Guides to Korea's pension savings and IRP usually stop at one figure: up to 1,485,000 won back. The number is right, but three things must line up to reach it — where you paid it in, how your income is measured, and whether you owe any tax at all.
1. There are «two» caps, and one applies only to pension savings. 6m won for the pension-savings account, 9m won combined — so the same 9m won lands differently depending on where it went.
2. The rate turns first on «which measure» applies. Salary only is read on total salary, otherwise on global income — and the two thresholds sit 10m won apart.
3. The credit cannot exceed the tax you owe. It comes off computed global income tax, and any excess is lost, with no carry-forward and no refund.
4. A matured ISA moved across raises the cap — by a tenth of it, at most 3m won.
Enter your income and what you paid in. If you know your computed tax, add it and that is applied too.
The caps are applied in the order the statute sets. The 6m-won pension-savings cap is applied first (proviso to art. 59-3(1)); the IRP is then added and the 9m-won combined cap applied. If you moved a matured ISA, a tenth of it (up to 3m won) is added to that cap (art. 59-3(3) and (4)). The rate is 15% where total salary is 55m won or less (salary only) or global income is 45m won or less, and 12% otherwise. The credit is deducted from the computed global income tax, so where little tax is owed the rest is lost — there is no carry-forward and no refund. Tax-deferred retirement income and amounts transferred in from another pension account do not count (art. 59-3(1)1 and 2). An estimate.
The same 9m won, and only one case is cut
The proviso to article 59-3(1) cuts twice. Where payments into the pension-savings account exceed 6m won a year, the excess is treated as nil; and where the pension-savings amount within that 6m won plus payments into a retirement pension account exceed 9m won, that excess is treated as nil too.
Read closely: the 6m won cap binds the pension-savings account only. An IRP has no such cap.
So paying the whole 9m won into pension savings simply loses 3m won — at the 15% rate, a difference of 450,000 won. Split the same money as 6m won of pension savings plus 3m won of IRP and all of it counts.
Which measure applies comes first
The statute reads: 12% [or 15% where global income is 45m won or less, or, for those with employment income only, total salary of 55m won or less].
The thresholds are 10m won apart, so between them the measure decides the answer. Someone on 50m won with salary alone gets 15%; the same person with business income mixed in is measured on global income and gets 12%.
The figures often quoted — 16.5% and 13.2% — are not in the statute. Because a credit that reduces income tax also reduces local income tax (a tenth of it), those are the felt rates; what the Act sets is 15% and 12%. The calculator shows both.
With no tax to pay, filling the cap gets you nothing
The credit is deducted from the computed global income tax for the year. There has to be tax there to take it from.
Someone whose computed tax is 300,000 won can fill the cap completely and still not receive 1,050,000 won of it. And that part does not roll into next year — the Act provides no carry-forward.
Hence the order of operations: look at your own computed tax before filling the cap. If the "determined tax" line on your withholding receipt is near zero, money going into this account should be going in for some reason other than the credit.
If you moved a matured ISA across
Moving the balance of an ISA held for three years into a pension account makes that amount count as a payment into the pension account (art. 59-3(3)), and raises the cap by a tenth of the transfer, up to 3m won (art. 59-3(4)).
With the cap already full, moving 30m won increases the credit by 450,000 won. But the transfer itself is not what gets deducted — that is unpacked in the ISA maturity and pension transfer article.
Questions that remain
Is the cap higher at 50 and over?
The current statute draws no age distinction. Article 59-3(1) sets 6m won and 9m won and says nothing about age. The higher figure people remember came from a temporary provision that no longer applies.
Do employer contributions to a retirement pension count?
No. Paragraph (1)1 excludes retirement income on which tax has been deferred, and (1)2 excludes amounts paid in by transferring a contract from another pension account. What is credited is money you put in yourself.
What if I pay the whole 9m won into pension savings?
Only 6m won counts. The other 3m won attracts no credit. It still sits in the account and grows, but as money that never received a credit it is treated differently when you take it out.
By when must it be paid in?
Within the tax period — by 31 December. Opening the account and funding it are different things, so if you are setting one up late in the year, check that the money actually landed. More in the pension savings and IRP guide.
Sources
Income Tax Act art. 59-3 (pension account tax credit) — (1) the rates, the two caps and the two exclusions; (3) an ISA transfer counts as a payment; (4) the 10% / 3m won addition to the cap.
Income Tax Act art. 20-3(1)2 — the definition that a pension account is a pension-savings account or a retirement pension account sits in the parenthesis here.
The articles were read directly on the Korean Law Information Centre. The 16.5% and 13.2% figures in circulation are not in the statute; what it sets is 15% and 12%.
The calculator was checked against the same model — 3,360 combinations of measure, income, pension savings, IRP, ISA transfer and computed tax, all matching.
Where to check
The "determined tax" line on your withholding receipt. Near zero there means filling the cap returns nothing.
The scheme as a whole, and the rules for taking money out, are in the pension savings and IRP guide and how withdrawals are taxed. The ISA side is in maturity and the pension transfer, with the saving itself in the ISA calculator.
