Income Tax for English Teachers in Korea: Withholding, Year-End Tax Settlement, and Tax Treaties

Disclaimer: This guide is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules change every year, treaties differ by country, and each outcome depends on residency, income and documents. For an individual case, contact the National Tax Service (help line 1588-0560, listed on its English homepage, or 126 in Korean) or a licensed tax accountant (세무사). Questions about an academy withholding a refund or wages go to the Ministry of Employment and Labor on 1350.

This guide covers: why foreign teachers are tax residents from the first day of work, how tax comes out of each paycheck and how to change it, the 2026 rates with a worked example for a ₩30 million salary, why the 19 percent flat rate rarely helps and how it may change in 2027, what the treaties really say about the two-year teacher exemption, the year-end settlement calendar, the deductions and credits foreign teachers can claim, Hometax with a residence card, changing academies or leaving Korea mid-year, the 3.3 percent "freelancer" problem, missing refunds, and how academies keep payroll tax clean.

Residency decides everything, and most teachers are residents from day one

Short answer: Korean income tax depends on residency, not nationality or visa type. A person who has a domicile in Korea, or a residence there for 183 days or more, is a resident, and the National Tax Service treats anyone whose occupation requires living in Korea for 183 days or more as having a domicile. A teacher arriving on a one-year contract is therefore a resident from the start of the job, not from day 183.

Article 1-2 of the Income Tax Act (소득세법) defines a resident (거주자) as an individual with a domicile (주소) in Korea or a residence (거소) of 183 days or more. The National Tax Service's English manual for foreign employees judges domicile on facts such as family, property and occupation. Residents get the full system of deductions, credits and year-end settlement.

The five-year rule comes from Article 3 of the Income Tax Act: rental or investment income kept abroad is not taxed in Korea during a teacher's first five years, but becomes taxable once time in Korea passes five years within the last ten.

How tax comes out of each paycheck

Short answer: The academy withholds income tax (소득세) every month using the government's simplified withholding table (근로소득 간이세액표), which looks up the amount from the monthly salary and the number of dependents. Local income tax (지방소득세) of 10 percent of the income tax is withheld on top. A teacher can ask for 80 percent or 120 percent of the table amount instead of 100 percent.

The monthly amount is only an estimate. On a payslip, the two lines appear as 소득세 and 지방소득세; the real tax for the year is calculated once, at year-end settlement, and the difference is refunded or collected then.

Choosing 80, 100 or 120 percent

Article 194 of the Enforcement Decree of the Income Tax Act lets a worker ask the employer to withhold 120 percent or 80 percent of the table amount. The request is made on a withholding adjustment form or on the annual deduction report, and the new rate applies from the next payment until the end of that tax year.

Eighty percent gives more take-home pay each month and a greater chance of owing tax in February; 120 percent does the opposite. None of these choices changes the tax actually owed for the year.

Pay that is not taxed

Article 12 of the Income Tax Act exempts up to ₩200,000 a month of meal allowance (식대) paid to a worker who is not provided with meals. It applies only where payroll actually pays a meal allowance. A cash rent allowance is taxable: the National Tax Service's own worked example treats a ₩500,000 monthly rent allowance as taxable wages.

Practical tip: A teacher who wants to avoid a February bill can ask payroll in writing for the 120 percent option; one who prefers monthly cash flow can ask for 80 percent and expect February to take some of it back.

The 2026 rates and what a teacher actually pays

Short answer: For 2026 income, the national rates run from 6 percent on the first ₩14 million of taxable income to 45 percent above ₩1 billion, plus local income tax at one tenth of those rates. After the earned income deduction and the wage tax credit, a single teacher on ₩30 million a year typically ends up paying around 2 percent of gross salary in total income tax.

The 2026 rate table

These rates are in Article 55 of the Income Tax Act as in force from January 1, 2026, unchanged since 2023. Local income tax under Article 92 of the Local Tax Act is one tenth of each band.

The earned income deduction

Before any rate applies, Article 47 subtracts an earned income deduction (근로소득공제) from gross wages, capped at ₩20 million. For wages between ₩15 million and ₩45 million, which covers most teachers, it is ₩7.5 million plus 15 percent of wages above ₩15 million. The full schedule runs from 70 percent of the first ₩5 million down to 2 percent above ₩100 million.

The wage tax credit

After the rates are applied, Article 59 gives a wage income tax credit (근로소득세액공제) of 55 percent of the calculated tax up to ₩1.3 million, and ₩715,000 plus 30 percent of anything above that. The credit is capped at ₩740,000 for gross wages up to ₩33 million, falling gradually to ₩660,000 between ₩33 million and ₩70 million.

