3.3% is not a tax — two people split in May, a ₩297,000 refund and a ₩1,336,500 bill

3.3%. Anyone who has been paid as a freelancer knows the number. Earn ₩1M and ₩33,000 is taken off; ₩967,000 lands in your account. Now take two people who both had the same 3.3% withheld. One got ₩297,000 back in May; the other paid ₩1,336,500 more. The rates were not different and nobody made a mistake. There is one reason: 3.3% is not a tax.

The 3.3% is money paid in advance, closer to a deposit than a tax. The real tax is set the following May. If the advance exceeds the real tax you get a refund, and if it falls short you pay the difference. Between the two sit five steps: what 3.3% is, how the real tax is set, why May splits people, what happens if the rate falls, and what happens if you don't file.

The 3% is written into Income Tax Act Art. 129(1)3: for business income subject to withholding, 3 percent. Local Tax Act Art. 103-13 adds 10 percent of the withheld income tax as local income tax, which is 0.3%, so together 3.3%. It applies to personal services (lecturing, design, translation, delivery, insurance sales) and to medical and health services (VAT Act Art. 26(1) items 5 and 15). What matters is not the rate but what the 3% is multiplied by: everything you were paid. No expenses, no deductions. Earn ₩1M and the 3% is applied to ₩1M, whatever it cost you to earn it. No tax is levied like that, because it is not a tax. The Act calls it withholding, collecting in advance.

The real tax is set on income, which is revenue minus expenses. Revenue and income are different words. Follow someone earning ₩30M a year (the calculator's default). At a 60% expense ratio, expenses are ₩18M and income is ₩12M. Subtract the basic deduction of ₩1.5M per person (Income Tax Act Art. 50) and the tax base is ₩10.5M. The rate applies to this base, not to revenue. Up to ₩14M the rate is 6%, so ₩630,000, plus ₩63,000 local income tax: ₩693,000. That is the real tax. With no expenses deducted at all, the same ₩30M would carry about 5 times the tax (4.8×). Expense ratios are set by the tax office per industry and change every year, so check yours on Hometax.

Now put the two numbers side by side. Withheld: 3.3% of ₩30M, ₩990,000. Real tax: ₩693,000. ₩297,000 comes back in May. The second person earns ₩60M at a 50% expense ratio. Expenses of ₩30M leave ₩30M of income; the basic deduction leaves a tax base of ₩28.5M. That clears ₩14M and moves into the 15% bracket, giving ₩3,015,000, or ₩3,316,500 with local income tax. Withheld was 3.3% of ₩60M, ₩1.98M, so ₩1,336,500 is short and paid in May. If 3.3% is above your real rate you get money back; if it is below, you pay more. Low revenue and high expenses mean refunds; as earnings grow, May brings a bill. Nothing went wrong. The advance rate simply differs from your rate.

There is talk of cutting the rate to 2%, 2.2% with local income tax. It is in the government's tax reform proposal of August 3, 2026, and it is not law. Today Income Tax Act Art. 129 says 3 percent, and every already-promulgated future version says 3 percent too. The government submitted the bill to the National Assembly on September 3 and it was referred to the Economy and Finance Committee on September 4; as of September 7, 2026 it has not passed. Nor is it a cut for everyone: foreign professional athletes stay at 20%, personal-service earners who settle through year-end adjustment (insurance or door-to-door sales with only that income) stay at 3%, and only other personal services would fall. Assume it passed: the first person's advance drops from ₩990,000 to ₩660,000, but the real tax stays ₩693,000, because what changed is the advance rate, not the rule that sets the tax. So the person who got ₩297,000 back now owes ₩33,000, and the second person's ₩1,336,500 becomes ₩1,996,500. The year's tax does not move by a won; only when you pay it does.

The refund does not come by itself. Income Tax Act Art. 70 says to file during May of the following year, and in parentheses it adds: including residents with no comprehensive income tax base or with a loss. That means file even if there is nothing to pay. Filing is what reconciles the advance against the real tax; skip it and the first person's ₩297,000 stays where it is. Miss May and there is still a route: the late filing under Framework Act on National Taxes Art. 45-3, available until the tax office determines and notifies the amount. If all you have is a refund, filing late draws no penalty, since penalties apply when tax was owed and not filed.

Two things to do now: add up everything you were paid this year (withholding receipts or the payment statements on Hometax), and check your industry's expense ratio. With those two, whether you get money back or pay more next May is settled today. This covers only the typical case. It changes with business registration, VAT status, and other income such as wages, and expense ratios vary by industry and year. If a large sum is at stake, have a tax adviser confirm.