South Korea has introduced two regulatory changes affecting organisations with employees or cross-border payment obligations. From 1 January 2026, new obligations apply when applying reduced withholding tax rates for non-residents, and interest on delayed wage payments now applies to all employees. Employers should review payroll, tax, and compliance processes to ensure readiness for both changes.
Effective 1 January 2026, withholding agents paying domestic-source income to non-residents under a tax treaty must submit applications and supporting documents to the competent tax office.
Under the previous rules, withholding agents were required only to retain documentation, including:
Under the new requirements:
Organisations should ensure applications and supporting documents are obtained in advance and review internal payroll and compliance processes to meet the new submission deadlines.
Relevant legislation: Income Tax Act §156-6; Income Tax Enforcement Decree §207-8(8); Corporate Tax Act §98-6; Corporate Tax Enforcement Decree §138-7(8)
From 23 October 2025, Article 37 of the Labour Standards Act was amended to extend interest on delayed wage payments to all employees. Previously, interest applied only to retired employees.
Under the amended provisions:
Employers should review payroll calendars, employment contracts, and the treatment of bonuses and allowances to mitigate the risk of interest liabilities.
For detailed guidance on payroll, employment law, and compliance in South Korea, visit our South Korea Global Insights on the activpayroll website.
To understand how these changes may impact payroll, mobility, or HR policies in South Korea, complete our Contact Us form, and a member of our expert team will assist with your queries.