How to get a tax credit for monthly house rent as a foreign resident?

How to get a tax credit for monthly house rent as a foreign resident?

Starting 2021, a foreigner with salary income less than KRW 70mil a year can apply for a tax credit of 10% to 12% of the total rental payment for his housing in Korea.
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Who can apply for the tax credit on monthly housing rent?

1. A foreign resident with a valid ARC number and the current address on the ARC is the same as the rent house address on the lease contract.
2. A foreigner with a yearly gross salary equal to or less than KRW 70 mil. (Income from employment contract only. Freelancers or a person with registered business only is not applicable. A person with a mixture of salary income and freelancing income can apply this tax credit to his salary income tax, but there is another income volume limit)
3. The head of household (세대주) or a family member with the same address didn’t apply for residential tax deductions or housing rent tax credit for the same period.
4. A house with its standard market price(기준시가) less than KRW 300mil or its exclusive residential area(주거 전용면적)less than 85 square meters.
5. A foreigner who doesn’t own a residential house in Korea.
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How much do I benefit from this housing rent tax credit?

Let’s assume you pay KRW 500,000 per month (or KRW 6,000,000 / year) for your house.

If your gross salary income (which is before deduction of social insurance and income tax) is less than KRW 70 million, then the maximum tax credit is KRW 600,000 (10% of your total rent payment) from the housing rent.

If your gross salary income (which is before deduction of social insurance and income tax) is less than KRW 55 million, then the maximum tax credit is KRW 720,000 (12% of your total rent payment) from the housing rent.

This is a tax credit that only works as a deduction from your salary income tax payable, NOT a tax refund. Also, there is a yearly limit on the total housing rent payment which is KRW 7,500,000 per year for tax credit.
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How do I apply for this housing tax credit?

When your company performs the salary income tax settlement in February 2022, please provide the following application documents to your company.

1. Alien Registration Card with current address or Confirmation of Residence (체류지 확인서)
2. House Rent Contract
3. Copy of Bank Transfer to show the payment of housing rent fee (Recipient's name is the same as landlord’s name)
4. Any additional documents may be required by the accountant of your company
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If you would like to ask more questions on a housing tax credit, feel free to reach myself at www.aratax.net

Written by Ara Jung (CTA)

All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation.

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