Deduction Items
Use
When you run one of the following:
· Regular payroll
· Periodic / non-periodic payroll
· Leave quota
there are several kinds of deduction items needed to be calculated for a person’s earned income:
· Earned income deduction
The earned income deduction amount of employees’ taxable income varies as below:
|
Earned income amount |
Earned income deduction amount |
|
Below/equal 5,000,000 KRW |
Exempted |
|
5,000,000 KRW ~ 15,000,000 KRW |
5,000,000 + (excess amount over 5,000,000 * 45%) |
|
15,000,000 KRW ~ 30,000,000 KRW |
9,500,000 + (excess amount over 15,000,000 * 15%) |
|
30,000,000 KRW ~ 45,000,000 KRW |
11,750,000 + (excess amount over 30,000,000 * 10%) |
|
over 45,000,000 KRW |
13,250,000 + (excess amount over 45,000,000 * 5%) |
|
Daily employee |
60,000 per day |
If employees‘ earned income is less than or equal to 5,000,000 KRW, they are exempted from tax.
· Basic deduction
Residents who have earned income are allowed to deduct an amount that equals to 1,000,000 KRW times the number of persons in their family annually, as determined below:
¡ the spouse whose income is less than 1,000,000 KRW per year.
¡ Dependents live with the taxpayer.
· Additional deduction
Besides basic deduction, a resident who belongs to any of the following types may deduct a certain amount each year from his or her earned income :
¡ A person who is 65 years or older will deduct 500,000 KRW.
¡ A handicapped person/aged person will deduct 1,000,000 KRW.
¡ A female worker, or a single male worker who has a lineal descendant under six years old will deduct 500,000 KRW.
¡ Additional deduction for employees with few dependent
§ Employees have no dependents will deduct 1,000,000 KRW.
§ Employees only have one dependent will deduct 500,000 KRW.
· Insurance premium deduction
Employees‘ income may also deduct an amount equal to the sum of the following, during the taxable year:
¡ Medical insurance: the entire premium amount
¡ Employment insurance: also the entire premium amount
¡ National pension
§ 50% premium amount deducted for 2001 (01.01.2001 – 31.12.2001)
§ 100% premium amount deducted starting from 2002
· Standard deduction
¡ When the number of dependents who live with the taxpayer is equal to one or less than one, the taxpayer gets the deduction amount 1,200,00 KRW.
¡ When the number of dependents who live with the taxpayer is over two, the taxpayer gets the deduction amount 1,800,000 KRW.
· Tax credit
For employees‘ earned income, 30% (45%, if the total tax amount is less than 500,000 KRW) of the calculated tax amount may be subtracted from the tax amount due, up to 600,000 KRW each year.
Prerequisites
In Customizing for Payroll Korea under Tax ® Define Tax Deduction Items, you determined the withholding tax amount by specifying the tax deduction items according to payroll categories. The numbers of tax deduction items are fixed by SAP and you have selected the check boxes for the necessary items according to payroll category. The more items you select, the less income tax the employee pays.
See also: