Opening a company in Korea implies apart from registration having the manpower to operate it. While hiring employees is not difficult, keeping track of their activities, paying their wages and registering annual leaves, as well as other actions associated with their work implies setting up the payroll.
Below, our local specialists explain the most important things to consider in respect to South Korea’s payroll regulations, specifically taxes to pay and documents associated with the respective payments. You can also use our company formation services in South Korea.
Setting up the payroll in South Korea and the process behind it
Payroll in South Korea is an entire process that starts right after the incorporation of a company when the respective entity needs to register with various labor authorities. Then, it continues with the enrollment of each employee with various institutions and payment of social contributions. Payroll is a continuous process due to the number of workers that can increase or decrease in time. This is why many businesses use the services of an accountant to handle it.
Taxes and contributions under the payroll in South Korea
It is the employer’s duty to withhold both the income tax and the social security contributions from its employees’ salaries and make the associated payments with the National Tax Service. Here are the main tax aspects to consider when it comes to payroll in Korea:
- natural persons can choose between two income tax options;
- depending on their options, the employer must withhold the income tax at various rates;
- apart from the income tax, there are several contributions that need to be withheld from one’s salary;
- the employer must also pay a certain percentage of these contributions.
Here are the rates of the income tax in Korea:
- the standard rates range from 6% to 38%;
- foreign residents, however, can opt for a flat rate of 17%;
- no matter the chosen tax bracket, a 10% surcharge applies to the taxable income.
Apart from withholding the income tax, there are also several contributions to be made.
If you need support in setting up the payroll in South Korea, do not hesitate to reach out for support offered by our local specialists.
Our Korean company formation agents are at the service of local companies seeking to bring foreign workforce and for whom they can offer assistance in immigration and obtaining work visas. Although it might not be as easy as it seems, many people choose to immigrate to Korea every year. So, if you wish to relocate from Europe or the USA to South Korea, you can rely on our experts to help you find a good solution and apply for the type of residence permit you qualify for.
Payroll taxes in South Korea
Here are the main contributions to be paid by employers under South Korea’s payroll taxation system:
- the contribution for the national pension fund is set at 4.50% of the monthly salary;
- 3.83% of the monthly salary must be paid to the health insurance scheme;
- South Korea also has an employment insurance that ranges from 1.05% to 1.65%;
- the long-term care insurance is subject to a 5.76% contribution on a monthly basis;
- the work accident compensation scheme also implies a contribution of 5.76%.
While the contributions of the employer represent approximately 30% of the entire salary, the employee’s quota is significantly lower, of 17.50%.
Payroll services in Korea
If you need assistance in payroll in South Korea, you can rely on us for various solutions that will be tailored to your needs. We can handle the following:
- registration with labor and tax authorities as employer;
- registration and de-registration of employees with the labor and tax authorities based on the dynamics in your company;
- issuing monthly pay slips and delivering salaries in employees’ bank accounts;
- directing contributions to the National Taxation System.
Feel free to contact us and ask for our help if you need support with payroll in South Korea.
We are also at your disposal if you want to apply for residency in Korea. The application procedure can be complex because there are several different ways to apply based on your qualifications and needs, and the visa criteria are extremely strict. The fees of Korean visas are also to be considered when moving to this country.