On 3 August 2026, Korea’s Ministry of Economy and Finance announced the 2026 tax reform plan. The selected proposals include changes affecting global mobility employees.
The proposals remain subject to legislative review and may change before enactment. It is expected to be finalized and approved by the National Assembly in December 2026, and changed regulations are generally intended to apply from 1 January 2027.
Broader eligibility for the basic personal deduction
The income threshold for a spouse or dependent to qualify for the KRW 1.5 million basic personal deduction would increase from KRW 1 million to KRW 3 million of annual income. Where wage and salary income is the individual’s only income, the gross salary threshold would increase from KRW 5 million to KRW 7.5 million. The revised thresholds would apply for tax years beginning on or after 1 January 2027.
Changes to the foreign employee flat tax regime
The optional flat income tax rate for qualifying foreign employees would increase from 19% to 21% (from 20.9% to 23.1% including local income tax). As under the current regime, an employee electing the flat rate would not be entitled to income exclusions, deductions, or tax credits that otherwise apply under the progressive tax system.
The regime would remain available for up to 20 years from the date the individual first begins working in Korea, and its sunset deadline would be extended from 31 December 2026 to 31 December 2029. The 21% rate before local income tax would apply to income arising on or after 1 January 2027.
Foreign engineers and qualifying research personnel
The 50% income tax reduction for qualifying foreign engineers would be extended through 31 December 2029, but eligibility would be narrowed for certain researchers. For the research-based category, a doctorate would be required instead of a bachelor’s degree, together with at least five years of overseas research experience. The current special two-year experience concession for doctorate holders would be removed.
In addition, an in-house corporate research institute or dedicated R&D department would qualify only where the employer meets specified strategic technology conditions, including qualifying R&D tax credit treatment or ownership of designated national strategic, advanced strategic, or core industrial technology. These changes would apply to employment contracts entered into on or after 1 April 2027.
Childbirth and childcare support
Employer-paid childbirth support would qualify for non-taxable income where paid from the beginning of pregnancy through two years after the child’s birth, rather than only during the two-year period following birth. The limit of two payments per child would remain. In addition, the monthly non-taxable childcare allowance of up to KRW 200,000 per child would be extended to foster children aged six or younger. These changes would apply to the childbirth support and childcare allowance paid on or after 1 January 2027.
Separately, the existing childbirth and adoption tax credit—KRW 300,000 for the first child, KRW 500,000 for the second child, and KRW 700,000 for the third and subsequent children—would be discontinued as part of a transition to direct fiscal support. The temporary marriage tax credit would also expire after 31 December 2026.
Enhanced penalty relief for prompt late filing
A taxpayer filing within one week after the statutory deadline would receive a 75% reduction of the failure-to-file penalty. The existing reductions would continue for later filings: 50% where filed after one week but within one month, 30% where filed within three months, and 20% where filed within six months. The enhanced relief would apply to late returns filed on or after 1 January 2027.
As the proposals remain subject to review and possible amendment, employers and individuals should confirm the final legislation, implementing regulations, and effective dates before taking action.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Danielle Suh
Partner
Na Young Hwang
Director
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