Every employee in Korea gets one tax credit without asking: the wage income tax credit. It takes off 55% of calculated tax up to 1.3 million won and 30% above that, but its cap falls from 740,000 to 660,000, 500,000 and 200,000 won as total pay rises. On the same line of the settlement sits the standard tax credit of 130,000 won, given even with no receipts. We read articles 59 and 59-4(9) of the Income Tax Act as written and worked out the caps.
1. The credit: 55% up to 1.3 million won, then 715,000 won plus 30% of the excess. It is based on calculated tax on wage income (art. 59(1)).
2. The cap depends on total pay. 740,000 won up to 33 million won; at least 660,000 up to 70 million; at least 500,000 up to 120 million; at least 200,000 above (art. 59(2)).
3. The standard tax credit is 130,000 won. Employees who claim no special income deductions, special tax credits or monthly-rent credit get it instead (art. 59-4(9)1).
The credit — art. 59(1)
| Calculated tax on wages | Credit (statute) | Example (ours) |
|---|---|---|
| 1.3 million won or less | 55/100 of calculated tax | 1,000,000 → 550,000 won |
| Over 1.3 million won | 715,000 won + 30/100 of the amount over 1.3 million | 2,000,000 → 925,000 won (before the cap) |
715,000 won is 55% of 1.3 million, so the two bands meet without a jump.
The cap — art. 59(2)
| Total pay | Cap (statute) | Pay at which the floor is reached (ours) |
|---|---|---|
| 33 million won or less | 740,000 won | — |
| Over 33m to 70m won | 740,000 − (pay − 33m) × 8/1000, minimum 660,000 won | 660,000 from 43 million won |
| Over 70m to 120m won | 660,000 − (pay − 70m) × 1/2, minimum 500,000 won | 500,000 from 70.32 million won |
| Over 120m won | 500,000 − (pay − 120m) × 1/2, minimum 200,000 won | 200,000 from 120.6 million won |
Watch the slopes. The second band falls slowly, 80 won per 10,000 won of pay, but the third and fourth fall by 5,000 won per 10,000. So going just 320,000 won over 70 million drops the cap from 660,000 to 500,000 won, and just 600,000 won over 120 million drops it from 500,000 to 200,000 (our arithmetic).
An example — total pay of 40 million won
If calculated tax on wages is 2,287,500 won, the credit is 715,000 + (2,287,500 − 1,300,000) × 0.3 = 1,011,250 won. But the cap at 40 million won is 740,000 − (40m − 33m) × 0.008 = 684,000 won, so 684,000 won is what comes off. Our year-end tax calculator shows the same case as a chart.
Standard tax credit of 130,000 won — art. 59-4(9)
A resident with wage income who has not applied for the income deductions or tax credits under paragraph 6, article 52(8) and article 95-2(3) of the Restriction of Special Taxation Act: 130,000 won a year
Claim none of the special tax credits (insurance, medical, education, donations), special income deductions (health insurance premiums, housing funds) or the monthly-rent credit, and 130,000 won comes off instead (our plain-language reading of the three provisions the article points to). Put the other way, if those would total less than 130,000 won, the standard credit is better (our reading).
Daily workers — art. 59(3)
When tax is withheld from a daily worker’s wages, 55/100 of calculated tax is credited. The 1.3 million won band and the pay-based cap do not appear in this paragraph.
Checklist
- ☐ Which band is your total pay in? Just above 70 million or 120 million won the cap is very different
- ☐ The wage income tax credit applies automatically
- ☐ Special credits totalling under 130,000 won? Take the standard credit
Questions that remain
Is total pay the same as gross salary?
No. It is salary less non-taxable pay — see non-taxable pay allowances. More exempt pay lowers total pay and can change the band.
What if I have other income too?
Article 59(1) deducts from “calculated tax on that wage income.” How the wage share is split when other income is mixed in is not covered here.
Before the rates apply, the wage income deduction comes off total pay — 70% of the first 5 million won, capped at 20 million, and 11.25 million on pay of 40 million won (wage income deduction).
Sources
- Income Tax Act [in force 1 Jul 2026] [Act No. 21221] — original text (checked 2 October 2026). Article 59(1) (1.3 million won, 55/100, 715,000 won, 30/100), (2) (740,000, 660,000, 500,000 and 200,000 won; 8/1000; 1/2), (3) (daily workers, 55/100) and article 59-4(9) (standard tax credit, 130,000 won).
- Our own working. 43 million, 70.32 million and 120.6 million won, and the 1,011,250 and 684,000 won in the 40 million won example, are our arithmetic.
Where to check further
- The whole calculation — year-end tax calculator.
- With children — child tax credit.
Written on 2 October 2026. Articles are from the National Law Information Center; the arithmetic and example are ours.
