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Employing in South Korea

At a glance

Employment in South Korea

Employment laws in the Republic of Korea (ROK) could be complex and confusing at first sight, although there are many similarities with other developed countries. In general, different rules will apply depending on the type of business structure and number of workers employed by the company that is planning to hire or sponsor new employees.

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Payroll & Tax in South Korea

Payroll and taxation in South Korea will typically depend on the business model of the company and number of employees. Among the primary concerns for a foreign company operating or incorporating in the Republic of Korea could be individual income tax for employees, health insurance contributions and social security costs, payroll tax, sales tax and withholding tax.

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Immigration / Work Permits in South Korea

There is a multitude of visas available for people who intend to work in South Korea, ranging from short-stay of up to 90 days to long-term visas for the period of up to 3 years (issued to professionals with special ability required by the South Korean government).

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Incorporation

Companies incorporating in South Korea will have to consider certain business factors, such as the industry and type of business they are planning to operate, nationality of the headquarters or individuals (both managers and workers) and presence of existing trade agreements and relationships between their country of origin and South Korea. Generally, there are three types of business structure available to them: Company, Foreign Branch and Liaison Office.

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GEO Solutions or DIY Employment in South Korea?

Companies entering South Korea must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO pr South Korea Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a South Korean entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated entity ready to run payroll. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in South Korea

Payroll South Korea
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

 
Grossed income Tax Rate (%)
KRW0 - KRW12,000,000 6% + 0.6% (local income tax)
KRW12,000,001 - KRW46,000,000 15% + 1.5%
KRW46,000,001 - KRW88,000,000 24% + 2.4%
KRW88,000,001 - KRW150,000,000 35% + 3.5%
Above KRW150,000,000 38% + 3.8%
Tax Returns Supplied

If required

Corporate Tax Requirements

A tax year for companies is usually coincides with their accounting period specified in the articles of incorporation. This normally is a 12-month period and cannot be longer than that.

 

There is a self-assessment system in South Korea. Advance tax must be paid for the first six months of the business year if the year is longer than six months. This is based on 50% of the previous year’s tax liability or the actual financial performance for the six-month period.

Employers Social Security and statutory contributions

Both the employer and the employee pay the following social security contributions that are based on the gross income of employees: national pension, unemployment insurance and medical insurance premiums. They contribute 4.5% of the monthly salary to the national pension fund. The employer and employee also contribute 2.945% and 0.55% of the average monthly wage as a national medical insurance premium and an unemployment insurance premium, respectively. In addition to the unemployment insurance, the employer contributes an insurance premium, which varies from 0.25% to 0.85% of an employee’s average monthly wage based on the number of employees. The long-term care insurance contribution is imposed on the national medical insurance premium at a 6.55% rate.

 

The maximum amounts of the national medical insurance premium  and national pension premium are KRW 4,901,380 and KRW 350,100, respectively, including both the employee and the employer’s portion.

 

Employees Social Security and statutory contributions

See above

Corporate Income Tax Rate

First KRW 200,000,000 of taxable income = 10% tax rate;

Income in the KRW 200,000,000 – KRW 20 billion is taxed at 20%;

22% tax rate applies to all the income above KRW 20 billion.

 

There is also a local income surtax of 10% that applies to corporate income before tax credit and exemptions. Losses could be carried forward for a period of time up to 10 years. Small and medium businesses in some cases are allowed to carry losses back for one year.

Payroll Tax

The employer typically withholds tax on employees’ salary (at rates that range from 6.6% to 41.8%) on a monthly basis. A year-end payroll tax settlement is filed in the following year.

Sales Tax

Value Added Tax of 10% is imposed on the supply of goods and provision of services. There is a zero rate that applies to exports and services rendered outside Korea.

Withholding Tax

Dividends, royalties and interest on regular loan paid to nonresident individuals or companies are taxed at a 22% rate (includes the local surtax), unless there is a treaty that reduces this rate. The same tax rate is usually imposed on services provided by a nonresident companies (or individuals). Interest on bonds is, however, subject to a 15.4% withholding tax. Technical service fees maybe classified as royalties in some cases.

Other Tax

When a company purchases real estate,heavy equipment, motor vehicles and other items it has to pay acquisition tax of 4.6% (including the local surtax).

 

There is also a capital registration tax of 0.48% (with the local surtax), which is levied when a company registers its incorporation or capital increase with the court registry. This tax rate for a company incorporated in the Seoul Metropolitan Area would be higher, at a rate of 1.44%.

Work Permits
Can Sponsor Work

Yes

Work Permit cost

$4250 USD

Work Permit processing time

2-4 weeks

Can Work Permit be processed in country

Yes

Switch Business Visa to Work Permit?

Yes but nationality dependent

Business Visas
Can do Business Visa

Yes, for non-visa exempt nationals. All non-visa exempt nationals require a C3-4 Business Visa.

Business Visa Cost

$500 USD

Business Visa processing time

5-7 days

Others
Can supply private health care

Yes

Can assist opening bank accounts

Yes

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