Your guide to doing business in South Korea
South Korea is part of the Korean Peninsula, which lies between the Sea of Japan, the Yellow Sea, and the East China Sea. Along with Taiwan, Hong Kong, and Singapore, South Korea forms part of the ‘Four Dragons’ economic group, comprising the most high-tech, industrialised nations in Asia. In the early 1950s, South Korea kickstarted a period of rapid economic growth which became known as the ‘Miracle on the Han River’ and transitioned from a developing, to a developed country. While the successful transformation was attributed to a workplace culture of hard work and dedication, today South Korea continues the economic trend, having recorded an average 10% annual growth for around 30 years. Now the world’s seventh-largest economy, South Korea is also the fifth-highest exporter, has the highest credit rating in East Asia, and operates with the largest budget surplus in the G20. Major industries in South Korea include high-technology manufacturing, telecommunications, shipbuilding, automotive and steel - but emergent areas of interest include biotechnology, internet services, and tourism. Some of the world’s biggest brand names have facilities or headquarters in South Korea, including LG, Samsung, Google, Siemens, Hyundai and Kia. The World Bank ranked South Korea 5th on its Ease of Doing Business Survey 2017.
Interested investors will discover a variety of reasons to consider South Korea as a target:
The Government encourages foreign investors with attractive incentives to invest. South Korea provides investors with a highly skilled workforce and a stable political environment to operate within.
A new company is required to apply for registrations for its employees within 15 days of the first month which allows the company to start paying monthly withholding payroll tax by the tenth day of the next month. In addition, a new company is subject to tax registration within 20 days after the start day of business to comply with all Korean tax laws including withholding payroll tax. The timescale for completion of this process is four weeks.
It is mandatory to make payments to both employees and the authorities from an in-country bank account. The banks in South Korea open at 9:00am and close at 4:00pm. However, on-line or telebanking transactions are possible regardless business hour.
The working week in South Korea is from Monday to Friday. The general working hours for commercial offices in South Korea are from 9 am to 6 pm.
South Korea is also known as the Republic of Korea and lies at the tip of the Korean Peninsula, sharing a land border with North Korea, and maritime borders with Japan to the east, and China to the west. South Korea’s population is largely, urban with over half the population concentrated around the capital, Seoul. Korean civilisation on the peninsula dates back to prehistory and the territory was ruled, for centuries, by a series of dynasties. Innovative and forward-looking, Korean societies have always enjoyed a relatively high standard of living, and a number of important inventions, such as a movable printing press originated in the country. In the aftermath of the Second World War, Korea was divided into North and South Korea, with the south annexed by Imperial Japan. In aftermath of its division, South Korea benefited from a period of industrialisation and reform which led to an ongoing period of modern prosperity. South Korea is predominantly hilly and mountainous with narrow stretches of coastal plains, while its climate is humid and subtropical with hot, wet summers and mild, dry winters.
Full Name: Republic of Korea
Population: 50.22 million (World Bank, 2013)
Primary Language: Korea
Main Religion: Buddhism, Christianity, No religion.
Monetary unit: won
Main exports: Electrical products, machinery, transport equipment.
Internet domain: .kr
International Dialing Code: +82
Good morning 좋은 아침
Good evening 안녕히 주무세요
Do you speak English? 영어 할 줄 아세요?
Good bye 안녕히 가세요
Thank you 감사합니다
See you later 나중에 봐요
The tax year runs from 1st January to 31st December.
Whether you are classified as a resident or non-resident, will determine whether you pay taxes in Korea on only the income earned domestically or on your worldwide income. For income tax purposes,
A person deemed to be a resident of Korea is subject to taxation on her/his worldwide income, while a non-resident will pay taxes on only the income earned from employment in Korea.
An employee's wage and salary income subject to Korean income taxation is the amount received as payment for labor performed in Korea
The basic income tax rate is from 6 to 38%, but the monthly withholding tax amount is calculated by the ‘Simplified Tax Withholding Table’ presented by National Tax Service (NTS) NTS. Employers should withhold and pay monthly income tax to the district tax office, and file a year-end tax settlement which will finalize the employee's’ tax liability in Korea by the end of January the following year, or the month the employee retires.
Foreign residents can choose to pay a flat tax at 17% instead of the progressive tax as described above.
All residents (including foreigners) pay a resident surtax, which is 10% of their taxable income.
Foreign employees, who chose the flat rate option for their individual income tax, would then pay 18.5% when the resident surtax is added. Those who chose the progressive rate would pay 6%, 16.5%, 26.4%, 35% or 41.8% when the resident surtax is added.
Employers are required to deduct withholding tax from each employee’s salary each month. Employers must withhold the taxes for each employee to NTS by the 10th day of the following month. Employers who have less than 20 employees can, with the permission of the tax office, pay the taxes withheld twice a year instead of every month - although the tax will still be deducted from each pay.
Employers in South Korea have certain withholding obligations towards their employees during payroll administration. Those withholding obligations include income tax - which is charged at a rate of 6% to 38% (depending on income), and social security contributions - which cover pensions, unemployment, and medical care.
Withheld taxes must be reported to the tax authority by the 10th of the following month - and payroll reports must be kept for a minimum of five years. Businesses with less than 20 employees can report taxes twice a year if an arrangement is made with the tax authority. Payslips may be issued to employees electronically.