Korea’s tax bill would lift the optional flat income tax for foreign employees from 19% to 21%, with EY reporting an effective date of income earned from 1 January 2027 — still a bill, not law. In my single-filer model, flat only beats the regular brackets above about ₩156 million a year, up from ₩136 million now.
On 2 August I published my earlier explainer on why foreign workers in Korea can choose the flat rate (단일세율, danil seyul, literally “single rate”) instead of the regular progressive scale. It could only say the hike to 21–22% was under review. The finance ministry made 21% official the next day. That post is out of date now and never priced the change.
So I did what I do at work. I put the rules in a spreadsheet, deduction schedule on one tab and brackets on another, and refused to trust it until it matched a number I hadn’t produced myself. Kookmin Ilbo reported in June that a Korean single earner at ₩300 million pays about ₩95.1 million, while a foreigner on the 19% rate pays about ₩62.7 million. My sheet returns ₩94.6 million and ₩62.7 million. The flat figure matches, and the regular one is off by ₩0.5 million, about 0.5%.
It checks the top of the schedule, not the ₩100–160 million range where the crossover sits, so treat those figures as model output built on the National Tax Service (NTS, 국세청, Gukseocheong) deduction and credit schedules.
What Is Actually Changing, and Is It Law Yet?
The 3 August proposal changes two things in Restriction of Special Taxation Act art. 18-2 (조세특례제한법, jose teukrye jehanbeop, the statute that holds the foreigner flat rate). The rate goes from 19% to 21%, and the sunset moves from the end of 2026 to 31 December 2029, so anyone who starts working in Korea by then stays eligible for up to 20 years from the first work day. EY reports the higher rate applying to income earned on or after 1 January 2027.
The rate on your payslip runs slightly above the headline, because local income tax (지방소득세, jibang sodeukse) adds 10% of the tax. Today’s 19% is an effective 20.9%. The proposed 21% becomes 23.1%, which is 21% × 1.1. Every tax amount below includes it.
As of 19 September, it is a bill: proposed 3 August, Cabinet approval of the finalised government bills 1 September, scheduled for submission to the National Assembly by 3 September. Taxnet lists seven items that changed between the August draft and the September bill, and the foreign-worker rate is not one of them. I read that as 21% surviving intact, but it is an inference: I could not read the ministry’s release text itself. Use 21% as the working number, not a settled one.
Why Does the Government Say 21% Is Fair?
Twenty-one points. That was the gap between the top income-tax rate (40%) and the flat rate when the rate reached 19% in 2017. With the top rate at 45% today, the gap is 26 points. That is the stated rationale, tax equity with Korean workers, and 21% would narrow the gap to 24.
The money is real too. Per the National Assembly Budget Office, as Kookmin Ilbo reported in June 2026, the rate’s tax expenditure (revenue the state gives up) was a provisional ₩342.1 billion for 2025, with ₩361.7 billion projected for 2026. The report also raises “reverse discrimination” against Korean workers and worries about ethnic Koreans on foreign passports using the rate.
In my table the report’s ₩300 million example is the highest-pay row, where the flat rate saves the most: ₩31.9 million a year today, still ₩25.3 million at 21%. At ₩40 million the same rate runs the other way, costing ₩8.36 million against ₩2.21 million on the regular scale, nearly four times as much. I am a Korean salaried employee, so the regular scale is the only one I get. But the headline example describes one end of the table, not the middle.
At What Salary Does Flat Still Beat the Regular Rate?
Assumptions: single filer, no dependents, all pay taxable. Regular method: employment income deduction (근로소득공제, geullo sodeuk gongje), ₩1.5 million basic deduction, earned-income tax credit and ₩130,000 standard credit (dropping that credit moves the crossover by only about ₩1 million). Flat method: gross pay, no deductions. Inputs come from the PwC bracket summary and the NTS schedules.
| Annual pay | Regular brackets | Flat 19% (today) | Flat 21% (bill) | Cheaper today | Cheaper at 21% |
|---|---|---|---|---|---|
| ₩40M | 2.21 | 8.36 | 9.24 | Regular | Regular |
| ₩60M | 5.29 | 12.54 | 13.86 | Regular | Regular |
| ₩80M | 10.06 | 16.72 | 18.48 | Regular | Regular |
| ₩100M | 15.08 | 20.90 | 23.10 | Regular | Regular |
| ₩130M | 26.22 | 27.17 | 30.03 | Regular | Regular |
| ₩150M | 33.76 | 31.35 | 34.65 | Flat | Regular |
| ₩200M | 53.67 | 41.80 | 46.20 | Flat | Flat |
| ₩300M | 94.64 | 62.70 | 69.30 | Flat | Flat |
The crossover, where flat first turns cheaper, is about ₩135.7 million at 19% and about ₩156.1 million at 21%. The hike moves it up ₩20.4 million.
Inside that band, at ₩150 million, flat saves ₩2.41 million today (₩31.35 million against ₩33.76 million) but costs ₩0.89 million more than the regular scale at 21%. Above the band, flat still wins, just by less: at ₩200 million the saving drops from ₩11.87 million to ₩7.47 million.
Reading the regular column felt oddly personal. I do year-end settlement (연말정산, yeonmal jeongsan) on that scale every winter and had never looked at how fast the share climbs: 5.5% at ₩40 million, 15.1% at ₩100 million, 31.5% at ₩300 million.
