When you work as a freelancer or sole proprietor in Korea, you must manage your own taxes — unlike salaried employees whose employers handle withholding. To avoid scrambling every May during income tax filing season, it is crucial to prepare from early in the year. Proper tax planning can save you millions of won.
This guide covers the tax structure for freelancers vs business owners, 2026 tax brackets, deductible expenses, VAT filing, and key tax-saving strategies.
📑 Table of Contents
1. Freelancer vs Business Owner Tax Structure
Freelancers (personal service income earners) and registered sole proprietors have different tax structures in Korea.
| Category | Freelancer (3.3%) | Sole Proprietor |
|---|---|---|
| Withholding | 3% income tax + 0.3% local = 3.3% | No withholding (self-file and pay) |
| VAT | Exempt (personal services) | Taxable (10% of sales) |
| Expenses | Standard expense rate | Actual expenses (bookkeeping) |
| Best for | Revenue under 48M won, low expenses | Revenue over 48M won, high expenses |
2. 2026 Comprehensive Income Tax Brackets
Korea uses a progressive tax system — the higher your taxable income (income minus expenses minus deductions), the higher the rate.
| Taxable Income | Rate | Progressive Deduction |
|---|---|---|
| Up to 14M won | 6% | - |
| 14M ~ 50M won | 15% | 1.26M won |
| 50M ~ 88M won | 24% | 5.76M won |
| 88M ~ 150M won | 35% | 15.44M won |
| 150M ~ 300M won | 38% | 19.94M won |
| Over 1B won | 45% | 65.94M won |
3. Deductible Expense Checklist
The more expenses you can deduct, the lower your taxable income and tax bill. Here are common deductible items for freelancers and business owners.
01 Office & Workspace
- ✓ Office rent, maintenance fees
- ✓ Coworking space memberships
- ✓ Home office (proportional to area used)
- ✓ Internet and electricity (business-use portion)
02 Equipment & Software
- ✓ Computers, monitors, printers
- ✓ Software licenses (Adobe, MS Office, etc.)
- ✓ Cloud service fees
- ✓ Business phone bills
03 Transport & Travel
- ✓ Business transportation (taxi, transit, fuel)
- ✓ Business trip accommodation and meals
- ✓ Business vehicle expenses (insurance, maintenance, depreciation)
4. VAT Filing Schedule
Registered business owners must file Value Added Tax (VAT). (Freelancers providing personal services are VAT-exempt.)
25
Final VAT for previous year July~December
25
Preliminary VAT for January~March
25
Final VAT for January~June
5. Tax-Saving Strategies
💡 5 Key Tax-Saving Strategies for Freelancers
A retirement-style savings plan for small business owners, with income deductions of up to 5M won/year depending on your income level.
Contributing up to the limit (pension 6M + IRP for total 9M won) gives a tax credit of 16.5% (income under 45M) or 13.2% (over 45M).
If your actual expenses exceed the standard expense rate, bookkeeping lets you deduct more. Double-entry bookkeeping also qualifies for an additional tax credit (20% of calculated tax, up to 1M won).
Tax invoices, cash receipts, and card slips are required proof for expense deductions. Expenses without documentation will not be recognized.
Above certain revenue thresholds (varies by industry), you must get a CPA's verification. The verification cost itself is 60% tax-creditable (up to 1.2M won).
Conclusion
Tax management for freelancers and business owners is most effective when started early. Collect expense receipts from the beginning of the year, enroll in tax-saving products, and use CalKit's tax calculators to estimate your tax liability in advance. You will not be caught off guard in May.