Korean Year-End Tax Settlement Calculator

Employees have income tax taken out of every pay packet, but the monthly amount is only a rough estimate from a simplified withholding table. Once the year ends, the real tax is computed precisely from a full year of salary and deductions, and the difference from what was already paid is refunded or collected. That is the year-end settlement. Enter your annual gross salary, the number of people in your basic deduction, your other income deductions, your tax credits, and the income tax withheld during the year, and this calculator works out your final tax and tells you whether you get money back or owe more.

The skeleton of the calculation, the earned income deduction, personal deductions, progressive rates and the earned income tax credit, is computed exactly as the statute sets it out. Special deductions such as card spending, medical costs, education and donations each have their own conditions and ceilings, so you enter their total yourself, taking the figures from the Hometax year-end preview.

Employees who want to know the outcome before handing in their settlement documents in January. Knowing the rough refund or extra payment before the employer runs the numbers lets you plan February's pay. It also works the other way round: once the result comes back, enter the figures from your withholding statement and the calculator should reproduce it.

It is also handy for seeing what one more deduction is worth. Add a dependant, or put more into a pension account, and watch how much the final tax falls. Foreign employees settle in the same way if they have earned income, and this page shows what the ordinary settlement comes to as an alternative to electing the flat rate.

The first step is the earned income deduction under 소득세법 제47조제1항, set by salary band with a higher percentage for lower pay. Up to ₩5 million the deduction is 70% of salary; the rate falls band by band, so that above ₩100 million it is ₩12 million plus 5% of the excess, and in the top band only 2% of the excess is added. The deduction is capped at ₩20 million. Gross salary minus this deduction is your earned income amount.

Second come income deductions. The basic deduction under 소득세법 제50조제1항 is ₩1,500,000 for yourself and each dependant, and to it you add other income deductions such as social insurance contributions, housing and card spending; the total comes off the earned income amount to leave the tax base. Third is the computed tax. The progressive rates in 소득세법 제55조제1항 are applied by multiplying the tax base by the rate for its bracket and subtracting the bracket's progressive deduction.

Fourth are tax credits. The earned income tax credit under 소득세법 제59조제1항 is 55% of computed tax up to ₩1.3 million and 30% of the rest, but 제2항 of the same Article lowers the ceiling as salary rises, so most people receive only the ceiling. Subtract that and your other credits for medical costs, education, donations, pension accounts and children, and you have the final tax. Local income tax of 10% is added on top, and the tax already withheld is compared on the same basis, local tax included. If the total final tax exceeds what was withheld you pay the difference; if it is less, you get a refund.

Take a single person on a gross salary of ₩50 million, with ₩4 million of income deductions for social insurance and the like, and ₩2.5 million of income tax withheld during the year. The earned income deduction is ₩12 million plus 5% of the ₩5 million above ₩45 million, or ₩12.25 million, leaving earned income of ₩37.75 million. Subtracting the ₩1,500,000 basic deduction and the ₩4 million gives a tax base of ₩32.25 million. That falls in the 15% bracket: ₩32.25 million times 15% less the ₩1,260,000 progressive deduction is computed tax of ₩3,577,500. The earned income tax credit would be larger by formula but hits the ₩660,000 ceiling for a ₩50 million salary, so the final tax is ₩2,917,500. Adding ₩291,750 of local income tax gives ₩3,209,250, while the tax already paid, ₩2.5 million plus its local tax, is ₩2,750,000. The result is ₩459,250 more to pay.

Now give the same person two dependants, making three in the basic deduction, and ₩1 million of tax credits. The basic deduction rises to ₩4,500,000, the tax base drops to ₩29.25 million and computed tax to ₩3,127,500. After the ₩660,000 earned income credit and the ₩1 million of other credits, the final tax is ₩1,467,500, or ₩1,614,250 with local tax. Against ₩2,750,000 already paid, that is a refund of ₩1,135,750. Same salary, and deductions alone turn an extra payment into a refund.

The most common error is entering your headline annual salary as gross salary. Gross salary excludes tax-free items such as meal allowances and is smaller than your contract figure; use the gross salary on your withholding statement. The second is entering tax withheld with local income tax included. This calculator takes income tax alone and adds the local tax itself, so entering the combined figure overstates the refund.

The third is mixing up income deductions and tax credits. An income deduction reduces the tax base, so it saves only the tax rate's share; a tax credit comes straight off the tax. The same ₩1 million behaves very differently, so each belongs in its own field. The fourth is expecting the full earned income tax credit by formula. The ceiling falls as salary rises, and most people receive only the ceiling amount. Finally, this calculator assumes one job and earned income only. If you changed jobs mid-year, the previous employer's income must be combined, and if you also have freelance income, you must file a comprehensive income tax return in May.