South Korea – New Assignee-Related Withholding Rule for Korean Entities

South Korea – New Assignee-Related Withholding Rule

This GMS Flash Alert reports on a new withholding obligation starting 1 July 2016, to be imposed for certain South Korean entities with foreign workers who have been dispatched from foreign entities.

Related content

Flash Alert 2016-057

Starting 1 July 2016, there will be a new withholding obligation to be imposed for certain South Korean entities with foreign workers who have been dispatched from foreign entities.


The rules are changing and the procedures for reporting and withholding by affected Korean entities will need to be modified.  Payroll administrators should take the necessary steps to put appropriate policies and procedures in place that comply with the new rules.

Current Rules and New Rules

Under current rules, Korean entities do not have an income tax withholding requirement for foreign workers’ employment income when they are working for a Korean entity if the employment costs are not recharged to or borne directly by that entity.  Korean entities are required to file monthly withholding tax returns if the employment income is recharged to or the payment is borne by the local Korean company.  

The new law imposes a withholding tax obligation on South Korean companies for receiving seconded foreign assignees in South Korea.1   This new law, effective from 1 July 2016, requires that Korean companies meeting several conditions report and withhold monthly income tax in relation to foreign assignees’ employment income at a flat rate of 17 percent (18.7 percent including the local income tax) where a Korean entity pays a service fee to the foreign entity dispatching its employees in connection with the labor of said foreign assignees. (For related coverage, see GMS Flash Alert 2015-111, 17 September 2015.)

Conditions to Be Met

  • The annual service fee payable to the foreign entities exceeds KRW 3 billion.
  • Prior year’s gross sales of the Korean entity total KRW 150 billion or more; or prior year’s total assets total KRW 500 billion or more. 
  • The business of the Korean entity falls under one of the following categories:
    • aviation transportation;
    • construction;
    • professional, scientific, or engineering services.

The foreign entities dispatching their employees to South Korea are required to perform and file year-end income tax reconciliations by March 10th of the following year in relation to their employees’ monthly tax filings.     


Companies that may be affected by these changes should determine if they are ready to make the relevant withholdings from 1 July 2016.

We are awaiting clarification from the government on how the different types of employment income will be treated under the new law.


1   Newly legislated as Article 156-7 of Income Tax Act and Article 207.10 of Enforcement Decree of Individual Income Tax Act.


For further information or assistance, please contact your local GMS or People Services professional or one of the following professionals with the KPMG International member firm in South Korea:


Kim, Ui Sung

Tel. 82 2 2112 0922


Jung, So-hyeon

Tel. +82 2 2112 7657

The information contained in this newsletter was submitted by the KPMG International member firm in South Korea.

© 2016 Samjong KPMG Accounting Corp., the Korea member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative(“KPMG International”), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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