As most of you already know, one of the benefits of teaching in Korea is two years of tax free income. There have been many changes and rumors, so here is the low down on getting your tax freebie!
Going through the trouble of getting a residency certificate seems like a lot of extra work. Let’s face it, with some of the SA public offices — it is. Luckily for us, SARS has a specialized unit for expats. (woot woot!)
If you get your residency certificate, you can save roughly R7000 in taxes per year. That’s almost the price of a flight home to visit your family and friends… Definitely worth it!
Firstly, it is important to know that tax exemption only applies to teachers working in a public school and that you will only be exempt for the first 24 months. Teachers who work in hagwons, universities or private schools will have to pay tax. I will comment on that a bit later. The National Tax Office in Korea would obviously need a document from you, to prove that you are, in fact, a South African. In the past, South African teachers simply submitted a Tax Clearance Certificate from SARS, however in recent years the Korean tax office decided that the TCCs were no longer acceptable. We now have to submit a Residency Certificate. SARS didn’t have these documents available, so getting one was such a mission! Now they do!
Getting a Residency Certificate (RC):
There are a number of ways to obtain this golden document, but I’ll stick to the best way — the free way! You will need to send an e-mail to the expat unit at SARS. ( email@example.com ) You will need to provide them with some information so that they can send you your proof of residency: Personal information:
- Full names
- Income Tax Reference number
- Residential or Postal address in South Africa
- Residential or Postal address in the other country - For this I’m sure you can simply state that you are not abroad yet.
- Nationality (South African?? Another country?)
- How long have you been living in South Africa?
- How long have you been living abroad? – You can just write when you expect to arrive in Korea.
- Do you have a permanent residence in South Africa or do you rent/lease a home in SA?
- Do you have a permanent home in any other country?
- Where do your spouse, children and family live?
- What is your professional and/or business interest?
- Do you have any intention of remaining / returning to South Africa?
- For which tax periods are you requesting this residence certificate? - This is usually just for one year! Remember to get another RC next year!
After sending the information, the SARS expat unit will send your RC via email within a day or two. They will mail the original to your address. Be sure to ask them to send it to a family member (especially if you are already in Korea) so your family can then forward it to you. If you prefer going through a company (remember that this service is not free) I can highly recommend DocAssist. They are very professional and respond to queries very quickly. Great service!
What do I do with this thing?
When arriving at your school, be sure to give your residency certificate to the school’s admin office. They need to give it to the tax office. Make sure that they understand what it is and make sure they KNOW to give it to the tax office. There have been instances where the admin had no clue what it was and asked the teacher to pay tax at the end of the year. This is NOT a train smash. Even if you only get around to obtaining your RC a few months in, you can get a refund of any money you have already paid. It’s just easier (and less paper work for your school!) to give them your RC as soon as possible. Remember that your co-teacher is not a tax employee. Do your home work and make sure you know what you should be paying / when / if you should or shouldn’t etc. If your school insists that you should pay tax and you know you shouldn’t, you are allowed to question it and ask them to contact the tax office to confirm.
RC or not, DON’T forget about SARS!
Just because you’ve been “cleared” on the Korean side doesn’t mean you can forget about your SARS responsibilities. You won’t pay taxes on income earned abroad (in Korea) if you are out of the country for more than 183 days in a year. You must, however, still declare this income. Register for SARS e-filing online. Once tax season* starts, submit your tax returns by selecting the form on your profile (it will be there!) and entering your details and income amount under the exempt income section. Submit! About a day or two later, you will receive a statement from SARS. Check it! It will most likely show a R0,00 balance. Then you know you’re in the clear. Sometimes they may ask you to provide documented proof of your earnings abroad etc. Best bet would then be to ask on the South African Tax group mentioned below, but it’s not too difficult.