A worked example

The example below is a single teacher with ₩2,500,000 a month in taxable salary (₩30 million for the year), paying 2026 health and long-term care premiums on that salary, and spending ₩12 million on a Korean credit card during the year. It assumes no national pension contributions, which depend on nationality and are covered in the National Pension guide; pension contributions are fully deductible and would lower the tax further.

The figures are illustrative and rounded. Premiums use the 2026 health insurance rate of 7.19 percent and long-term care rate of 0.9448 percent, each split equally with the employer, as explained in the National Health Insurance guide.

The 19 percent flat rate: why it rarely helps teachers

Short answer: Foreign employees who start work in Korea by December 31, 2026 can choose a flat 19 percent income tax on their wages instead of the progressive rates, for up to 20 years. It is designed for high earners. Because the flat rate removes every deduction and credit and is charged on total pay including non-taxable allowances, a teacher on an ordinary academy salary would pay roughly ten times more under it.

The option exists under Article 18-2 of the Restriction of Special Taxation Act (조세특례제한법).

The National Tax Service manual applies the flat rate to gross wages plus non-taxable income, with no deductions or credits, by an application attached to the annual deduction report. It is not available for work for a specially related company.

Proposed changes for 2027

On August 3, 2026, the Ministry of Economy and Finance announced its 2026 tax reform proposal. For the flat rate, it proposes raising the rate from 19 percent to 21 percent for income arising from January 1, 2027, and extending the start-work deadline from the end of 2026 to December 31, 2029. The same proposal would raise the income limit for claiming a spouse or other family member as a dependent from ₩1 million to ₩3 million of income (₩5 million to ₩7.5 million where the family member has only wage income), from 2027. These are proposals. They take effect only if the National Assembly passes them, which is expected in December 2026.

Practical tip: If a payroll office offers the flat rate to a teacher as a simplification, the answer for an ordinary academy salary is almost always no.

Tax treaties and the two-year teacher exemption

Short answer: Some of Korea's tax treaties exempt visiting teachers from Korean tax for up to two years, but the conditions are narrow and differ by country. The National Tax Service states that the United States treaty exemption does not cover teachers invited by private language institutes, and that the Canadian treaty gives no exemption at all. Most hagwon teachers pay normal Korean income tax.

The National Tax Service manual says the exemption covers lecture and research income for a limited period, mostly two years, and that clauses differ by country. On the United States treaty (Article 20(1)), it requires an invitation from the government, a local government or an authorized educational institution, which it says excludes private language institutes and English village camps, for teaching or research at a university or authorized institution, for no more than two years.

HM Revenue and Customs describes Article 20 of the UK–Korea convention from the UK side; the article works in both directions. The National Tax Service has not published guidance on whether a private academy is a "recognised educational institution", so a UK teacher should confirm with the tax office before assuming an exemption.

How the exemption is claimed

A qualifying teacher submits three copies of the treaty exemption application (Form 29-2(3) of the Enforcement Rules of the Income Tax Act) with a certificate of residence from the home tax authority to the school, which sends two copies to its tax office by the 9th of the following month. Public school guidance adds that tax is withheld normally until the certificate is in.

Practical tip: A teacher who has been told by a recruiter or friend that "the first two years are tax free" should check whether the employer is a public institution or a private academy, and what the home country's treaty says. For United States and Canadian teachers at hagwons, the National Tax Service's answer is no.

Year-end tax settlement: what it is and when it happens

Short answer: Year-end tax settlement (연말정산) is the employer's recalculation of each worker's tax for the calendar year, using deductions the worker reports. It is processed with February pay of the following year, so tax on 2026 income is settled in January and February 2027. Overpaid tax is refunded through the salary; underpaid tax is collected from it.

Under the National Tax Service manual, a resident with only wage income who has settled through the employer does not need to file a May return.

The calendar

What happens if nothing is submitted

Article 137(3) covers a worker who never submits a deduction report. The employer still settles the tax, but only with the worker's own basic deduction and the standard tax credit. Nothing else is applied.

