Korea’s 3.3% freelancer withholding: how to invoice

Why Korean clients deduct 3.3% from freelance fees, who it applies to, a worked 1,500,000-won example, how to write the invoice and what happens at year end.

The short answer

When a Korean business pays an individual freelancer for services that count as business income subject to withholding, it keeps back 3% as income tax and a further tenth of that, 0.3%, as local income tax, and pays the freelancer the rest. That is the “3.3%” Korean clients mention. The payer pays the withheld tax to the tax office by the 10th of the following month, according to the National Tax Service (NTS).

For you as the freelancer, the invoice shows the agreed fee before withholding, and the client transfers 96.7% of it. The 3.3% is a prepayment of your income tax, settled in your annual return, not a fee you lose.

Who it applies to, and who it does not

The NTS rate table lists 3% for business income subject to withholding. In practice this covers individuals who supply their own services without charging VAT, such as many lecturers, writers, designers and developers working without a VAT business registration. These cases are different:

  • A freelancer registered as a VAT business charges 10% VAT and issues a tax invoice instead; the 3.3% is not taken.
  • A one-off payment treated as other income, such as some single lectures, follows a different line of the rate table, so this arithmetic does not apply.
  • A non-resident paid by a Korean business is under the NTS rules for non-residents, and a tax treaty may change the rate.
  • An employee’s salary is withheld under the payroll rules, not this rate.

Worked example: a design fee of 1,500,000 won

A freelance designer without a VAT registration agrees a fee of 1,500,000 won with a Korean company. No VAT is added, so the fee is also the invoice total. The company works out the withholding on that fee:

The designer’s bank account receives 1,450,500 won, and the company gives a withholding receipt showing the 49,500 won. When you agree a price, say whether it is before or after withholding: “1,500,000 won before tax” is clear, while “1,500,000 won” on its own invites a dispute about 49,500 won.

  • Income tax at 3%: 1,500,000 × 0.03 = 45,000 won
  • Local income tax, a tenth of that: 45,000 × 0.1 = 4,500 won
  • Withheld in total, 3.3%: 45,000 + 4,500 = 49,500 won
  • Paid to the designer: 1,500,000 − 49,500 = 1,450,500 won

Writing the invoice

Bill the fee before withholding. In QuoteBill, enter the work as lines with their prices, set “Tax rate (%)” to 0 when you do not charge VAT, and write the withholding in “Notes”, for example: “3.3% business income withholding (49,500 won) to be deducted by the payer; amount to be transferred: 1,450,500 won.” QuoteBill has no withholding line of its own, so the printed total stays 1,500,000 won and the note explains the difference.

Add your name, contact details and bank account in “Terms”. Many clients also ask for a copy of your ID card or bank book to file the withholding; send those through a channel you trust, not inside the invoice PDF.

Checking the numbers with the calculator

QuoteBill’s VAT and GST calculator has a second box for a deduction. Type 1,500,000, set the tax rate to 0 and the deduction to 3.3, and it shows 49,500 deducted and 1,450,500 payable. For a VAT-registered freelancer the same tool adds 10% VAT first. It is a helper, not tax advice: whether withholding applies and at what rate depends on the kind of income.

At the end of the year: a checklist

Withholding is not the final tax. You declare your income for the year in the comprehensive income tax return the following May, the 3.3% already withheld is credited, and you pay the difference or receive a refund. Keep each client’s withholding receipt and your invoices together; they are the record of what was paid and withheld.

  • Agree every fee as an amount before withholding.
  • Check that each payment received equals 96.7% of the invoice.
  • Collect a withholding receipt from each client.
  • Keep the invoices and receipts by client and month for the May return.

Questions people ask

Is 3.3% a fee the client keeps? No. The client pays it to the tax office in your name, and it is credited against your income tax when you file your annual return.

Should my invoice show 1,500,000 or 1,450,500 won? The fee before withholding, 1,500,000 won, with a note that the client deducts 3.3% and transfers 1,450,500 won. Showing only the net figure makes the client’s withholding records harder to match.

I am registered as a VAT business. Does the 3.3% still apply? Generally not: a VAT-registered business adds 10% VAT and issues a tax invoice. Check with the client or a tax adviser if a client still asks to withhold.

I live abroad and work for a Korean company. Is it 3.3%? Non-residents follow separate withholding rules, and a tax treaty between Korea and your country may change the rate. Ask the client which rule they apply and check the NTS page for non-residents.

Sources

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