Taxes and Deductions

Local income taxes will be deducted from your paycheck on a monthly basis. Most employers will withhold income tax (3-4% of salary), resident tax (10% of the income tax), national pension-plan contributions (4.5% of salary) and national health insurance premiums (2% of salary) from monthly pay. In many cases employers will only deduct around 4-7% from your total salary and will exclude deductions for the national pension plan. You don’t have to file a tax return in Korea.

Many teachers ask if they have to pay taxes in their home countries while teaching abroad in Korea.

• USA – Tax Implications for Americans

If you are an American citizen living and working in another country, and if you pay tax in that country, and if you meet the “bona fide residence test” or the “physical presence test” you can file for tax exemption if you make less than $80,000 US/year.

- “Bona fide residence test” – this is established by having a home in a foreign country or illustrating that you have settled there with some sort of permanence
 bank account

 phone bill

 cell phone bills

 utility bills in your name

-“Physical Presence Test” – were you physically in a foreign country for 330 days in a consecutive 12 month period

You should still fill out and submit a 1040 form to the IRS found here: 1040 Form

and you should also attach the 2555-EZ form found here: 2555-EX Form

Thus, although you will be filing with the IRS during your year abroad, you won’t have to pay income tax in both countries.

• Canada – Tax Implications for Canadians

The main question for Canadians is whether to file as a resident or a non-resident. This information can be found on this website: Non-Residency Status Link

The Canadian government says residential ties include:

• A home.

• A spouse or common-law partner and dependants who stay in Canada while you are living abroad.

• Personal property, such as a car or furniture, and social ties.

• Credit cards or driver’s licenses can also be included as can bank accounts and health insurance.

There is usually enough grounds to be considered a resident of Canada if you so choose- check out this website for further information:Click here to see if you are considered a resident

Canada has a tax treaty with South Korea , thus by working there with a legal visa, you are considered a resident of that country and therefore are required to pay tax there and NOT in Canada – qualifying you as a “deemed non-resident”.

If you have an extenuating circumstance, for example a pension, revenue from rental property, child benefits under CCTB, mutual funds or RRSPs that you decide to cash in while you’re in Korea, there are other factors to consider and you’re going to have to do your own research- our accountant quit to live a life of luxury in the Cayman Islands.

Contact Revenue Canada or the IRS for more information and a barrel of laughs.

Once you are in Korea, here is the information you need in order to get your Canadian Pension refunded at the end of your contract. Contact (031-424-9731).

The Anyang office is located near Indeogwan Station on the blue line- it is a fifteen minute walk to the Cambridge Building. You can also e-mail npcblooo@npc.or.kr

In Chamsil, Seoul you can call 2-2240-1083.

Things you need to bring with you:

1: Sin #

2: Passport

3: Canadian Bank Account Info

4: Copy of statement from Korean bank after you have sent money home

5: Alien Registration Card

6: Proof of flight (ticket) out of Korea

Go to the office in your last week.