-end tax settlement in February. I also have some rental income from an apartment back home, and I may leave Korea at the end of this year. Do I still need to file a comprehensive income tax return in May? And I heard the 19% flat rate for foreigners is changing. Does that affect me?"

 

📌 The short answer

 

If your only income is salary from one Korean employer, you generally do not need to file in May. Your employer's year-end settlement usually finalises your tax for the year.

 

Filing is generally required if you have other income, more than one employer without combined settlement, or salary paid from abroad without Korean withholding. Four questions decide it: your residency, your income scope, your income mix, and whether you are leaving Korea.

 

If you are leaving Korea and are required to file, the deadline is the day before you depart, not May. Check your position before you book your flight.

The detailed grounds and decision criteria follow below.

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Statutes cited in this post 

Abbreviation	Statute (English)	Statute (Korean)
ITA	Income Tax Act	소득세법
ITA Decree	Enforcement Decree of the Income Tax Act	소득세법 시행령
RSTA	Restriction of Special Taxation Act	조세특례제한법

"Art." refers to an article (조) of the statute; numbers in parentheses refer to paragraphs (항) and subparagraphs (호).

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2. Facts and Issues

A. Summary of facts

The typical readers of this post are:

• foreign nationals employed in Korea (E-7 visa holders, expatriates at foreign-invested companies) who receive salary from a Korean employer or from an overseas group company
• foreign employees who also have side income, overseas income such as rent on a property abroad, or Korean rental income
• foreign employees who plan to leave Korea this year

Whether a May filing is required is not decided by nationality or visa type. It follows from four questions asked in order: residency, taxable scope, income mix, and departure plans.

B. Issues

• Issue ① Step 1 — Are you a resident or a non-resident?
• Issue ② Step 2 — If a resident, how much of your income is within Korean tax?
• Issue ③ Step 3 — Given your income mix, must you file in May?
• Issue ④ Step 4 — If you leave Korea this year, when must you file?
• Issue ⑤ How does the 19% flat rate for foreign employees interact with the filing decision, and what does the proposed change to 21% mean?

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3. Relevant Provisions by Issue

If you are not interested in the statutory text, feel free to skip this section and go straight to 4. Tax Analysis.

A. Residency and taxable scope (Issues ① and ②) 

Provision	Content
ITA Art. 1-2(1)1·2	A "resident" is an individual with a domicile (주소) in Korea, or with a residence (거소) in Korea for 183 days or more. A "non-resident" is any individual who is not a resident.
ITA Decree Art. 2(1), (3)1·2	Domicile is judged by objective facts of living — family sharing a household, assets, occupation. A person is deemed to have a domicile if their occupation normally requires continuous residence in Korea of 183 days or more, or if family lives with them here and continuous residence of 183 days or more is expected.
ITA Decree Art. 2-2(1)	Residency begins on the day a domicile is established or deemed established, or the day the residence period reaches 183 days.
ITA Decree Art. 4(1)·(3)	The residence period runs from the day after entry to the day of departure; the 183-day test is met within one tax year or continuously across two.
ITA Art. 3(1)·(2)	Residents are taxed on all income; however, a foreign resident with 5 years or less of Korean domicile or residence over the past 10 years is taxed on foreign-source income only to the extent paid in or remitted to Korea. Non-residents are taxed only on Korean-source income under ITA Art. 119.

 

B. The May filing decision (Issue ③)

Provision	Content
ITA Art. 70(1)	A resident with comprehensive income for the tax year must file a return from May 1 to May 31 of the following year.
ITA Art. 73(1)1	A resident with employment income only may choose not to file.
ITA Art. 73(2)	The exemption does not apply to a person receiving employment income from two or more payers, unless year-end settlement leaves no further tax to pay.
ITA Art. 73(3)	The exemption does not apply to a person with employment income under ITA Art. 127(1)4(a)·(b), unless the tax was paid by withholding through a taxpayers' association (납세조합) under ITA Art. 152(2).
ITA Art. 127(1)4(a)·(b)	Employment income excluded from ordinary withholding: (a) income from foreign government bodies or UN forces stationed in Korea (other than US forces); (b) income from a non-resident or foreign corporation located abroad (excluding Korean branches). The proviso to (b) keeps withholding in place where the pay is booked as an expense of a Korean permanent establishment, or where it is paid to a dispatched worker covered by ITA Art. 156-7.
ITA Art. 121(2)·(3); Art. 126(5)	A non-resident with a Korean permanent establishment or Korean real estate income is taxed on an aggregated basis; one without is taxed separately per income type. Korean-source employment income of such a non-resident is computed and settled under the rules for residents, but deductions for dependants other than the taxpayer, special income deductions, the child tax credit and special tax credits are not allowed.

