Korea tax guide
Simple vs Standard Expense Rate in Korea for Freelancers
3.3% Freelancer Tax
Who this guide is for
- Foreign freelancers seeing an expense rate in Hometax
- New business-income earners
- People without complete books
- 3.3% workers comparing filing methods
Quick Answer
Korea's simple expense rate and standard expense rate are official estimated-expense methods used in specific bookkeeping situations; they are not interchangeable percentages a freelancer may freely choose. Eligibility can depend on business type, prior-year or current-year revenue, new-business status, and bookkeeping obligations. Confirm the correct industry code and year-specific threshold before using either method.
Key points
- Simple and standard expense rates use different formulas.
- Eligibility depends on the taxpayer's facts, not preference alone.
- The correct industry code affects the applicable rate.
- Major expenses may receive different treatment under the standard method.
- Bookkeeping can be required or more favorable depending on actual costs.
Step-by-step explanation
Do not start with the percentage
Start with the taxpayer and business: identify the industry code, whether the business is new, current and prior-year revenue, and the applicable bookkeeping obligation. Only then determine whether an official expense-rate method is available.
Understand the formula difference
The simple expense rate estimates a broader portion of expenses through an official rate. The standard expense rate generally separates specified major costs, such as purchase costs, rent, and payroll, from a smaller rate applied to the remaining base. Exact treatment must follow current official instructions.
Compare with actual books
An expense-rate result can be higher or lower than actual net income. If actual costs are substantial and well documented, bookkeeping may produce a more accurate result. Conversely, missing records can limit separately recognized costs.
Verify the current-year data
Rates, thresholds, industry codes, and filing screens can change. Use the official table for the income year being filed and save the basis for the method chosen.
Documents you may need
- Business registration and industry code
- Current and prior-year revenue
- Hometax filing notice
- Books and account statements
- Purchase, rent, and payroll evidence
- Official year-specific expense-rate table
Common mistakes
- Choosing the higher percentage without checking eligibility
- Using the wrong industry code
- Applying a rate to net deposits instead of the correct revenue base
- Ignoring separate treatment of major expenses
- Assuming a Hometax prefill guarantees the final result
When should you ask a tax professional?
Ask a qualified tax professional if you have income from several countries, business income, unclear tax residency, treaty questions, missing documents, late filing concerns, or a visa situation that depends on tax records. This site explains general patterns only and cannot review your personal facts.
FAQ
Can I choose the simple expense rate because it gives a bigger deduction?
Not simply by preference. The applicable method depends on statutory eligibility, business type, revenue, new-business status, and bookkeeping obligations.
Is the rate the same for every freelancer?
No. Official rates vary by industry code and tax year.
What is different about the standard expense rate?
The standard method generally applies a lower official rate to part of revenue while separately recognizing specified major expenses when properly evidenced.
Should I keep receipts if using an expense rate?
Yes. Records remain important for revenue, separately recognized expenses, VAT, later review, and determining whether bookkeeping would be more accurate.
Official Sources to Verify
Tax rules and filing procedures in Korea may change depending on your visa status, income type, tax residency, and the tax year. Before making a tax decision, always verify your situation with official sources or a qualified professional.