Article 127 (Liability for Withholding Taxes), Income Tax Act, as last amended by Act No. 14474, Dec. 27, 2016

An employer shall withhold income tax of employees.


*Income Tax Act

Article 127 (Liability for Withholding Taxes)

(1) Any person who pays any of the following incomes (limited to persons specified by Presidential Decree, such as business operators, in cases of a person who pays income specified in subparagraph 3) to a resident or a nonresident in the Republic of Korea, shall withhold income tax from such resident or nonresident pursuant to this Section:

1. Interest income;

2. Dividend income;

3. Business income prescribed by Presidential Decree (hereinafter referred to as "business income subject to withholding");

4. Wage and salary income: Provided, That the following income shall be excluded:

(a) Wage and salary income received from a foreign institution or the UN forces (excluding US forces) stationed in the Republic of Korea;

(b) Wage and salary income received from a nonresident abroad or a foreign corporation (excluding a branch or a sales office thereof in the Republic of Korea): Provided, That the following income shall be excluded:

(i) Income reflected as necessary expenses or deductible expenses in calculating the amount of domestic source income of a domestic place of business of a nonresident under Article 120 (1) and (2) and the amount of domestic source income of a domestic place of business of a foreign corporation under Article 94 (1) and (2) of the Corporate Tax Act;

(ii) Income of temporary staffing agency workers whose wage and salary income from a foreign corporation abroad (excluding a branch or a sales office thereof in the Republic of Korea) is subject to the withholding of income tax under Article 156-7;

5. Pension income;

6. Other income: Provided, That the following income shall be excluded:

(a) Income under subparagraph 8;

(b) A penalty for breach of contract or damages under Article 21 (1) 10 (only applicable to cases where earnest money is replaced with a penalty for breach of contract or with damages);

(c) Income under Article 21 (1) 23 or 24;

7. Retirement income: Provided, That income received by any person with wage and salary income falling under any item of subparagraph 4 after retirement from office shall be excluded;

8. Service charges prescribed by Presidential Decree.

(2) Paragraph (1) shall apply to an act of a person who acts for a withholding agent pursuant to paragraph (1) (limited to persons prescribed by Presidential Decree, such as business operators, in cases of income specified in paragraph (1) 3) or is entrusted with withholding, considering it as an act of a person himself/herself or the mandator within the scope of authorization or delegation.

(3) Where a financial company, etc. underwrites, trades, mediates, or represents bills, debt certificates, stocks, or collective investment securities (hereafter referred to as "bills, etc." in this Article) issued by a domestic person, paragraph (2) shall apply to such financial institution, etc., considering that there is relationship of procuration or trust between such financial company, etc. and the relevant domestic person.

(4) Where a trust business operator under the Financial Investment Services and Capital Markets Act operates, keeps, or manages trust property, paragraph (2) shall apply, considering that there is relationship of procuration or trust of tax withholding obligations between the relevant trust business operator and a person who pays income attributed to the relevant trust property.

(5) Where a foreign corporation pays income under paragraph (1) 1 or 2 generated from bonds or securities it has issued to a resident, a person who acts for the foreign corporation to make such payment in the Republic of Korea or is delegated or entrusted with the authority to make such payment, shall withhold income tax on such income.

(6) Where a business operator (including a corporation; hereafter the same shall apply in this paragraph), when receiving the fees for supplying boarding and lodging service or any service, receives service charges pursuant to paragraph (1) 8 with the price and pays the same to the relevant income earner, such business operator shall withhold income tax for the service charges.

(7) A person obliged to withhold taxes pursuant to paragraphs (1) through (6) shall be referred to as "withholding agent."

(8) The scope, etc. of the withholding agent and other necessary matters shall be prescribed by Presidential Decree.