Korean citizens and foreigners who are considered to be residents for tax purposes are subject to taxation on worldwide income derived from sources both inside and outside of Korea. The income includes global income [employment (earned) income, business profits, pension, dividend, interest and other income], severance pay, and capital gains. Regarding the scope of income subject to the tax return filing, an exception exists for the foreigners who lived in Korea less than 5 years. A foreigner deemed to be a non-resident is taxed only on income derived from sources within Korea, including wages and salaries earned in Korea, unless a tax treaty to which the individual is subject indicates otherwise.
Taxpayers making monthly tax payments and having only one source of worldwide income (i.e., either Class A or Class B) are generally not required to file a global income tax return since the employer (for Class A income earners) or the Class B taxpayers' association (for Class B income earners) finalizes the individual's tax liability at the end of the year. Taxpayers having more than one source of income, however, are required to file a global income tax return for the year and pay taxes due on such income on or before May 31 of the following year, or prior to permanently leaving Korea. In case an employee has both Class A and Class B income declared to the Class B taxpayers’ association, the employer who pays Class A income may finalize the employee’s tax liability by including Class B income in the exact payroll withholding tax settlement at the end of the year instead of the employee filing a global income tax return.