The crossover also moves with your deductions. The flat rate gives up every deduction and credit (art. 18-2(3)), so the more you would claim on the regular scale, the higher it climbs.
| Extra deductions | Crossover at 19% | Crossover at 21% |
|---|---|---|
| None (base case) | 135.7 | 156.1 |
| ₩3 million | 142.5 | 164.0 |
| ₩6 million | 149.4 | 171.9 |
| ₩10 million | 158.5 | 181.6 |
Each extra ₩1 million of deductions lifts the crossover by roughly ₩2.3 million at 19% and ₩2.6 million at 21%. Every dependent you claim adds ₩1.5 million of basic deduction on its own (Income Tax Act art. 50), so two dependents already put you on the ₩3 million row, before counting the insurance, housing and family items my base case leaves out.
What Does the Hike Cost If You Stay on the Flat Rate?
The hike itself is simple arithmetic: two percentage points plus 10% local tax on top makes 2.2% of gross pay. That is ₩1.10 million a year at ₩50 million, ₩2.20 million at ₩100 million, ₩4.40 million at ₩200 million and ₩6.60 million at ₩300 million.
For someone below the crossover, though, the bigger number is the one already being paid. At ₩60 million, staying on the flat rate costs ₩7.25 million more than the regular scale today and ₩8.57 million more at 21%. At ₩100 million, the overpayment grows from ₩5.82 million to ₩8.02 million.
That leaves three groups. Under about ₩136 million, the regular scale wins now and after. Between ₩136 and ₩156 million, flat wins today and loses in 2027. Above ₩156 million, flat still wins, and the hike is a 2.2-point rise in the share of pay taken (₩4.4 million at ₩200 million).
How Do I Check My Own Payslip Before 1 January 2027?
Nobody lands on the flat rate by accident, because art. 18-2(5) requires an application. Under Enforcement Decree art. 16-2, a non-Korean-national worker files it through the withholding agent (원천징수의무자, wonchon jingsu uimuja, the payer that deducts tax at the source, in practice your employer’s payroll) by the 10th of the month after the month in which the work is performed. The other route is attaching the application form at year-end settlement or to the May income-tax return. If you are on the flat rate, a form sits in your HR file, and the check takes three steps.
- Read the percentage, not the label. Add one month’s income tax and local income tax lines and divide by gross pay. On the flat rate the result lands close to 20.9%. On the regular scale it lands far lower at these salaries: the model’s full-year totals are 5.5% of pay at ₩40 million, 8.8% at ₩60 million and 15.1% at ₩100 million. Monthly withholding gets trued up at year-end settlement, so expect a rough match.
- Set your pay against the crossover: ₩136 million today, ₩156 million at 21%, plus about ₩2.3–2.6 million for every ₩1 million you would deduct on the regular scale.
- If you are on the wrong side, ask payroll about the flat-rate withholding waiver (원천징수 포기 신청서, wonchon jingsu poki sincheongseo). Under art. 16-2, art. 18-2(4), the provision that lets your employer withhold at the flat rate, stops applying from the tax year after the year you submit it. For salaried workers the tax year is the calendar year, so by that wording a form filed in 2026 ends flat-rate withholding from 1 January 2027, and one filed in 2027 from 1 January 2028.
I am reading decree text here, not reporting from experience. It covers monthly withholding. How that fits with the separate year-end step of attaching an application form (art. 16-2(4)) I could not confirm, and I did not check what happens if you later want the flat rate back, so ask payroll or the NTS helpline (126) before filing. The same goes for the exact form name and for who counts as a foreign worker: the decree says a non-Korean-national worker.
What Can’t I Tell You Yet?
Three things, listed rather than papered over.
Grandfathering comes first. None of the announcements I read says whether people already on the 19% rate keep it for the rest of their 20 years or move to 21% on 1 January 2027. EY’s summary does not address it, and the Korean legal coverage I found lists no transition rule. My tables assume 21% applies to everyone’s 2027 income because that is how the effective date reads. That is a planning assumption, not a finding.
The final text is second: the Assembly can change the rate, the sunset or the effective date, so recheck after the vote.
Home-country tax is third, and it sits outside my model. Whether your home country credits Korean tax paid depends on that country and the treaty, and it can change which choice is cheaper, especially inside the ₩136–156 million band. Payroll holds your application form, and the NTS helpline (126) takes general tax questions on weekdays.
If I were a foreign employee on the flat rate at ₩80 million, the payslip check would take five minutes and the answer would send me to payroll the same day: ₩10.06 million on the regular scale against ₩18.48 million at 21%. At ₩200 million I would do nothing except budget ₩4.4 million more and watch the vote. The one thing I would not do is wait for January to learn which of those two people I am. By the decree’s wording, a waiver filed after 31 December would leave flat-rate withholding running through 2027; I could not confirm what that means for the year’s final tax, so I would ask payroll before January.
This is a reader’s guide, not tax advice. Rates, dates and the bill’s text can change; confirm with your payroll team or the NTS before filing anything.
Sources: EY Tax News, Taxnet, Kookmin Ilbo, PwC Tax Summaries, NTS deduction and credit tables, Special Taxation Act art. 18-2, Enforcement Decree art. 16-2.