2026 Foreign Worker Year-End Tax Settlement Guide: Receive Your 13th Month's Pay! Utilize the Simplified Year-End Tax Settlement Service and Learn About Tax Benefits
Hello, this is JOBPLOY, a foreign recruitment platform. The 2026 year-end tax settlement season is upon us. For foreign workers working in Korea, the year-end tax settlement process can feel unfamiliar and complicated. However, it's a crucial step that, if followed carefully, can lead to a refund, often referred to as the "13th month's salary." Based on the latest information from the National Tax Service (hometax.go.kr), we've compiled information on year-end tax settlement methods for foreign workers and how to use simplified services. What is year-end tax settlement? Year-end tax settlement is a process of comparing the taxes withheld from your salary throughout the year (withholding tax) with the exact taxes you actually have to pay and calculating the difference. Refund: When the tax paid is more than the actual tax amount (you get money back) Additional Payment: When the tax paid is less than the actual tax amount (you have to pay more money) All income is subject to income tax. If you only have earned income, your company automatically deducts it when you pay your salary, so you don't need to worry about it. If you have other income (side jobs, real estate income, etc.), you must file a separate comprehensive income tax return. In this case, you probably already know this even without reading this article, so this post will focus on employment income. Every company pays a separate income tax on salaries paid. Tax rates can be 80%, 100%, or 120%. If foreign worker A receives a monthly salary of 5 million won, the income tax below will be withheld at source according to the tax rate. (The salary after deducting this withheld tax is referred to as the after-tax amount.) Select your tax rate in advance Monthly withholding tax (income tax + local income tax) 80% 295,200 won 100% 369,010 won 120% 442,810 won This amount is based on the standard for one dependent (the applicant), and may differ slightly from the amount on the actual payslip depending on deduction items such as health insurance premiums. A high advance tax rate means higher monthly withholding taxes. However, this isn't necessarily a bad thing. Employees can receive a full refund of prepaid taxes through the year-end tax settlement, which varies depending on company policy and doesn't result in any losses to employees. In the above case, if the total earned income is 5 million won per month and 60 million won per year, and 100% of the income was paid, the annual income tax would be approximately 4.4 million won. Year-end tax settlement begins here. If I spend 20 million won on "income deductions" (credit card payments, insurance premiums, etc.), the government acknowledges, "Mr. A earned 60 million won, but spent 20 million won on necessary matters, so we'll recalculate taxes on only 40 million won." If the recalculated tax (final tax amount) is 1.9 million won, you can receive a refund of 2.52 million won, which is the amount you already paid (4.4 million won withholding tax) minus the actual amount you owe (1.9 million won) (final tax amount). The above is a fairly extreme example, and it is not easy for the actual income deduction to reach 20 million won. This is because the total amount used is not deductible, and the maximum deductible amount is different for each item. Let's take credit cards, one of the easiest items to claim a tax deduction for. Even if you spent 20 million won on your credit card last year, the maximum credit card deduction is only 2.5 to 3 million won, depending on your salary (the maximum amount may vary depending on the number of children). Also, please note that credit card usage only becomes eligible for deductions after it exceeds 25% of your total salary. It is very difficult for an individual to accurately calculate this amount because the detailed deduction items are different for each individual and vary greatly depending on the individual's salary, number of dependents, etc. Fortunately, in Korea, you can extract all your income deduction items at once through the simplified year-end tax settlement service, and if you submit it to your company, the amount will be automatically calculated, so you don't have to worry too much and just understand the concept. There's a 19% flat tax rate system that applies only to foreigners. Under this rate, deductions through year-end tax settlement are virtually impossible. However, since the income tax rate is fixed at 19%, for high-income earners earning over 100 million won, who fall into the progressive tax brackets of 40-50%, choosing the 19% flat tax rate can be significantly more advantageous. 