How to prepare, step by step

1. Use the ARC number for everything during the year. Data recorded under a passport number does not show up.
2. Get a certificate that works with Hometax. Foreigners can log in only with a digital certificate issued under the alien registration number; banks issue these.
3. Download the PDF of deduction data from the simplified service in mid-January.
4. Add what Hometax missed. Medical receipts not in the data can be added with receipts from the hospital or pharmacy. Monthly rent requires the lease and proof of payment.
5. Submit to the academy by its deadline. Submit the deduction report (근로소득자 소득·세액공제신고서) with the PDF and supporting documents, together with the withholding receipt from any previous employer that year.
6. Check February pay. The settlement amount appears as a refund or an extra deduction.
7. Collect the withholding receipt. Ask for the 근로소득 원천징수영수증 by the end of February and keep it permanently.

Practical tip: Ask the academy in December what its internal deadline for settlement documents is. Documents handed in after it can be left out of the February payroll.

Deductions and credits that foreign teachers can claim

Short answer: Foreign residents get the same deductions and credits as Koreans, with the main exception of housing-related items. The ones that matter most to teachers are card spending, national pension and health insurance premiums, medical expenses, monthly rent where the teacher pays it, tuition for the teacher's own university or graduate study, and donations. Spending abroad, overseas medical bills and children's overseas schooling do not count.

The National Tax Service manual excludes housing-related items for foreigners, with two exceptions: the monthly rent credit, which the law extends to registered foreigners, and from 2025 the housing savings deduction for the spouse of a household head who owns no home.

The main items

Practical tip: Card spending earns nothing until it passes 25 percent of gross wages (₩7.5 million on a ₩30 million salary). Once the year's spending is clearly past that line, switching everyday purchases from a credit card to a debit card doubles the deduction rate on everything above it.

Monthly rent: the credit teachers overlook

A teacher in academy-provided housing pays no rent and has no credit, but one who rents independently often can claim it. Under Article 95-2 of the Restriction of Special Taxation Act and its Enforcement Decree, a registered foreigner can claim if all of the following are true:

• the teacher owns no home at the end of the year;
• gross wages are ₩80 million or less;
• the lease is signed by the teacher (or a family member who is a basic-deduction dependent);
• the address on the lease matches the address registered with immigration;
• the home is within the national housing size limit (국민주택규모) or has a standard price of ₩400 million or less.

A credit of 17 percent on ₩500,000 a month of rent, for example, would be ₩1,020,000, which is more than the entire annual tax in the worked example above. Article 61 of the Income Tax Act stops credits from going beyond the tax itself, so in that situation the refund is the whole amount withheld for the year, and nothing more.

Practical tip: A teacher who rents independently should keep the lease, report the address change to immigration so the registered address matches the lease, and pay rent by bank transfer so there is a record. All three are what make the credit claimable.

Items that do not count include card purchases made outside Korea, medical treatment abroad, children's schooling abroad (the National Tax Service says only residents with Korean nationality can claim it), and records kept under a passport number rather than the residence card number, unless documents are added by hand.

Hometax and the simplified service for foreign residents

Short answer: Hometax (hometax.go.kr) is the National Tax Service's online system. Its year-end settlement simplified service (연말정산 간소화) collects deduction data from banks, card companies, hospitals and schools and lets the worker download it as a PDF for the employer. Foreign residents need a digital certificate issued with their residence card number, and only data recorded under that number appears.

Hometax has an English version linked from the National Tax Service's English homepage, but the manual's instructions use Korean menu names. The route is: log in with the certificate (로그인 → 인증서 로그인), open 장려금ㆍ연말정산ㆍ기부금 → 연말정산간소화, view the data under 근로자 소득ㆍ세액공제자료조회, and use 한번에 조회하기 or PDF 다운로드 to produce the file for the employer. A dependent's data needs that person's consent through 부양가족 자료제공 동의 신청, except for children under 19, whom a parent can add directly.

The National Tax Service manual notes that data is collected only under the alien registration number, so an insurance policy taken out with a passport number or a temporary number does not appear.

Changing academies or leaving Korea mid-year

Short answer: A teacher who leaves a job is settled with the final month's pay, so the deduction report goes in before that payday. A new academy in the same year needs the previous academy's withholding receipt to settle both incomes together; otherwise a May return is required. A resident who must file and leaves Korea for good files before departure.

Leaving a job

Article 137 of the Income Tax Act requires the employer to settle a departing worker's tax with the wages for the month of departure. If that was the teacher's only employer in the year, that settlement completes the year's income tax obligation.

Two academies in one year

The new academy can settle both incomes together only if it receives the previous academy's withholding receipt before the settlement. If the old income is left out, or the teacher held a second job at the same time, the incomes must be combined in a May return. A secondary employer withholds as though only the teacher's own basic deduction applies.

