Foreigners with salary income earned in Korea can now seek a further income tax reduction by applying house rental payment tax credit or 월세세액공제.
To read my previous article on House Rent Payment Tax Credit, click here
By 2023 tax reform, the percentage of tax credit increased from 12% to 17% of rental payments for people with an annual gross salary equal to or less than KRW 55 million. (From 10% to 15% for an annual gross salary between KRW 55 million and KRW 70 million.)
With this 5% increase in tax credit limit, you can save 350,000 won more than before by applying house rental payment credit.
Tax credit limit from house rental payments was KRW 900,000 but with the new percentage, it is now KRW 1,275,000 for people whose annual gross salary is less than KRW 55 million.
Let’s assume your annual gross salary was KRW 55 million, and you were paying 625,000 won every month for a house rental. You can save income tax up to 2 months worth of rent payments from this housing tax credit.
Q. My company has already completed my salary tax settlement for 2022 income, how can I add house rental payment tax credit?
A. You can add this tax credit by reporting your income deduction data at Hometax in May 2023. May is the income filing season for all individual taxpayers in Korea and it is when you can add any missing deduction items including housing fee.
Q. This is the first time I’ve learned about housing rent tax credit. Can I redo my tax filing for the previous years?
A. House rental payment tax credit was allowed to foreigners since 2021. So the furthest you could go back to amend your income tax filing is 2021.
Please be aware of that a tax refund is available to those who had paid income tax in the first place. Although the housing rent tax credit limit was lifted higher, this does not mean you can get back more than what you have paid to the tax office.
Before seeking to achieve a higher tax refund, make sure you know how much prepaid tax amount you have. This information is written on your salary income tax receipt( or 근로소득 원천징수영수증)
If you would like to ask more questions on a rent fee tax credit, feel free to reach myself at www.aratax.net
Written by Ara Jung (CTA)
All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation.