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Year-End Tax Settlement (Yeonmal Jeongsan) & Residency Status Overview

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1. What is the Year-End Tax Settlement?​

Every month, when you receive your salary, your company withholds a certain amount of tax based on a standard tax table. However, this figure does not yet account for your personal circumstances (supporting young children, medical expenses, rent payments, etc.). The Year-End Tax Settlement (Yeonmal Jeongsan - 연말정산) is the process of recalculating the exact amount of tax you must pay for the entire year.

  • If the amount already paid > actual tax due: You receive a Refund.
  • If the amount already paid < actual tax due: You must Pay more.

2. Determining Residency Status (Resident vs. Non-Resident)​

This is the most crucial step because it determines which tax benefits you are eligible for.

FeatureResidentNon-Resident
DefinitionHas an address in Korea or resides for more than 183 days/year.Does not satisfy the residency conditions.
Tax ScopeTax on global income (see the 5-year rule in Article 2).Tax only on income earned within South Korea.
DeductionsEligible for most types of deductions (Medical, Education, Housing, etc.).Only eligible for basic (personal) and pension deductions. Not eligible for housing, medical, or dependent deductions.

3. Choosing the Optimal Tax Calculation Method​

Foreigners have the privilege of choosing one of two tax calculation methods:

  1. Progressive Tax: Applies tax rates from 6% to 45% on taxable income (after all deductions have been subtracted). This is the default method and is generally beneficial for those with medium/low income or many deductions.
  2. Flat Tax Rate (19%): Applies a direct tax rate of 19% to Total Income (including items that are usually tax-exempt). You cannot apply any deductions (such as medical, education, etc.) except for the personal deduction if you choose this method. This is usually beneficial for high-income earners (typically over 140 million KRW/year).

[!NOTE] You can ask your accounting department to calculate your tax using both methods and choose the one that results in lower taxes. The deadline to apply for the Flat Tax regime is until December 31, 2026.