Leaving Korea? Here is what you get
Severance pay, pension refund and the tax on both. Nobody puts these in one place, so we did.
Your employment
Total you take home
Severance plus pension refund, after tax
| Severance pay (before tax) | ₩8,909,228 |
|---|---|
| Average daily wage | ₩98,901 |
| Days of service | 1,096 |
| Retirement income tax | -₩93,820 |
| Local income tax | -₩9,380 |
| Severance after tax | ₩8,806,028 |
| Monthly contribution | ₩285,000 (9.5%) |
|---|---|
| Principal | ₩10,260,000 |
| Interest (2.2%) | ₩347,985 |
| Tax withheld | -₩148,040 |
| Refund after tax | ₩10,459,945 |
The refund includes your employer's share, not just your own contributions. Art.77(2) covers the full contribution rate.
| Annual salary | ₩36,000,000 |
|---|---|
| Normal progressive rates | ₩1,336,500 |
| Flat 19% (20.9% with local tax) | ₩7,524,000 |
| Cheaper option | Progressive rates — saves ₩6,187,500 |
Do not apply for the flat rate at this salary. It strips every deduction and credit, so you would pay 5.6× more tax. The flat rate only pays off above roughly ₩144 million a year.
What you are owed when you leave
Three separate payments, handled by three separate organisations. Nobody tells you about all of them at once.
1. Severance pay
If you worked 12 months or more, your employer owes you 30 days of average wage for each year of service. Nationality does not matter. The Employee Retirement Benefit Security Act has no citizenship requirement, and the Act on Foreign Workers' Employment explicitly bans discrimination.
E-9 workers: you get paid after you leave. Your severance comes from the Departure Guarantee Insurance, which pays out within 14 days of your departure, not before. If the insurance payout is less than the statutory amount, your employer must cover the difference.
2. National Pension lump-sum refund
This is the one most people miss. You can get back everything paid in, including your employer's half, plus interest.
But not everyone qualifies. Foreign nationals are excluded by default under art.126(4). You need one of these:
- An E-8, E-9 or H-2 visa — nationality is irrelevant. A Vietnamese worker on an E-9 qualifies even though Vietnam is not on the reciprocity list.
- A home country that pays Koreans a lump sum — the US, Canada, Australia, India, Indonesia, the Philippines, Thailand, Turkey and others.
- A social security agreement with a refund clause — some agreements use totalization instead, meaning your Korean contributions count toward your home pension rather than being refunded.
3. Tax on both
Severance and the pension refund are both taxed as retirement income, not regular income. That is good news: retirement income is taxed separately with generous deductions for length of service, so the effective rate is usually 1-3%.
Tax is withheld at source. You do not file anything for these.
The flat 19% tax trap
Foreign workers can elect a flat 19% rate instead of the normal progressive rates. Recruiters mention it a lot. For most people it is a very expensive mistake.
The flat rate strips every deduction and credit. No earned income deduction, no basic deduction, no pension contribution deduction, no tax credits. And it is 19% plus local income tax, so 20.9% in total.
| Salary | Progressive | Flat 20.9% |
|---|---|---|
| ₩24M | ₩229K | ₩5.0M |
| ₩50M | ₩3.3M | ₩10.5M |
| ₩100M | ₩14.1M | ₩20.9M |
| ₩144M | ₩29.9M | ₩30.1M |
| ₩200M | ₩52.1M | ₩41.8M |
Break-even sits around ₩144 million a year. Below that the progressive table wins, usually by a lot. An E-9 worker on ₩24 million would pay 22 times more tax under the flat rate.
You choose annually, so a bad year does not lock you in. The election is made at year-end settlement or in your final return.
Common questions
Can I claim the pension refund before I fly out?
You can file up to a month before departure if you show proof, such as a flight ticket. Payment still requires confirmed departure. Incheon Airport has a same-day counter that pays in foreign currency, but your employer must have filed your loss of coverage the day before.
How long do I have to claim?
Five years from departure or loss of nationality. After that the claim expires.
Do I get my employer's contributions back?
Yes. Art.77(2) explicitly includes the employer's share for workplace subscribers. You get the full contribution rate, not just your own half.
What if I worked less than a year?
No severance pay. The pension refund still applies for any period you contributed, provided you meet the eligibility rules.
Am I a resident or a non-resident for tax?
Generally you are a resident if you have an address in Korea or stay 183 days or more. Workers on contracts of a year or more are usually treated as residents from arrival. It does not change retirement income tax, which is assessed the same way either way.
Show the full formulas
[Severance pay] Employee Retirement Benefit Security Act art.8
average daily wage = wages of last 3 months / days in that period
severance = average daily wage x 30 x (days of service / 365)
Requires 12+ months of service and 15+ hours per week.
[Retirement income tax] Income Tax Act art.48, art.55
1. taxable = payment - service period deduction
up to 5 yrs : 1,000,000 x years
6-10 yrs : 5,000,000 + 2,000,000 x (years-5)
11-20 yrs : 15,000,000 + 2,500,000 x (years-10)
over 20 yrs : 40,000,000 + 3,000,000 x (years-20)
2. converted = taxable / years x 12
3. base = converted - converted income deduction
4. tax on base at progressive rates (6-45%)
5. final tax = tax / 12 x years
6. local income tax = final tax x 10%
Years always round UP.
[NPS lump-sum refund] National Pension Act art.77, Decree art.50
principal = monthly income x contribution rate x months
2026 rate = 9.5% (employee 4.75% + employer 4.75%)
interest = principal x 2.2% x (average holding months / 12)
2.2% is the 2026 three-year term deposit rate
Then taxed as retirement income using the formula above.
[Flat rate] Restriction of Special Taxation Act art.18-2
tax = gross salary x 19%
local income tax = tax x 10%
total = gross salary x 20.9%
No deductions or credits of any kind.
Available for 20 years from your first day of work in Korea.
Must have started work on or before 31 December 2026.