The South Korean government has passed an amendment to the Individual Income Tax Law provision May 12, 2015 to be applied retroactively to earned income derived in the 2014 fiscal year. This amendment is an effort to reduce the tax burdens on employee taxpayers. With the passing of this bill, the National Tax Service (NTS) issued guidelines announcing that the employer is required to perform re-run of 2014 year-end settlement calculations for any qualified employees based on the below changes:
• Increase in tax credit for children
• New tax credit for new born baby and adoptee
• Increase in tax credit for pension contribution
• Increase in standard tax credit
• Increase in tax credit for wage/salary income
Employers need to pay any overpayment resulting from this recalculation to their employees through the May payroll processing and report the recalculation results by June 10, 2015.