The year-end tax settlement is a system that recalculates and finalizes the income tax you paid over the course of a year.
All employees working in Korea prepay income tax when they receive their monthly salary—this is called withholding tax. The company compares the total tax withheld throughout the year with the final tax amount determined through the year-end tax settlement. If the employee paid too much, the difference is refunded; if the employee paid too little, the shortfall is additionally deducted from wages.
The tax withheld by the company each month is only an estimated amount. In reality, it does not reflect various items that affect tax, such as employment period, marriage and childbirth, changes in family circumstances, medical expenses, education expenses, and credit card spending. Through the year-end tax settlement, all of these items can be reflected to calculate the accurate tax amount.
Let’s look at the difference between the two systems that many foreigners often confuse. Basically, both systems are the same in that they calculate and report the accurate income tax on the income you earned, but the filing method is determined depending on the type of work/income and individual circumstances.
In general, it is a principle that the year-end tax settlement is handled by the company. However, if for any reason the company does not process the year-end tax settlement, you must file a comprehensive income tax return yourself.
Year-end tax settlement | Comprehensive income tax filing |
* The company proceeds on behalf of the employee * For office workers/part-time workers who have only employment income * Timing: Every year, January–February * You only need to submit documents to the company | * You file directly with the tax office * For part-time work (3.3% withheld), freelancers (3.3% withheld), business owners, or those with income from multiple places * Timing: Every year, May * You file directly via the National Tax Service (NTS) Hometax |
Rather than the work arrangement, what matters is whether your income is employment income or business income (3.3% withheld).
Work type | Subject to year-end tax settlement | Notes |
Regular employee | ✅ YES | The company processes the year-end tax settlement. The employee only submits deduction documents to the company. |
Contract employee | ✅ YES | The company processes the year-end tax settlement. Even if the contract period is less than 1 year, you are subject to it. |
Part-time (employment income earner) | ✅ YES | In principle, the company processes it. Applies when it is an employment contract, not the 3.3% withholding type. |
Part-time (business income earner) | ❌ NO | When wages are paid after 3.3% withholding. |
Freelancer | ❌ NO | 3.3% withholding. Applies regardless of business registration status. |
Daily worker | ❌ NO | Year-end tax settlement and comprehensive income tax filing are not required. |
Visa type and residence status are not directly related to whether you do the year-end tax settlement.
NTS foreigner hotline: ☎ 1588-0560 (English)
Year-end tax settlement guide for foreigners (NTS website path): https://www.nts.go.kr > English > Resources > Publication