 

C. Departure (Issue ④)

Provision	Content
ITA Art. 5(3)	When a resident moves their domicile or residence abroad ("departure") and becomes a non-resident, the tax year runs from January 1 to the day of departure.
ITA Art. 74(4)	A resident who is required to file and departs must file for the year of departure by the day before departure.
ITA Art. 74(5)	If departure falls between January 1 and May 31, the same day-before-departure deadline applies to the return for the previous year.
ITA Art. 137(1)	The employer performs the year-end settlement when paying the final month's salary to a retiring (departing) employee.

 

D. Flat tax rate for foreign employees (Issue ⑤)

Provision	Content
RSTA Art. 18-2(2)	A foreign employee (excluding daily workers) who first starts working in Korea by December 31, 2026 may elect to pay income tax at 19% of employment income for tax years ending within 20 years of the first day of work in Korea. Work for certain related-party employers (other than qualifying foreign-invested companies) is excluded.
RSTA Art. 18-2(3)	Under the flat rate, exemptions, deductions, reductions and credits under the ITA and the RSTA do not apply (except certain welfare-type benefits), and the income is not aggregated into the comprehensive income tax base.
RSTA Art. 18-2(4)·(5)	The employer may withhold at 19% monthly; the employee must apply as prescribed by Presidential Decree.

 

Status of the 2026 tax reform proposal (government bill, not yet enacted)

Item	Current Law	Government Bill
Flat rate	19%	21%
Deadline to first start work in Korea	Dec 31, 2026	Dec 31, 2029
Effective from	–	Income arising on or after Jan 1, 2027, including employees already using the flat rate

The bill was submitted to the National Assembly in early September 2026 and is under deliberation as of this writing. Its content may change before enactment.

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4. Tax Analysis

Key terms

• Year-end settlement (연말정산): the employer recalculates your annual tax in February — or in your final month of work — and refunds or collects the difference.
• Withholding (원천징수): tax the payer deducts from your salary and remits to the tax office on your behalf.
• Korean-source income (국내원천소득): income treated as arising in Korea, such as pay for work performed in Korea or rent from Korean property.
• Taxpayers' association (납세조합): an association through which employees paid from abroad can have Korean tax withheld during the year.

Case A. Ms. L, on an E-7 visa, works full-time for one Korean company on a three-year contract. She has no other income. Her employer completed the year-end settlement in February.
→ Direction: She is generally a resident from arrival, and in most cases no May filing is needed.

 

Case B. Mr. K is an expatriate seconded to Korea for two years. His salary is paid directly by the overseas parent company with no Korean withholding. He also receives rent from a flat abroad and sends part of it to his Korean account.
→ Direction: In most cases he must file in May. His salary falls outside the wage-only exemption, and the rent he remits to Korea is taxable.

A. Step 1 — Resident or non-resident? (Issue ①)

Everything else depends on this. You are a resident if you have a domicile in Korea or a residence here for 183 days or more (ITA Art. 1-2(1)1) — and the test is your actual living situation, not your nationality or visa.

 

The point most foreign employees miss is that residency usually does not wait for 183 days. If your job normally requires you to live in Korea continuously for 183 days or more — which describes a typical multi-year employment contract — you are deemed to have a domicile here (ITA Decree Art. 2(3)1), and residency generally starts when that condition arises, typically on arrival (ITA Decree Art. 2-2(1)2). The 183-day count (from the day after entry, and satisfiable continuously across two tax years) is the fallback test (ITA Decree Art. 4(1)·(3)).

