Foreign Workers 580,000 Under Year-End Tax Settlement... Average Annual Salary 27.32 Million Won

[Sejong=Asia Economy Reporter Kim Hyunjung] The average annual salary of about 580,000 foreign workers who filed year-end tax settlements last year was estimated to be around 27 million KRW.

According to the National Tax Service on the 21st, 583,482 foreign workers filed year-end tax settlements for the 2019 tax year, and the income tax (final tax amount) they paid was 904.3 billion KRW. Their average annual salary (total wages and taxable income) was 27.32 million KRW, which is about 73% of the average for all workers who filed year-end tax settlements (37.44 million KRW). Among foreign workers, the top 10% earned an average of 86.01 million KRW, about 30 million KRW less than the top 10% of all workers (116.43 million KRW).

By country of origin, China (212,032 people) accounted for 36% of the total, the largest share, followed by Vietnam (46,465), Nepal (34,985), Indonesia (29,276), the Philippines (28,687), and Thailand (24,525). Outside of Asia, the United States (24,080) had a significant number. As of 2019, there were 860,000 foreign workers, of whom 330,000 were temporary or daily workers and not subject to year-end tax settlement.

Foreign workers must file year-end tax settlements on their earned income by the end of February regardless of their length of stay, and the deduction items and tax calculation methods are the same as for Koreans. However, since they are not household heads or members under the Resident Registration Act, they cannot receive benefits such as housing fund income deduction, monthly rent tax credit, or housing subscription savings income deduction. However, from next year (for the 2021 tax year), the law has been amended so that most foreign workers can receive housing-related deductions.

For the first five years from the year they start working in Korea, foreign workers can choose a flat tax rate by multiplying 19% by their annual total salary (including non-taxable income). Also, if they meet certain conditions such as providing technology under an engineering technology introduction contract or working as researchers in foreign-invested companies, they can receive a 50% reduction in calculated earned income tax for five years.

According to measures to strengthen competitiveness in materials, parts, and equipment (SoBuJang), foreign technicians in this field who started working in Korea after January last year receive a 70% tax reduction for the first three years and a 50% reduction for the following two years. Reference materials helpful for foreign workers’ year-end tax settlements, such as the "Year-end Tax Settlement Foreign Language Manual," are available on the National Tax Service’s English website and can also be viewed in Chinese and Vietnamese. This year, a video titled "Understanding Year-end Tax Settlement for Foreigners" was produced in English and released on the National Tax Service’s YouTube channel.