Self-Employed Tax in South Korea

What taxes does a Korean sole proprietor pay on business income?

A sole proprietor (saeopja, 사업자) in South Korea is taxed as an individual under the Income Tax Act (Sodeuksebeob, Act No. 4019). Net business income -- gross revenue minus allowable business expenses -- is combined with any other income the individual earns and taxed through the eight-band progressive schedule administered by the National Tax Service (Guksecheong, NTS). National income tax rates run from 6 percent on the first KRW 14 million of taxable income up to 45 percent on income above KRW 1 billion. An additional local income tax (jibangsebeob) is levied at 10 percent of the national income tax payable, raising the effective combined top marginal rate to approximately 49.5 percent [1][2]. Because a sole proprietorship is legally transparent, all business profit is attributed directly to the owner and reported on the annual comprehensive income tax return (jonghap sodeukse singo, 종합소득세 신고) due by 31 May each year. There is no separate corporate layer. Individuals with income below KRW 14 million pay the 6 percent floor rate; those earning KRW 50 million to KRW 88 million fall in the 24 percent band, which covers a large share of Korean service-sector freelancers. Consulting a qualified tax professional (semusa, 세무사) registered with the Korean Association of Certified Public Tax Accountants is the standard practice for complex sole-proprietor situations.

How does the simplified expense-rate (gyeongbi-yul) method reduce compliance burden?

Small Korean sole proprietors who lack detailed receipt records may calculate deductible expenses using the NTS-published estimated expense rates (gyeongbi-yul, 경비율) rather than documenting every invoice. Two tiers exist. The basic estimated rate (dansun gyeongbi-yul, 단순경비율) applies to taxpayers whose prior-year revenue falls below prescribed thresholds: roughly KRW 60-75 million for most service businesses. Under this method the NTS pre-certifies that a set percentage of gross receipts represents allowable costs, eliminating the need to substantiate actual expenditures. Example rates from the NTS 2024 gyeongbi-yul notice include approximately 89.7 percent for Korean-food restaurants and 72.9 percent for accountants and tax consultants, meaning a restaurant reporting KRW 50 million in receipts would deduct an estimated KRW 44.85 million before applying the income tax schedule [3]. The standard estimated rate (gijun gyeongbi-yul, 기준경비율) applies once a business crosses the threshold; this method recognises major cost items -- purchases, wages, rent -- at actual amounts while the remaining overhead is estimated using the published percentage. Above-threshold businesses that choose to substantiate all actual costs via double-entry bookkeeping (boksikjangbu, 복식장부) may claim a bookkeeping tax credit of 20 percent of income tax (capped at KRW 1 million). The NTS publishes the full industry-code table annually; the April 2025 release is available at the Korea Open Data Portal [3][4].

What bookkeeping method is legally required for each revenue tier?

The Income Tax Act sets distinct bookkeeping obligations by annual revenue and business category. Sole proprietors with prior-year revenue below approximately KRW 75 million in service businesses (or corresponding thresholds in other categories) may use the simplified ledger (ganpyeonjangbu, 간편장부) -- a single-entry cash-basis record that the NTS provides as a standard template. Those above the simplified-ledger threshold must maintain full double-entry bookkeeping (boksikjangbu), producing the five principal financial statements from which taxable income is derived. Wholesale and manufacturing businesses face lower thresholds because their transaction volumes are higher relative to revenue. Sole proprietors who voluntarily adopt double-entry bookkeeping below the mandatory threshold receive the 20 percent bookkeeping credit noted above. Separate from the bookkeeping obligation, sole proprietors with prior-year revenue of KRW 80 million or more must issue all B2B invoices as electronic tax invoices (jeonja segeum gyesanseo, 전자세금계산서) through the NTS Hometax system from July 2024 onward [4].

What VAT obligations apply to Korean sole proprietors?

Korea levies Value-Added Tax (bugagachise, 부가가치세) at 10 percent on most goods and services. There is no blanket revenue threshold that exempts a general business from VAT registration; registration is required at commencement of taxable business activity. However, taxpayers with annual supply value below KRW 104 million (threshold raised from KRW 80 million effective July 2024) may elect the simplified VAT taxpayer regime (ganil bugagachise, 간이부가가치세), which replaces the full input-credit calculation with a reduced sector-specific effective rate ranging from approximately 1.5 percent to 4 percent of supply value [5]. Real estate rental businesses and taxable entertainment venues retain the lower KRW 48 million threshold and are ineligible for simplified VAT treatment. General (non-simplified) VAT taxpayers file semi-annual VAT returns: the first-period final return covers January-June and is due 25 July; the second-period final return covers July-December and is due 25 January of the following year. Two interim payments are made on 25 April (50 percent of prior second-period VAT) and 25 October (50 percent of current first-period VAT); payments below KRW 500,000 are collected at the final filing rather than separately. Simplified VAT taxpayers file a single annual return due 25 January; those with supply value below KRW 48 million are exempt from payment but still file the annual declaration [6].

When must a sole proprietor file the comprehensive income tax return and the November interim prepayment?

The annual comprehensive income tax return (jonghap sodeukse singo) is due 1-31 May of the year following the tax year. For example, income earned in calendar year 2025 is reported by 31 May 2026. Where the NTS grants a review extension through a certified tax agent, the deadline extends to 30 June. In November of each tax year, sole proprietors with prior-year business income are also required to make an interim income tax prepayment (jungan yenam, 중간예납). The NTS issues a prepayment notice in early November calculated at 50 percent of the comprehensive income tax assessed for the prior year. The sole proprietor must pay by 30 November. Sole proprietors may elect instead to calculate interim tax based on actual business income earned in the current year's first half (January-June) and submit an estimated declaration; this election is available when the H1-based calculation is less than 30 percent of the NTS notice amount. The prepayment is credited against the May return liability. Exemptions apply to newly established businesses that have no prior-year liability, businesses that closed or suspended operations, and cases where the prepayment notice amount is below KRW 500,000. Instalments are available for interim amounts exceeding KRW 10 million [7]. The South Korea country overview provides additional background on the Korean tax system, including the treaty network and corporate-rate comparison.

What social insurance applies to the self-employed?

Four mandatory social insurance programs cover Korean sole proprietors, though the contribution mechanics differ from the employed. National Pension (gukmin yeonggeum, 국민연금): sole proprietors pay 9 percent of declared monthly income, compared with the employed who split 9 percent equally between employer (4.5%) and employee (4.5%). Self-employed individuals bear the full 9 percent themselves, subject to a floor (approximately KRW 330,000 monthly) and ceiling (approximately KRW 5.24 million monthly) [2]. National Health Insurance (gukmin geongang boheum, 국민건강보험 -- NHIS): locally insured households (including sole proprietors) pay premiums based on a score system that weights income, property, and vehicle ownership. For 2025-2026 each score point equals KRW 211.5; the effective rate approximates 7.19 percent of income for a household relying primarily on business income, though the actual calculation is household-specific [8]. Long-Term Care Insurance (janggi yoyang boheum): assessed at approximately 12.95 percent of the health insurance premium, adding roughly 0.93 percent of income in 2025-2026. Employment Insurance (goyong boheum): self-employed may voluntarily enroll; the 2025 rate is 2.25 percent of declared income. Total mandatory contributions for a sole proprietor without optional employment insurance run approximately 10-11 percent of income, rising to roughly 13 percent including voluntary employment insurance. These obligations are separate from income tax and add meaningfully to the overall effective burden. Reaching a qualified tax professional -- search TaxPros Rated for practitioners experienced in Korean sole-proprietor compliance -- is recommended when planning contributions around the NPS income ceiling or structuring household NHIS exposure.