South Korea proposes private pension taxation changes 

The taxation of private pensions in South Korea would change under a bill (Korean) awaiting approval by the National Assembly but expected to take effect in February 2020.

Highlights

• A lower tax ceiling for executives’ retirement income would treat amounts exceeding the ceiling as earned income subject to a higher income tax rate.
• A tax credit would apply to individual savings account (ISA) deposits transferred to a pension account. An ISA deposit could be transferred on its expiration to a pension account, even if the amount exceeds the annual pension contribution cap (currently KRW 18 million). The tax credit would equal 10% of the transferred amount (up to KRW 3 million), provided that the transfer takes place within 60 days after the ISA’s expiration.
• Individuals aged 50 years or older who earn up to KRW 120 million will receive an expanded tax credit on pension savings up to KRW 6 million (increased from KRW 4 million) or, if their individual pensions account is included, up to KRW 9 million (increased from KRW 7 million).
• A reduced tax rate will apply to retirement income held as an annuity exceeding 10 years. For income withdrawn earlier than 10 years, the tax rate remains unchanged.

Related Resources

• Tax Amendment Bill (Korean) (Ministry of Economy and Finance, 25 Jul 2019)