Korean Interim Income Tax Prepayment Calculator

Anyone with business income in Korea receives an interim prepayment notice every November, demanding half of last year's global income tax in advance. Enter last year's tax (the interim prepayment base) and this calculator shows the amount that will be billed. Enter this year's January-to-June income, deductions and tax already withheld, and it works out the estimated amount based on this year's results, whether you may file that estimate in place of the notice, and how much that would save. Where the tax is large, it also shows how much can be deferred in instalments.

The essential point is that the notice is based on last year. Even if business has collapsed this year, the figure arrives unchanged. The remedy is an estimate filing, but it has a threshold and is not open to everyone. This calculator shows, in won, how far you are from clearing it.

Sole traders and freelancers who paid global income tax last year, when the notice arrives between November 1 and 15. Since the billed amount depends only on last year's tax, it is also useful in summer for setting the cash aside before the notice comes.

It matters most to anyone whose revenue has dropped sharply this year. If you are winding down the business, lost a major client, or were off sick for months, the tax on your first-half results may be a fraction of last year's. Many people, unaware of this rule, pay money they do not have and wait until the following May to get it back. That is why tax advisers are flooded with calls every November.

소득세법 제65조제1항 sets the interim prepayment at half the prepayment base, rounded down to the thousand won, payable by November 30. Under 제86조제4호 nothing is collected if the amount is under ₩500,000. 제65조제3항 allows you to file an estimate based on this year's first-half results instead, provided the estimate falls short of 30% of the base, and 제8항 lays down how the estimate is calculated. 제77조 and 시행령 제140조 permit payment in instalments within 2 months when the tax exceeds ₩10,000,000.

The estimate works like this. Double the January-to-June global income to annualise it, subtract carried-forward losses and global income deductions to get a tax base, and apply the progressive rates in 제55조. Applying the rates directly to six months of income would land in too low a bracket, so the doubling is essential. Halve the resulting tax and subtract tax already withheld and tax credits for the first half, and that is the estimate. If it is less than 30% of the base, you may file it, and you then pay the estimate instead of the billed amount. For instalments, an amount up to ₩20,000,000 lets you defer the portion above ₩10,000,000; above ₩20,000,000 you may defer half.

Take someone who paid ₩10 million of global income tax last year. The interim prepayment billed is half of that, ₩5 million. If this year's January-to-June income is ₩10 million with ₩2 million of deductions, the annualised income is ₩20 million, the tax base after deductions is ₩18 million, and the tax at the progressive rates is ₩1.44 million. Half of that, ₩720,000, is the estimate.

Because ₩720,000 is below 30% of the base, which is ₩3 million, the estimate may be filed, and paying ₩720,000 instead of ₩5 million saves ₩4.28 million. Had first-half income been only ₩3 million, the estimate would be ₩120,000, under the ₩500,000 floor, so nothing would be collected and the full ₩5 million would be saved. In neither case does the tax exceed ₩10,000,000, so instalments do not arise.

The most common is paying the notice simply because it arrived. If this year is going badly, check first whether a filing can cut it. The second is the opposite: assuming that an estimate slightly below the billed amount can be filed. The estimate must fall below 30% of the base, so a drop of half is not enough. That is why the calculator shows the distance to the threshold.

The third is applying the rates straight to six months of income. The statute requires doubling to a full year, applying the rates, then halving. Reversing the order lands in a lower bracket, understates the estimate, and creates a false belief that a filing is available. The fourth is entering revenue in the income field. Income means revenue less necessary expenses. Finally, the interim prepayment is not a final tax but an advance. Whatever you pay here is deducted as prepaid tax in the following May's annual return, so it is settled in the end.