The flat special tax rate of 20.1% (19% of national tax + 1.9% local tax) is only applicable to foreign nationals employeed in Korea according to Special Tax Ristriction Law. The purpose of the special rate is to attract competent foreign employees into Korea as far as possible by simplifying their procedures of fulfiling tax obligation. It indeed simplifies the procedures a lot. However, that does not necessarily mean the special rate reduces every foreign nationals' tax burdens in Korea. It is more likely to increase their tax burdens.
The trick is this. If a foreign national chooses to apply the special rate, he or she is no longer eligible to various other tax deductions, exemptions and tax credits. Regardless of a taxpayer's nationality, if the taxpayer has stayed more than 6 months in Korea, the taxpayer is treated as a Korean resident for tax purposes. Thus, they may reduce their tax burdens by applying all kinds of tax deductions and credits sucsh family deductions, credit card deduction, housing rent deductions, heath care deductions, education deduction and etc.
However, the taxpayer loses the previliage of using the tax deductions, exemptions and credits if he or she chooses to apply the special rate of 20.1%. Generally, a foreign national's annual salary has to be over KRW 200 million to benefit from the special rate. It is quite high salary level in Korea or everywhere.
Thus, before determining to apply the special rate, it is highly advised to have your tax professionals look into details.
*Please note that the foreign nationals here are different from the term "non-residents". It literally means those who have foreign nationality as of the end of tax years. Thus, they can be either tax residents or tax nonresidents.
Source : knkcpaoffice.com
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