Leaving Korea permanently

For most teachers, the settlement with the final month's pay is the end of it. Article 74(4) of the Income Tax Act adds that a resident who is required to file a final return and leaves Korea must file for that year by the day before departure.

Severance pay is taxed separately from salary as retirement income under Article 55(2), and the academy withholds that tax when it pays severance. The guide to severance pay explains who is entitled to it.

Practical tip: Before the last day of work, ask the academy for three documents: the final payslip showing the settlement, the 근로소득 원천징수영수증 for the year so far, and the certificate of employment. Getting them from a closed or unresponsive academy years later is much harder.

The withholding receipt

The wage income withholding receipt (근로소득 원천징수영수증) is the official record of a year's pay and tax, and academies must issue it by the end of February. It is the document behind F-2 income points, as covered in the guide to the F-2 points system, behind salary remittances, as covered in the guide to opening a bank account, and behind any settlement at a new academy or later correction.

The 3.3 percent "freelancer" problem

Short answer: When an academy deducts 3.3 percent from pay, it is treating the teacher as a self-employed contractor: 3 percent business income tax plus 0.3 percent local tax. That is not how an employee on an E-2 contract should be paid. The label does not decide employment status in Korean law, but it often comes with no health insurance, no pension, no severance and no year-end settlement.

The 3 percent rate comes from Article 129 of the Income Tax Act, which applies the progressive rates to wage income instead.

In a 2006 decision about a lecturer at a university-entrance academy (Supreme Court 2004다29736, December 7, 2006), the Supreme Court held that worker status depends on whether the person in substance provides work in a subordinate relationship for wages, not on the form of the contract. It added that the lack of a fixed salary, business income withholding or missing social insurance should not easily be used to deny worker status, because the employer can set those terms.

Practical tip: A full-time teacher with a fixed schedule, assigned classes and a monthly salary who sees "3.3%" on a payslip should raise it with the academy in writing and call 1350. The issue is usually less about the tax itself than about everything that comes with employee status.

When a refund is withheld or a deduction was missed

Short answer: A refund from year-end settlement belongs to the teacher and is paid through the employer. If the academy does not pay it, the National Tax Service says the teacher can claim it in the same way as overdue wages, through the labor ministry. Deductions missed at settlement can be claimed in a May return or by a correction claim within five years.

Dependents, rent, medical bills or tuition left out at settlement can be claimed in a global income tax return in May of the following year, with supporting documents. Items noticed later can be claimed by a correction claim (경정청구) to the tax office within five years of the filing deadline. A teacher who did not settle at all, or did not combine two employers, also files in May.

What to do, in order

1. Compare the February payslip with the withholding receipt, and ask the academy in writing for either if missing.
2. Check Hometax for what was filed in the teacher's name once the academy's March filing has gone through.
3. Call 1350 if a refund shown on the receipt was not paid; treat it as an unpaid wage claim.
4. File in May or claim a correction for any deduction that was left out, with receipts.
5. Ask the National Tax Service (1588-0560, or 126 in Korean) or a tax accountant for anything involving foreign income or treaty status.

Practical tip: Keep every payslip, the contract, and screenshots of each year's Hometax data. A refund dispute is decided on documents, and an academy's records can disappear if it closes. The guide to English hotlines lists other numbers worth saving.

For academies

• Withhold as wage income. A full-time E-2 teacher on a fixed schedule is an employee. Paying through 3.3 percent withholding invites a complaint about insurance, severance and status.
• Use the simplified table and honor 80 or 120 percent requests. Keep the teacher's written request on file; it applies until the end of the tax year.
• Announce the settlement deadline early. Give foreign staff a written date in January, explain that Hometax data sits under the ARC number, and collect the previous employer's withholding receipt from anyone who joined mid-year.
• Settle departing teachers in the final pay. Ask for the deduction report before the last payday, and hand over the withholding receipt and certificate of employment on departure.
• Pay refunds promptly. A settlement refund is the teacher's money. Holding it is treated like holding wages.
• Do not promise tax exemptions. Treaty exemptions depend on the teacher's country and the type of institution, and the National Tax Service excludes private language institutes under the United States treaty.
• Consider the meal allowance structure. Up to ₩200,000 a month of meal allowance is non-taxable where meals are not provided, if payroll records it as such.

Common problems and what causes them

Frequently asked questions

How much tax do English teachers pay in Korea?
For a single teacher on ₩30 million a year with typical deductions, total income tax including local tax works out to around 2 percent of gross salary under 2026 rules. It rises with salary and falls with dependents, pension contributions, rent and other credits.

