Total salary is not your contract salary — non-taxable pay explained
Korean year-end tax starts from total salary (총급여), not from your contract salary. Mixing them up puts every threshold in the wrong place.
Total salary = annual pay − non-taxable pay
Some pay is exempt from income tax by law. Remove it from your annual pay and you get your total salary. The exact figure is in box ㉑ of your withholding receipt; during the year you can estimate it from your payslips.
Common non-taxable items (2026)
| Item | Non-taxable up to | Note |
|---|---|---|
| Meal allowance | ₩200,000 a month | The most common — most employees have it |
| Car allowance | ₩200,000 a month | When you use your own car for work |
| Childcare allowance (children 6 and under) | ₩200,000 a month per child | For the 2026 tax year: children born on or after Jan 1, 2020 |
| Childbirth support payment | Full amount | Within 2 years of the birth, up to 2 payments |
| Research allowance | ₩200,000 a month | When the conditions are met |
A meal allowance alone removes ₩2.4 million a year: a ₩50 million contract becomes a total salary of ₩47.6 million.
Why it matters
- Card threshold: card deductions start above 25% of total salary — ₩11.9 million at ₩47.6 million instead of ₩12.5 million at ₩50 million
- Medical threshold: 3% of total salary
- Income limits: pension credit rate (₩55 million), monthly rent credit (₩80 million), card caps (₩70 million)
Entering your contract salary sets these thresholds too high and understates your refund.
The exception: the 19% flat rate
The 19% flat rate for foreign employees works the other way. It is charged on your whole pay including non-taxable items such as the meal allowance. Only welfare-type benefits defined in the Income Tax Act — such as the value of company-provided housing and group insurance premiums — stay out.
So with a ₩47.6 million total salary and a ₩2.4 million meal allowance, the flat-rate base is ₩50 million and the flat tax is ₩9.5 million. In the calculator, enter your total salary as usual and put your non-taxable pay in the separate field — it is added back only for the flat-rate comparison.
Common questions
Are bonuses non-taxable? No — bonuses are fully taxable and part of total salary.
Is housing my employer provides non-taxable? Company-provided housing is one of the welfare benefits that stays out of the 19% flat-rate base. Whether it is taxable under the normal method depends on the arrangement — check your payslip or ask payroll.
Is more non-taxable pay always better? For income tax, yes. But it is also excluded from pension and health insurance contributions, which can lower later benefits based on those contributions.
Rules applied and how the numbers were made
- Tax year
- 2026 income (settled in early 2027)
- Legal basis
- Income Tax Act · Restriction of Special Taxation Act · National Tax Service year-end settlement guidance
- Numbers
- Amounts in this guide are not made up for illustration — they come fromthis site’s calculator, which implements the statutory formulas and is pinned by automated tests checked against hand calculations.
- Updates
- We update when the law or official notices change. The latest date is shown at the top.
Written by a developer who builds corporate year-end settlement systems. This is general information, not tax advice — your situation may differ, and your final figures are on the withholding receipt from your employer. For official help in English, call the National Tax Service at 1588-0560.