 

Most readers of this post — employees working in Korea under a contract of a year or more — will therefore be residents, and Steps 2 and 3 apply to them. Genuinely short-term or split-country situations are fact-dependent and may also engage tax treaty tie-breaker rules; those cases need individual review.

B. Step 2 — How much of your income is in scope? (Issue ②)

Residents are taxed on worldwide income, with one important narrowing for newcomers. A foreign resident whose total Korean domicile or residence over the past 10 years is 5 years or less is taxed on foreign-source income only to the extent it is paid in Korea or remitted to Korea (proviso to ITA Art. 3(1)).

Two boundaries prevent the common mistakes:

• Salary for work performed in Korea is Korean-source income. It is fully taxable even if an overseas company pays it into an overseas account. The 5-year rule shelters genuinely foreign income, not your Korean earnings.
• The narrowing is temporary. Once your cumulative Korean years exceed 5 within the rolling 10-year window, foreign income becomes taxable whether or not you bring it in.

Non-residents, by contrast, are taxed only on Korean-source income (ITA Art. 3(2), Art. 119).

 

C. Step 3 — Do you need to file in May? (Issue ③)

Your Situation	May Filing
Salary from one Korean employer only, with year-end settlement	Generally not required (ITA Art. 73(1)1)
Salary + business, other (miscellaneous) or rental income	Generally required (ITA Art. 70(1))
Salary from two or more employers, not combined in year-end settlement	Generally required (ITA Art. 73(2))
Salary paid directly from abroad with no Korean withholding	Generally required, unless paid through a taxpayers' association (ITA Art. 73(3), Art. 127(1)4(b))
19% flat rate elected, salary is the only in come	Generally not required, as the salary is not aggregated (RSTA Art. 18-2(3))
19% flat rate elected + other income	Required for the other income; the flat-rate salary still stays outside the aggregated base
Non-resident	Only Korean-source income is taxable (ITA Art. 3(2)); the taxation method depends on whether there is a Korean permanent establishment (ITA Art. 121(2)·(3))

Three points need emphasis.

 

First, the wage-only exemption means "only". Even a small amount of rental or side income generally pulls you back into the May filing for the whole return (ITA Art. 70(1)). Under the 5-year rule, foreign income you did not remit is outside scope for the year — but any remitted portion counts as other income for this purpose.

 

Second, expatriates paid from abroad are the classic blind spot. If the overseas group company pays your salary directly and no one withholds Korean tax, the wage-only exemption does not apply (ITA Art. 73(3)). The choices are paying through a taxpayers' association during the year or filing in May. Where the salary cost is charged to the Korean branch or permanent establishment, ordinary withholding rules generally apply instead (proviso to ITA Art. 127(1)4(b)); which side of that line an arrangement falls on depends on the cost-bearing structure and needs individual review.

 

Third, changing jobs mid-year matters. If you worked for two employers in the year and the second employer's settlement did not combine the first employer's salary, the exemption is lost (ITA Art. 73(2)). Handing your new employer the previous employer's withholding receipt at year-end settlement avoids a separate May filing.

For non-residents, Korean-source employment income is computed and settled under the resident rules, but personal deductions for anyone other than the taxpayer, special income deductions, the child tax credit and special tax credits are not allowed (ITA Art. 126(5)). A non-resident with Korean rental income falls under aggregated taxation (ITA Art. 121(2)).

 

D. Step 4 — Leaving Korea this year? (Issue ④)

This is the step foreign employees miss most often.

When you move your base abroad and become a non-resident, your tax year ends on the day of departure (ITA Art. 5(3)). If you are required to file, the return for that short year is due by the day before departure, not the following May (ITA Art. 74(4)).

 

The rule catches those who must file. If your only income is salary from one employer, the employer settles your tax with your final paycheck (ITA Art. 137(1)), and a separate departure return is generally not needed. But if you have other income — or overseas-paid salary with no Korean withholding — the day-before-departure deadline is yours.

And if you depart between January 1 and May 31, the return for the previous year is also due by the day before departure (ITA Art. 74(5)). Someone leaving in March with rental income from last year cannot wait for May. Build the filing into your departure timeline the way you build in closing your lease.

