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Payroll income tax return
(1) Monthly withholding income tax reporting
The Company must withhold monthly income tax on salary income based on the Simplified Tax Withholding Table and remit the withholdings to the tax office. The Company must also submit a withholding income tax report thereon to the tax office by the 10th day of the following month
In certain instances, the Company is also obligated to withhold income tax when the Company pays outside professional consultation fees, etc. at the rates as specified in the Korean Income Tax Law and remit these withholdings to the tax office by the 10th day of the following month.
(2) Year-end tax settlement
Taxpayer's Wage & Salary income tax liability for the year is settled and finalized in February of the next year through year-end tax exact computation as we call Year-end Tax Settlement.
Then, the total of monthly withholding (the amount withheld) taken off an employee's earnings is treated as a credit against the overall amount of tax payable by the employee for the tax year in question.
To sum up, a withholding tax agent (the Company), who is liable for tax withholding, must calculate the tax amount for the year at the time of the second payment of wage and salary income of the next year and collect or refund the balance between the tax amount payable calculated by applying the tax rate and the tax amount withheld according to the Simplified Tax Withholding Table.
If a taxpayer has wage & salary income only, he/she is not subject to final global income tax return (self-assessment). If he/she has other incomes in addition to wage & salary income, he/she should file the final global income tax return in total of the incomes by the end of May of the next year.