*Filing season will start around 1 July and online submissions will be due by November. Remember that it will get busier closer to November, so the sooner the better
Monthly vs. Yearly tax:
If you have started your third year in Korea, or you are working at a private academy, you have to pay Korean taxes. Your school might tell you that they’ll deduct your taxes at the end of the year. If at all possible, ask them to rather take a monthly amount. It might sound silly, but paying 40,000 or 80,000 a month is fine. Getting a 1 million won tax bill at the end of the year is not fun. Also, if you are February intake, you might go to school one fine day in January, with about a week left before your lovely trip to Bali, only to find a huge dent in your salary. Oh yes, hello there lump sum tax bill! Whoops! You don’t want that!! I even asked my school for a pay slip so I know how much I’ve paid.
How much will my monthly tax be?
This is REALLY difficult to calculate. But possible… There’s a tax calculator on the NTS website. I faffed around with it and got an amount a while ago. It looks like the same amount my co-teacher gave me when I asked him as well, so I think it’s pretty accurate. There are ways to lower your tax payments.
I’m terrified that SARS will want proof that I actually paid tax in Korea. I have asked my school to please give me a monthly pay slip. In Korean, it’s called “Geubyeo-myeong-seseo” (급여 명 세서). Feel free to use the sample I have posted below. If you ask really nicely I’m sure they won’t mind giving you one. It took some time for them to understand why I was asking, but now I just remind my co-teacher after each pay day to please get me another one.
An example of a Korean pay slip. There are more amounts than necessary — this was at the beginning of my new contract so I have bonuses added etc.
Reducing your tax payments:
There are many ways to reduce your yearly tax payment. I am going to skip the ones that aren’t really relevant to most teachers (for example “Studying at a Korean University”). Basically, you need to use your cards as much as possible. When you use your cards, they automatically have a record of your expenditure. If you spend more than a certain amount of your salary, you are eligible for tax deduction. Spending cash won’t give them a clear record of this, unless you apply for a tax cash card, which you swipe when using cash. Unfortunately, I have NO information on this but I will try my best to find out about applying for one. I even pay my doctors with cards now. These aren’t just credit cards, any of your check cards will help. I always have a bit of cash on me for taxis or whatever, but I even buy a bottle of water at Family Mart with my cards. Unlike South Africa, we don’t pay for swiping our cards — the companies do. (woot woot!)
When it’s time for you to submit your tax returns, all your receipts will be online (just like the Koreans’!) Simply go to the Yesone website. The first tab at the top is for Income Deduction searching and printing. Click on it. Log in using your internet banking digital certificate and entering your Alien Registration number and digital certificate password. Ask a Korean to help you – Click on the headings that you need to print. Give these documents to your school admin office. After submitting your documents to the tax office, they will review it. They will calculate whether or not you owe them money (sometimes our monthly deductions are too low) or if they owe you! (Maybe you paid enough but then after submitting your documents you find that you actually paid too much ) They will let you know how much you owe / how much they owe you. If they owe you money, it can take about a month to get it. (This REALLY happens, promise!)
A few final hints and tips:
- As mentioned before, use your cards as much as possible!
- Calculate (roughly) how much your tax will be before deductions. Calculate what your monthly payment should be. If your school only takes half of that from your salary save the rest! Put some money in a separate bank account so that you won’t get a huge surprise when tax season comes around. If you don’t have to pay anything extra, well then you’ll have more spending money for your next vacation!
- Remember to ask for pay slips!
- DON’T FORGET YOUR SARS E-FILING!
- Remember to apply for a new residence certificate when you start your second year in Korea.
- National Tax Office help line: for foreigners: 1588-0560 or 02-2076-5711
- National Tax Service website in English, click here.
- For any questions regarding South African Tax (SARS) feel free to check out the Income Tax Basics for South Africans in Korea group on Facebook.
- Download the English Korean Tax guide here.
* A big thanks to everyone who contributed to this blog post. I found a LOT of information on the SA in SK Facebook group and the NTS website.