Change in workshop tax scheme in 2016

•What is workshop tax?

      - Applies to all businesses within the jurisdiction of local government.

      - All employers who pay salaries and wages to employees are responsible for workshop tax payment.

      - Assessed at 0.5% of monthly total salaries and wages paid to employees.

  

•What has changed?

      - Workshop tax exemption standard was changed from the “number of employees” to the “monthly average salary”.

 

Before the change	After the change (Effective from 2016)
Exempt if the number of employees is 50 or less	Exempt if the monthly average salary in the most recent 12 month period is Won 135,000,000 or less (regardless of the number of employees)

 

 

If your company exceeds the exemption threshold above, the company should pay workshop tax at 0.5% on total salary paid in the current month (excluding non-taxable income as specified under the Individual Income Tax Law of Korea).

 

      - This amendment shall apply for salaries and wages paid on or after January 1, 2016.

      - In calculating the monthly average salary, total salary paid in the most recent 12 month period including the current month should be divided by 12.

 

      - For Jan 2016 for example,

 

If total salary for Feb 2015 ~ Jan 2016 ≤ Won 1,620M (Won 135M * 12 months)	exempt from workshop tax
If total salary for Feb 2015 ~ Jan 2016 > Won 1,620M (Won 135M * 12 months)	MUST pay workshop tax

 

 

•When is workshop tax payment due?

The workshop tax should be reported to the governing local (provincial) tax authorities and paid on a monthly basis by the 10th day of the following month after each month end.