Korean Progressive Income Tax
Overview
Korean income tax is assessed marginally across eight bands, so each slice of the tax base is charged at its own rate rather than the whole amount at the top rate. The schedule runs six percent up to 14 million won, fifteen percent to 50 million, 24 percent to 88 million, 35 percent to 150 million, 38 percent to 300 million, forty percent to 500 million, 42 percent to one billion and 45 percent beyond. A taxable base of 60 million won pays six percent on the first 14 million, fifteen on the next 36 million and 24 on the remaining ten, totalling about 8.64 million won — an effective rate near 14.4 percent against a 24 percent marginal rate. A local income tax equal to ten percent of the national figure is levied on top, and the same brackets govern capital gains on property for most owners.
Variables
| Symbol | Name | Unit | Description |
|---|---|---|---|
| $B_i$ | Bracket amount | KRW | The portion of the taxable base that falls within bracket i. |
| $R_i$ | Bracket rate | % | The marginal rate for bracket i, from 6% to 45%. |
| $Tax$ | Total tax | KRW | The sum of each bracket's amount multiplied by its own rate. |
Marginal, Not Average
Korean income tax is assessed by slicing the taxable base across eight bands and taxing each slice at its own rate:
$$Tax = \sum_{i=1}^{8} (B_i \times R_i)$$
Entering a higher bracket raises the rate on the amount above the threshold only. No taxpayer takes home less by earning more.
The Eight Brackets
| Taxable base | Marginal rate |
|---|---|
| Up to 14,000,000 KRW | 6% |
| 14,000,001 – 50,000,000 | 15% |
| 50,000,001 – 88,000,000 | 24% |
| 88,000,001 – 150,000,000 | 35% |
| 150,000,001 – 300,000,000 | 38% |
| 300,000,001 – 500,000,000 | 40% |
| 500,000,001 – 1,000,000,000 | 42% |
| Above 1,000,000,000 | 45% |
Average Versus Marginal Rate
The two diverge sharply. A taxable base of 100,000,000 KRW sits in the 35% bracket, yet the tax due is 19,560,000 KRW — an average rate of 19.6%. The marginal rate governs the next won earned; the average rate governs the total bill, and confusing the two overstates the burden by nearly half at typical professional incomes.
The Same Table Serves Capital Gains
Property transfer gains pass through this identical schedule after their own deductions, which is why the eight brackets appear in both income tax and capital gains calculations.
Derivation & History
Progressive slicing solves a defect of step-rate schedules, in which crossing a threshold applies the higher rate to the entire base and can leave a taxpayer with less after tax than before. By taxing only the slice inside each band, the function becomes continuous and monotonic in income. Korea expanded from four brackets in the 1990s to the present eight, the additions concentrated at the top of the distribution: the 40%, 42% and 45% bands were all introduced after 2012 as separate high-income tiers rather than by raising the existing top rate.
Worked Examples
Taxable base of 100,000,000 KRW
- First band: 14,000,000 × 0.06 = 840,000 KRW
- Second band: 36,000,000 × 0.15 = 5,400,000 KRW
- Third band: 38,000,000 × 0.24 = 9,120,000 KRW
- Fourth band: 12,000,000 × 0.35 = 4,200,000 KRW
- Sum: 840,000 + 5,400,000 + 9,120,000 + 4,200,000
Result: 19,560,000 KRW — a 35% marginal rate but a 19.6% average rate
Edge Cases & Limitations
The base is not gross income: deductions and personal allowances are removed first, so a salary well inside one band frequently produces a taxable base in a lower one.
Local income tax sits outside the table: a further 10% of the calculated national tax is levied separately, raising an effective 35% marginal rate to 38.5%.
Thresholds are nominal: the bands are not indexed to inflation, so bracket creep raises effective rates in the absence of legislation.
Rates change by statute: the eight-band structure shown here is the 2026 schedule and is revised in most annual tax bills.
Real-World Applications
Payroll systems withhold against this schedule monthly and reconcile at the year-end settlement (연말정산), the point at which most Korean employees see whether their deductions matched the table. Financial planners use the marginal rate to price the benefit of a pension contribution or a deductible expense, and the same brackets determine the rate applied to a property transfer gain after the capital gains deductions have been taken.