👉🏻 Comparison of the 19% flat vs. progressive income tax rates for foreign workers Submit documents according to company guidelines The year-end tax settlement is basically carried out by having the employee submit relevant documents to the company, which then reports them to the National Tax Service. Check your company's notice: Each company uses a different system (either its own ERP or the National Tax Service's "Convenient Year-End Settlement") and has different submission deadlines, so please check with your HR team first. Check deduction items: Check whether you are eligible for deductions such as dependent deduction, insurance premiums, medical expenses, education expenses, and credit card usage. Utilize the simplified service: Most expenditure details can be downloaded at once through the 'Year-end Settlement Simplification Service' provided by the National Tax Service's Hometax. How to Use the Simplified Year-End Tax Settlement Service (PDF Download) This is the most important step: how to use the simplified service. Please follow the steps below. [STEP 1] Log in to the National Tax Service's Hometax Year-End Settlement Simplification Service (If the link doesn't work, search for the Year-End Settlement Simplification Service on Google). Enter your name and resident registration number (alien registration number) and select the simple authentication button (joint or financial authentication is also possible, but simple authentication is more convenient since many foreign workers do not have financial authentication certificates) [STEP2] Select authentication method You may have previously obtained certification to live in Korea. Please select a private, simple authentication method to verify your identity. Please enter your name, date of birth, and mobile phone number and check the Agree to All button. When you click the authentication request button, follow-up authentication will be performed according to each simple authentication method. [STEP3] Start Simplifying Year-End Tax Settlement This is a checkbox indicating your agreement to the above and consent to view the simplified materials. Please check it. Please agree and select the Start Simplified Year-End Settlement button. [STEP4] Check 2025 Income Deduction Data The 2026 year-end tax settlement will cover income/tax deductions for 2025 expenses. Please select all months in 2025 (the default is all months in 2025, so you don't need to change it). Please click the button to search all at once [STEP 5] Check your 2025 income deduction data Below, the 2025 usage amounts for each item are listed. Based on these amounts, each company's accounting team or labor law firm calculates the deduction amount. Select the Download button. [STEP6] Select PDF Download A modal will pop up for final confirmation. You can uncheck any items you don't want to generate as a PDF, but it's definitely better to submit everything, so just click the Download button without touching anything else. [STEP7] Download PDF Now that all the submission PDFs have been totaled, you can confirm the amount and submit these documents to the company. Conclusion: Don't forget to prepare in advance! The year-end tax settlement for 2025 is usually conducted from mid-January to the end of February 2026. Failure to submit documents by the deadline will result in the hassle of having to file a tax correction yourself later, so please adhere to the deadline set by your company. Thorough preparation will determine your valuable tax benefits. Frequently Asked Questions (FAQ) about Year-End Tax Settlement for Foreigners Q1. What is the difference between income deduction and tax deduction? Income deductions: These are deductions that reduce the amount (income) that is the basis for taxation. (Examples: personal deductions, credit card usage, homeownership savings) Tax deduction: A deduction of a certain amount directly from the calculated tax (e.g., monthly rent tax deduction, health insurance premium deduction, medical expenses, education expenses) Expert tip: Income deductions are more beneficial the higher your tax bracket, while tax credits directly reduce the amount of tax you pay, so they have a greater impact. Q2. What are the advantages of choosing the 19% single tax rate? Foreign workers can choose to be subject to a 19% flat tax rate for 20 years from the date they first worked in Korea. Note: If you choose a single tax rate, you will not receive any income deductions, tax credits, or tax exemptions. Who benefits? It's usually beneficial to high-income earners, who typically earn very high salaries and are subject to the standard tax rate (up to 45%) . For those with a typical salary, it's often more beneficial to apply the standard tax rate and claim deductions. Q3. Can family members living abroad also receive personal deductions? Yes, you can! However, you need proof that you are actually supporting the person. Required Documents: Proof of Family Relationship issued by the relevant country (notarized and translated required) and remittance receipts showing you have sent living expenses to your family. (However, your dependents' annual income must be less than 1 million won.) Q4. Can foreigners receive rent or housing loan deductions? As of 2026: Previously limited, foreign workers who are residents can now receive a housing savings tax deduction and a monthly rent tax deduction if they meet certain requirements (e.g., total salary of 70 million won or less, household head without a home), etc. Even if they aren't registered on the resident registration, they can still receive the deduction if their actual residency is confirmed, so be sure to check it out! Q5. Are credit card payments and medical expenses used overseas also deductible? No, they are not deductible. Year-end tax deductions generally only apply to expenses incurred within Korea. Credit card payments made overseas or payments made to overseas medical institutions are not deductible.
