Settlement and Declaration of Payroll Withholding Taxes for 2020 (due filing by
March 10, 2021)
The employer as a
tax withholding agent must perform the year-end settlement of exact payroll
withholding taxes for and on behalf of its employees in February of following
year after each year end mandatorily as required by the IITL of Korea.
In this connection,
the employer should reflect the results of year-end settlement in the February
payroll of the following year accordingly. Any overpayment resulting from
year-end settlement is used to offset the payroll taxes due in February of the
following year and onward until fully utilized. For any underpayment resulting
from the year-end settlement, the employer should withhold additionally from
the February payroll and remit it to the tax office as scheduled by March 10 of
the following year (by March 10, 2021 for year 2020).
For the year-end
settlement processing, the employees should gather and submit supporting
documents to claim tax deductions/credits.
By the year-end
settlement and filing, employees having only salary income may fulfill his/her
annual individual income tax reporting obligations in Korea. On the other hand,
employees having other source of income exceeding certain thresholds than
salary income are required to file additionally an annual individual income tax
return (“종합소득세신고” in Korean) together with tax
payment on or before May 31 of the following year additionally (i.e., by May
31, 2021 for 2020 income).