I. Legal basis

• Korean Personal Income Tax Act (PIT Act)
• The 2025 Tax Reform Bill, enacted by the National Assembly of Korea on December 31, 2024, shall take effect from the tax filing period commencing on January 1, 2025 (except for provisions with different effective dates).

II. Who is considered a “foreign resident” and what constitutes taxable income

Before examining the tax rates and the 2025 amendments, it is necessary to first identify the taxable subjects: foreign residents in Korea.

• Under the principles of the Personal Income Tax Act (PIT Act), if a foreign individual has a place of residence in Korea,such individual is subject to taxation on worldwide income –meaning that both income derived from Korea and income derived from abroad must be declared and taxed in Korea.
• “Residence” is generally determined based on the length of stay in Korea during the taxable year (for example, more than 183 days in a year). (The detailed criteria for residence shall be governed by the Act and its implementing guidelines.)
• If a foreign individual is classified as a non-resident, such individual is subject to tax only on income derived from sources within Korea.

III. Taxable income and method of tax calculation

Once residency status has been established, the next step is to examine which types of income are subject to tax and how the tax is calculated.

1. Categories of taxable income

Taxable income for individuals may include:

• Income from salaries and employment
• Income from business activities or personal profession
• Income from investments (interest, dividends, income from property)
• Income from capital transfer
• Other income (e.g., royalties and other income as prescribed by law)

Note: For non-residents or in respect of certain categories of income(for example, income from personal services sourced in Korea but without a permanent establishment in Korea), shall be subject to withholding tax in lieu of assessment of the full tax liability by way of an individual return.

2. Withholding tax on foreign individuals

Korean law generally applies withholding at source with respect to various categories of income paid to foreign individuals, particularly where such individuals are non-residents or where the income is sourced in Korea.

For example:

• If you are a foreign professional athlete receiving income from Korea, as of 2025 your business income will be subject to withholding tax at the rate of 22% (inclusive of local tax), regardless of the duration of the contract.
• With respect to income from dividends, interest, or capital derived from Korean sources, withholding tax is generally applied at the prescribed rates.

3. Tax rates and tax brackets

For residents, taxable income, after deduction of exemptions and allowable expenses (such as personal exemptions and deductible costs), is subject to Personal Income Tax (PIT) at progressive rates in the same manner as Korean nationals. The applicable tax rates vary by bracket (e.g., 6%, 15%, 24%, 35%, … as prescribed). (Note: The specific tax brackets are subject to change from year to year, and the latest 2025 tax schedule should be consulted.)

One notable change in the 2025 tax reform is the clarification of international tax provisions, in particular the “global minimum tax” (GloBE rules), under the amended law. These provisions primarily affect multinational enterprises and individuals with substantial cross-border income, with the aim of preventing profit shifting abroad and tax avoidance.

IV. New provisions in the 2025 tax reform impacting foreign residents

The 2025 tax reform introduces a number of significant changes, among which certain points warrant particular attention for foreign residents:

1. Introduction and clarification of Global Anti-Base Erosion (GloBE rules)

The 2025 Amendment clarifies the provisions on “Anti-Base Erosion and Profit Shifting” (GloBE Rules) in the Adjustment of International Taxes Act.

• Constituent entities may elect to recognize GloBE losses as deferred tax assets at 15% in the first year of application (instead of being required to recognize the full amount of the losses).
• If there are any outstanding top-up taxes, the law provides for a new allocation method. For instance, where the Ultimate Parent Entity is located in Korea, the entire amount of such outstanding top-up taxes may be allocated to the domestic parent company.
• In addition, during the transitional period, if a jurisdiction falls within the scope of the UTPR (Undertaxed Profit Rule), the top-up tax may be deemed to be zero for a specified period, provided that the relevant conditions are satisfied.

In summary, if you are a foreign resident with income derived from a multinational enterprise or investments through multiple entities, the GloBE rules may affect the determination of taxable income, the minimum tax payable, and international balancing adjustments.

2. Simplification of tax withholding procedures applicable to government bonds

Previously, if a foreign national invested in Korean government bonds or monetary stabilization instruments through foreign investment institutions, in order to be exempt from withholding tax, it was required to submit a certificate of residence of the ultimate beneficial owner.

Under the 2025 tax reform, this procedure has been simplified: an OIV (Organized Investment Vehicle), whether public or private, may apply for withholding tax exemption by submitting only its own certificate of residence as the deemed beneficiary, without being required to disclose the list of ultimate beneficial owners.

In addition, foreign individuals may directly claim a tax refund in the event of incorrect withholding, without the need to go through a withholding agent in Korea as was previously required.