 

E. The 19% flat rate, and the proposed 21% (Issue ⑤)

How the current rule works. A foreign employee who first starts work in Korea by December 31, 2026 can elect to pay 19% of gross employment income instead of the progressive rates (6–45%), for tax years ending within 20 years of the first day of work in Korea (RSTA Art. 18-2(2)). Local income tax is added on top. The trade-off: nearly all exemptions, deductions and credits are forfeited, and only certain welfare-type benefits remain exempt (RSTA Art. 18-2(3)). Because 19% applies to gross pay, the election generally favours higher earners; for middle incomes with dependants and deductible spending, the progressive rates are often lower. The comparison is worth running each year before year-end settlement.

To use it, an application is required as prescribed by the Enforcement Decree of the RSTA (RSTA Art. 18-2(5)), and the employer may withhold monthly at 19% (RSTA Art. 18-2(4)).

 

Effect on the filing decision. The flat rate does not by itself remove filing obligations. It takes the salary out of the aggregated tax base (RSTA Art. 18-2(3)) — so with salary as your only income, no May filing is generally needed. But other income still triggers its own May return; the flat-rate salary simply stays outside it.

 

The proposed change. The government's 2026 tax reform bill would raise the flat rate to 21%, extend the start-of-work deadline to December 31, 2029, and apply from income arising on or after January 1, 2027 — including employees already on the flat rate. This is a government bill before the National Assembly, not enacted law, and its content may change; the confirmed outcome will be covered in a follow-up post. Two practical implications if it passes as proposed: employees arriving in 2027 or later depend on the extension for access to the regime at all, and from 2027 income the 2-point increase narrows the flat rate's advantage, so current users should rerun the comparison at the next year-end settlement.

F. Practical management

For foreign employees

• Confirm your residency start date and, if you have foreign income, track your cumulative Korean years within the rolling 10-year window.
• List all income sources each year — overseas rent, interest, side work — and keep records of any amounts remitted to Korea.
• If you plan to leave, determine before booking whether you are required to file; if so, the deadline is the day before departure, and a January-to-May departure adds the prior year's return.
• Compare the flat rate against the progressive rates before each year-end settlement, especially with the proposed rate change pending.

For HR and payroll staff at companies employing foreigners

• For mid-year hires, collect the previous employer's withholding receipt and combine it in the year-end settlement; otherwise the employee generally must file in May.
• For departing employees, complete the settlement with the final month's pay, and remind them that other income may create a filing obligation due before departure.
• For secondees paid from overseas, establish who bears the salary cost — it determines whether Korean withholding applies or the employee must use a taxpayers' association or file directly.
• Manage flat-rate applications and the monthly withholding rate, and monitor the 2026 bill: if enacted, payroll withholding for flat-rate employees changes from January 2027.

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5. Conclusion

In principle, a foreign employee whose only income is salary from one Korean employer, settled through year-end settlement, generally does not need to file a May return.

 

However, the exemption generally does not apply in the following cases:

• you have other income — business, rental, other income, or foreign income that is within your taxable scope
• you received salary from two or more employers without a combined year-end settlement
• your salary is paid directly from abroad with no Korean withholding and no taxpayers' association
• you are leaving Korea and are required to file — in which case the deadline moves to the day before departure, and a January-to-May departure also accelerates the prior year's return

On the mitigating side, foreign residents with 5 years or less in Korea are taxed on foreign income only to the extent paid in or remitted to Korea, and the flat-rate election can simplify and sometimes lower the tax on salary itself.

 

The May question is answered in order: residency, scope, income mix, departure — nationality never enters the test.

 

If you have overseas income, salary paid from abroad, or a departure planned this year, we recommend reviewing your position before the relevant deadline. Consultations in English are available.

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※ Disclaimer

This post is written to provide general tax information and is not tax advice on any specific matter. Actual tax treatment may vary depending on individual facts, changes in legislation, and the interpretations of the tax authorities. Please consult a professional before making any important decision. The author accepts no responsibility for any consequences arising from reliance on this post.