History
Korea introduced the year-end settlement in its 1974 overhaul of the Income Tax Act, alongside monthly withholding. Employers deduct tax each month from a simplified table, then true it up after the year ends, so most salaried workers never need to file a return themselves. In 2006 the National Tax Service launched the Hometax simplified service, which ended the scramble for paper receipts. When a 2014 reform turned many deductions into credits and some workers suddenly owed money, the press dubbed it a "13th-month tax bomb," and lawmakers patched the rules the following year.
Deductions vs. credits
Income deductions shrink your taxable income, so they're worth more the higher your marginal rate. Examples include card spending above 25% of gross pay, housing subscription savings, and National Pension contributions. Tax credits come straight off the tax bill. They cover pension savings and IRP contributions, insurance premiums, medical costs above 3% of pay, education, donations, and monthly rent. In mid-January workers download their data from Hometax and submit it to the employer. Refunds usually arrive with the February or March paycheck.
Refunds and extra payments
If tax withheld during the year exceeds your final liability, you get a refund. If not, you pay the difference. Dual-income couples often route card deductions to the higher earner. Missed deductions can be claimed for up to five years through a correction request. Workers with business or rental income must also file a comprehensive income tax return in May.
FAQ
- What if I missed a deduction?
- Claim it in the May income tax filing or file a correction request on Hometax within five years.
- Why do I owe tax this year?
- Monthly withholding was too low or your deductions shrank, so your final tax exceeded what was withheld.
Sources reviewed: 2026-10-26
References
- 소득세법 제137조(근로소득세액의 연말정산).
- 국세청. (2025). 「연말정산 종합안내」.
- 국세청 홈택스. 연말정산 간소화 서비스 안내.