Starting This Year, Foreign Workers Also Eligible for "Housing Savings Income Deduction"

National Tax Service Provides Year-End Tax Settlement Guidance for Foreign Workers

Starting this year, foreign workers will also be eligible for income tax deductions on housing savings. On January 7, the National Tax Service announced that it would provide guidance on the "2025 Year-End Tax Settlement Schedule and Procedures" for 700,000 foreign workers who need to complete their year-end tax settlement in February this year.

The year-end tax settlement schedule and procedures for foreign workers are the same as those for Korean workers. If a company using the "Batch Provision Service" for simplified year-end settlement data registers the list of eligible employees with Hometax by the 10th of this month, it will be able to download the simplified data in bulk for employees who have agreed to data provision by the 15th of this month.

If a foreign worker is considered a resident in Korea (an individual who has an address or has resided in Korea for at least 183 days), the deduction items and tax calculation methods for the year-end settlement are the same as those for Korean nationals. However, the requirements for income deductions and tax incentives such as ▲housing savings income deduction ▲foreign engineer tax reduction ▲flat tax rate for foreigners ▲income tax exemption for foreign teachers are different.

First, starting this year, foreign workers are eligible for income tax deductions on housing savings. Previously, only the "head of household" could receive this deduction, so foreigners who could not become a head of household under the Resident Registration Act were not eligible. However, as the deduction has been expanded to include the spouse of the head of household, foreigners who meet certain requirements are now eligible. If a foreign worker is a resident in Korea with total annual salary of 70 million won or less and is the spouse of a head of household who does not own a home, they can deduct 40% (up to 3 million won per year) of the amount paid into a housing savings account in 2025 from their taxable income.

Foreign engineers who meet certain requirements can receive an income tax reduction. If a foreign worker provides technology under an engineering technology introduction contract, or holds at least a bachelor's degree in science or engineering and has overseas R&D experience, they can receive a 50% reduction in income tax on employment income earned over 10 years. If they work at specialized leading companies, they receive a 70% reduction in income tax for the first three years.

Foreign workers can choose to apply a flat 19% tax rate instead of the basic tax rate. Except in cases where they work for a related party company, foreign workers can choose between the flat 19% tax rate and the basic comprehensive income tax rate for up to 20 years from the tax year in which they first provide services in Korea.

Native-speaking teachers can be exempt from income tax under tax treaties. If the tax treaty between Korea and the teacher's home country includes a teacher (professor) exemption clause, native-speaking teachers can be exempt from income tax on lecture and research-related income, provided they meet the exemption requirements specified in the treaty. However, as the specific exemption requirements vary by tax treaty, it is necessary to check the original text of the relevant treaty.

The National Tax Service offers a variety of services to ensure that foreign workers who are not familiar with the Korean language or tax laws can complete their year-end tax settlement easily and accurately. Foreign workers can access information on year-end tax settlement in foreign languages through the English-language year-end settlement guidebook and manuals (available in English, Chinese, and Vietnamese) posted on the National Tax Service's English website. In addition, individual counseling on year-end tax settlement is available through a dedicated English-language helpline for foreigners.

National Tax Service Commissioner Lim Gwanghyun stated, "We will continue to actively improve our guidance services so that foreign workers can complete their year-end tax settlement more easily and accurately."