Payroll Compliance Updates-South Korea
A. Update

The Ministry of Health and Welfare (MOHW) held the fifteenth Health Insurance Policy Deliberation Committee to determine the health insurance premium rate for financial year 2021. It was decided to raise the health insurance premium rate by 2.89% in 2021. According to this health insurance premium rate adjustment, in 2021, the average monthly insurance premium rate will increase from 6.67% to 6.86%.

Employers and employees each will pay 3.43% (50% of the National Health Insurance Premiums). Long-term Care insurance is currently calculated as 10.51% of National Health Insurance premiums and the same has not been adjusted by MOHW yet.

B. Statutory Compliance Release Date: August 28, 2020
C. Effective Date: January 01, 2021
 
A. Update

The top individual income tax rate and income bracket under the Individual Income Tax Law is proposed to be adjusted as follows:

Tax base (KRW) Current Tax rates (Tax Year 2020) Proposed Tax rates (Tax Year 2021) Proposed Change
12 million won or less 6% 6% -
More than 12 million won, but not exceeding 46 million won 15% 15% -
More than 46 million won, but not exceeding 88 million won 24% 24% -
More than 12 million won, but not exceeding 46 million won 15% 15% -
More than 88 million won, but not exceeding 150 million won 35% 35% -
More than 150 million won, but not exceeding 300 million won 38% 38% -
More than 300 million won, but not exceeding 500 million won 40% 40% -
More than 500 million won, but not exceeding 1000 million won 42% 42% -
More than 1000 million won 42% 45% + 3% higher tax for this income slab
B. Statutory Compliance Release Date: July 22, 2020
C. Effective Date: January 01, 2021
 
A. Update

The Ministry of Economy and Finance (MOEF) has proposed to tighten the qualifications of foreign engineers eligible for the existing employment income tax reduction. There would be no change to the current income tax reduction rate (50%/70%) allowed to the qualified foreign engineers for the first five years of service however, the scope of qualified R&D facilities where qualified engineers can work is proposed to be expanded to include in-house R&D centers or research departments of domestic corporations, government-funded research organizations etc. To qualify for the employment income tax deduction, qualified engineers must start to work in Korea no later than December 31, 2021 (December 31, 2022 for those employed by specified materials and parts companies). The proposed changes would apply to foreign engineers whose employment agreements are executed on or after January 01, 2021.

B. Statutory Compliance Release Date: July 21, 2020
C. Effective Date: January 01, 2021
 
A. Update

The Ministry of Economy and Finance (MOEF) released a package of tax reform proposals for 2020 to support the Korean economy and individuals to cope with hardships during the COVID 19 pandemic. As a part of the same package, for the year-end settlement to be done from January 01, 2021 (for the income earned during tax year 2020), the cap on basic deduction depending on earned income level has been proposed to be increased by KRW 0.3 million. Accordingly, the ceiling limits for basic deduction for credit card usage would be as under:

Earned Income Cap
For YEA in 2021 (for income earned in 2020) For YEA in 2022 (for income earned in 2021)
KRW 70 million and Less KRW 3.3 million KRW 3 million
KRW 70 million ~ 120 million KRW 2.8 million KRW 2.5 million
In Excess of KRW 120million KRW 2.3 million KRW 2 million
B. Statutory Compliance Release Date: July 22, 2020
C. Effective Date: January 01, 2020 (for year-end adjustment to be done in 2021)
 
A. Update

The authorities have amended the provisions of Article 126-2 (Income Deduction for Amount Spent on Credit Cards, etc.) of Restriction of special taxation Act and the same shall enter into force on May 19, 2020.

As per the above regulation, the authorities have increased the rates for the expenditure done through credit/debit cards etc. as per the below table w.e.f. April 1, 2020 till July 31, 2020, regardless of payment means, usage place, etc. to 80% in respect of purchases from all types of businesses. The amount of income deduction threshold remains the same.

From August 01, 2020, the tax deduction rate will resume to the original rate as provided in the table below.

Spending Till February 2020 March 2020 Between April and July 2020 Between August and December 2020
Paid by cash cards 15% 30% 80% 15%
Paid by cash or debit cards 30% 60% 30%
Paid in traditional markets or for public transportations 40% 80% 40%
B. Statutory Compliance Release Date: May 19, 2020
C. Effective Date: April 01, 2020 till July 31, 2020
 
A. Update

A Guide has been released by National Health Insurance Authority (NHIA) on Reduction in Health Insurance due to Covid-19.

The reductions are as under:

A. Area: Special Disaster Area (Daegu, Kyungsan, Cheongdo, Bonghwa)
Health Insurance Premium Amount: Not exceeding 86,920KRW
Reduction rate: 50%
Period: March to May 2020

B. Area: Other Areas
Health Insurance Premium Amount: Not exceeding 58,360KRW
Reduction rate: 50%
Period: March to May 2020

C. Area: Other Areas
Health Insurance Premium Amount: Exceeds 58,360KRW but does not exceed 74,210KRW
Reduction rate: 30%
Period: March to May 2020

The above update implies that for an employee who’s monthly NHI premium does not exceed 86,920 KRW and whose working place is in special disaster area, 50% of his/her monthly NHI premium will be reduced; likewise for others.

Since, this amendment is effective from March 2020, the retrospective adjustment should be made in April month.

B. Statutory Compliance Release Date: April 13, 2020
C. Effective Date: March 01, 2020
 
A. Update

The lower and upper monthly limits for National Pension Contribution shall be adjusted as under:

Monthly Limit July 01, 2019 to June 30, 2020 July 01, 2020 to June 30, 2021
Lower KRW 310,000 KRW 320,000
Upper KRW 4,860,000 KRW 5,030,000
B. Statutory Compliance Release Date: April 07, 2020
C. Effective Date: July 01, 2020
 
A. Update

A press release was issued by Korean Ministry of Economy and Finance on the Comprehensive Measures to be taken for local economy for minimizing the ripple effects and early overcoming of Corona19.

As per it, for individuals, who are eligible for credit card deduction, a temporary increased tax deduction is granted for the usage for the period from March to June 2020.

Credit card deduction rate increases from 15% to 30%, debit card/cash receipt rate increases from 30% to 60%. Moreover, additional deduction for the expenditure used in traditional market and public transportation increases from 40% to 80%.

Additional deduction remains limited to KRW 1M for traditional market and public transportation, respectively.

Credit card deduction limit in total remains the same.

B. Statutory Compliance Release Date: February 28, 2020
C. Effective Date: March 01, 2020
 

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