3. Mandatory submission of tax exemption applications and disclosure of personal service income

Previously, if you provided personal services sourced in Korea without maintaining a permanent establishment in Korea, you could be exempt from tax without any formal procedure. However, from January 1, 2026 (applicable to income paid from 2026 onwards), you will be required to submit a tax exemption application and file an income declaration with the Korean tax authorities.

This means that foreign individuals providing services (such as consulting, technical, or artistic services) to Korean clients will need to complete additional administrative procedures in order to qualify for tax exemption or to ensure the correct amount of tax is applied.

4. Amendments to withholding tax for foreign professional athletes

The amended law stipulates that, from January 1, 2025, business income paid to foreign professional athletes shall be subject to a fixed withholding tax of 22% (including local tax), regardless of the duration of the contract.

Prior to the reform, if the contract was three years or less, the individual could be subject to a different tax rate (3.3%) depending on the circumstances. This reform establishes a fixed tax rate, making it easier to understand and apply uniformly.

5. Postponement of the application of tax on virtual assets

Under the current regulations, when a foreign individual or a Korean national sells virtual assets, the gains are treated as ‘other income’ and are subject to withholding tax of up to 11% on the transfer value or 22% on net profits, depending on the applicable provisions.

The 2025 Amendment postpones the application of this provision from January 1, 2025, to January 1, 2027. This means that, during the 2025–2026 period, transactions involving virtual assets will not be subject to withholding tax under this new rule.”

V. Practical implications and advisory for foreign residents

After understanding the new points, let us look at the practical impacts and the steps you should take to reduce risks and optimize your taxes.

• If you are a resident individual with international income (from abroad), you need to reconcile foreign taxes with Korean taxes to determine whether foreign tax credits apply, in order to avoid double taxation.
• If you invest in Korean government bonds through international investment institutions, you should verify whether the OIV has submitted a withholding tax exemption application under the new rules, so that you can benefit from the simplified procedure.
• If you provide personal services to Korean clients (such as consulting, programming, or artistic services), you should prepare in advance the tax exemption application and be ready to file a declaration if the income is derived from 2026 onwards.
• If you are a professional athlete or under contract with Korean clubs or organizations, you should be aware that the 22% withholding tax applies from 2025. Therefore, when negotiating contracts, the tax cost should be taken into account.
• If you have virtual asset transactions in 2025–2026, it is advantageous to know that the new law does not yet apply the new withholding tax rules for virtual assets — you may use this period for planning purposes.
• Finally, if you have substantial income from cross-border activities or hold a corporate structure, you should consider the impact of the GloBE rules, as you may be liable for a “minimum top-up tax” if your company or corporate group falls within the scope of international tax regulations.

VI. Conclusion

The 2025 income tax law for foreign residents in Korea continues to be based on the principle that residents are taxed on their worldwide income. However, the 2025 tax reform introduces several notable changes—particularly regarding cross-border taxation, withholding tax, and the management of personal service income and virtual assets.

VII. About NYLA – Korean Legal Office

■ NYLA – Your Trusted Legal Partner in Korea

At NYLA, we understand that the success of foreign businesses in Korea requires not only a solid business strategy but also reliable legal support. With a team of experienced Korean attorneys and legal professionals, NYLA provides tailored legal services for companies, investors, and individuals operating or planning to establish a presence in Korea.

We support our clients throughout the entire business journey with comprehensive services, including:

• Legal consultation on company establishment, taxation, and immigration;
• Advice on commercial real estate, franchising, and product distribution;
• Support in human resources, marketing, and business strategy.

In addition to legal advisory, NYLA also represents clients in civil litigation cases related to business, labor, marriage, family, and inheritance to ensure their rights and interests are fully protected.

■ Contact NYLA

If you’re a foreign business or individual looking for a reliable legal partner in Korea, NYLA is here to help. We are committed to delivering effective, practical, and personalized legal solutions for every client.

With a proven track record of assisting hundreds of international clients, our team is equipped to help you navigate complex legal challenges—whether it’s commercial disputes, contract issues, or foreign investment guidance.

Don’t let legal matters hold you back. Let NYLA be your trusted guide in the Korean market.

■ Get in touch with NYLA for expert legal support

Website: https://nylakoreanlegal.com/ FB: https://www.facebook.com/nyla.koreanlegal  Tiktok: https://www.tiktok.com/@nylakoreanlegal  Youtube: https://www.youtube.com/@NYLA-xd8qx Email:  info.NYLAkoreanlegal@gmail.com   SĐT: +82 10-3415-7859