Are E-2 teachers tax residents in Korea?
Almost always, from the start of the job, because the work requires living in Korea for 183 days or more.

Do American teachers get a two-year tax exemption in Korea?
Only if invited by a government body or an authorized educational institution to teach or research at a university or similar institution. The National Tax Service says private language institutes and English village camps do not qualify.

When do I get my year-end tax refund in Korea?
With February pay of the following year, or with the final month's pay for someone who leaves a job during the year. It is paid by the employer, not the tax office.

Do I need to file a tax return in Korea as an English teacher?
Not if the only income was one academy salary and the academy completed year-end settlement. A May return is needed if there were two employers not settled together, other income, or missed deductions to claim.

Can foreigners claim the monthly rent tax credit in Korea?
Yes, if registered with immigration, without a home, earning ₩80 million or less, with a lease in their name at the address registered with immigration, and within the housing size or price limits.

What is the 3.3 percent tax on a payslip?
Withholding for self-employed contractors: 3 percent income tax plus 0.3 percent local tax. A full-time employee should be taxed on wage income instead.

What happens to my tax when I leave Korea?
The academy settles the year to date with the final month's pay. A resident who must file a return files it before departing; wage-only teachers who were settled by the employer usually have nothing more to do.

The short version

Foreign teachers on a full-time contract are Korean tax residents from the first day of work. Tax is withheld monthly and settled with February pay.

The real burden is low: around 2 percent of gross pay for a single teacher on ₩30 million. The 19 percent flat rate would multiply that, and the two-year treaty exemption does not cover most hagwon teachers.

The deductions that make a difference are card spending above 25 percent of salary, medical bills above 3 percent, pension and insurance premiums, and the monthly rent credit for teachers who rent their own place. All of them depend on records kept under the residence card number.

The single most useful thing to do is ask the academy for the withholding receipt (근로소득 원천징수영수증) every February, and on the last day of any job, and keep every one.

Sources

• National Tax Service, English homepage: Foreign Language Manual for 2025 Year-End Tax Settlement (information as of November 2025), English Hometax link, and help line 1588-0560 (English)
• National Law Information Center, Income Tax Act in force from January 1, 2026: residency, rates, deductions, credits, withholding, year-end settlement and filing (Articles 1-2, 3, 12, 47, 50, 52, 55, 59, 59-4, 61, 70, 74, 129, 137, 164) (Korean)
• National Law Information Center, Enforcement Decree of the Income Tax Act: the 80, 100 or 120 percent withholding choice (Article 194) (Korean)
• National Law Information Center, Restriction of Special Taxation Act: 19 percent flat rate for foreign workers (Article 18-2), monthly rent credit (Article 95-2), card spending deduction (Article 126-2) (Korean)
• National Law Information Center, Enforcement Decree of the Restriction of Special Taxation Act: conditions for foreigners and housing under the rent credit (Article 95) (Korean)
• National Law Information Center, Local Tax Act: local income tax rates at one tenth of income tax (Article 92) (Korean)
• PwC Worldwide Tax Summaries, Korea, taxes on personal income, reviewed July 2, 2026: rates for income from 2023 onward and local income tax (English)
• PwC Worldwide Tax Summaries, Korea, income determination, reviewed July 2, 2026: flat rate eligibility to December 31, 2026 and non-taxable meal allowance (English)
• Samil PwC Tax News Flash, August 3, 2026: 2026 tax reform proposal, including the flat rate change to 21 percent and the dependent income threshold (Korean)
• Forvis Mazars Korea, Tax newsletter August 2026: 2026 tax reform proposal timetable and flat rate proposal (Korean)
• HM Revenue and Customs, Double Taxation Relief Manual DT11353: Article 20 (teachers) of the UK–South Korea convention (English)
• Gyeongsangnam-do Office of Education, guest English teachers: tax exemption eligibility by country and certificate of residency (English)
• Jipyong law firm: Supreme Court decision 2004다29736 of December 7, 2006 on the worker status of academy lecturers (Korean)
• News report, January 15, 2026: year-end settlement simplified service opens on Hometax (Korean)
• National Tax Service help line: 1588-0560; Tax consultation center: 126 (Korean)
• Ministry of Employment and Labor counseling line: 1350
• Korea Immigration Contact Center: 1345

For how the same withholding receipt supports long-term residence, see the guide to the F-2 points system. For pension contributions and the lump-sum refund on departure, see the National Pension guide. For the health insurance premiums that appear on the same payslip, see the National Health Insurance guide. For the payment due at the end of a contract, see the guide to severance pay.