Article 12 (Non-Taxable Income), Income Tax Act, as last amended by Act No. 14474, Dec. 27, 2016

No allowances are regulated to be paid mandatorily. However a lot of companies are paying various allowances and following are non-taxable examples among them.

Meal allowance is exempt from tax up 100,000 won per month.
Childcare allowance for under 6 year old up to 100,000 won per month.
Allowances for driving one’s own car on the purpose of business up to 200,000 won per month.


*Income Tax Act

Article 12 (Non-Taxable Income)

No income tax shall be levied on the following income:

1. Profits of a public trust under Article 106 of the Public Trust Act;

2. Any of the following business income:

(a) Income generated by having a person utilize a paddy field or a dry field for the production of crops;

(b) House rental income of a person who owns only one house (excluding rental income from a house whose standard market price under Article 99 exceeds 900 million won and from a house located overseas) or of a person the total amount of whose gross earnings specified by Presidential Decree during the relevant taxable period does not exceed 20 million won (limited to the income accruing until the taxable period that ends on or before December 31, 2018). In such cases, necessary matters concerning calculation of the number of houses, computation of the house rental income, etc. shall be prescribed by Presidential Decree;

(c) Sideline income of a farm household prescribed by Presidential Decree;

(d) Income generated from manufacturing traditional liquor prescribed by Presidential Decree;

(e) An amount not exceeding six million won a year, generated from felling or transferring forest trees in forest land, the afforestation period of which is at least five years. In such cases, necessary matters, such as the afforestation period and the calculation of the amount of tax, shall be prescribed by Presidential Decree;

(f) Income generated from business of cultivating plants prescribed by Presidential Decree;

3. Any of the following wage and salary income or retirement income:

(a) Pay received by a soldier in service prescribed by Presidential Decree;

(b) Pay received by a person mobilized according to Acts, from the place of work which mobilizes him/her;

(c) A medical care benefit, business suspension benefit, disability benefit, nursing benefit, survivors' benefit, special survivors' benefit, special disability benefit, funeral expenses received by a beneficiary under the Industrial Accident Compensation Insurance Act, or a benefit in the nature of compensation, reparation, or consolation received by an employee or his/her survivors in connection with any injury, disease, or death due to the provision of labor;

(d) Compensation for medical treatment, compensation for business suspension, compensation for injury or disease, lump sum compensation, compensation for disability, compensation for bereaved families, compensation for missing, compensation for loss of personal belongings, funeral expenses, and funeral service expenses received by an employee, seaman, or his/her survivors under the Labor Standards Act or the Seafarers’ Act;

(e) An unemployment benefit, childcare leave benefit, benefits for reduction of working hours during period of infant care, maternity leave benefit, etc. received under the Employment Insurance Act, support funds for a change of occupation under the Support for Discharged Soldiers Act, and a childcare leave allowance received by a public official under the State Public Officials Act or the Local Public Officials Act or by a person governed by the Pension for Private School Teachers and Staff Act or the Special Post Offices Act pursuant to the relevant Acts and subordinate statutes;

(f) A lump sum allowance of refund (only applicable to that received due to death) or a lump sum allowance for death received under the National Pension Act;

(g) Medical treatment expenses, a lump sum allowance for medical treatment, compensation for disability, condolence money, compensation for death, compensation for bereaved families, a lump sum allowance for the bereaved family, a lump sum allowance of pension for the bereaved family, additional money to bereaved family pension, special additional money to bereaved family pension, contribution for accident, and compensation for accident, or pay received while on leave due to physical or mental disability or disease under the Public Officials Pension Act, the Military Pension Act, the Pension for Private School Teachers and Staff Act, or the Special Post Offices Act;

(h) School expenses prescribed by Presidential Decree;

(i) Pay in the nature of reimbursement for actual expenses prescribed by Presidential Decree;

(j) A salary received by a person prescribed by Presidential Decree, who works for a foreign government (including a local government of a foreign country, and a state government of a foreign country which is a federal state; hereinafter the same shall apply) or an international organization prescribed by Presidential Decree: Provided, That this shall only apply where the relevant foreign government does not levy income tax on a salary of a public official of the Republic of Korea who works in that country;

(k) Veteran payments and educational subsidies received under the Act on the Honorable Treatment of and Support for Persons, etc. of Distinguished Services to the State or the Act on Support for Persons Eligible for Veteran’s Compensation;

(l) Pension received under the Honorable Treatment of Ex-Presidents Act;

(m) Pay received by military personnel or a civilian worker in the military stationed in a foreign country to perform any mission operations;

(n) Where military personnel or a civilian worker in the military who serves in a war dies in the line of duty (including death caused by any war wound; hereinafter the same shall apply), pay for the taxable period to which the date he/she dies belongs;

(o) Wages prescribed by Presidential Decree received for service furnished abroad or in North Korea under the Inter-Korean Exchange and Cooperation Act;

(p) Insurance premium borne by the State, a local government, or an employer under the National Health Insurance Act, the Employment Insurance Act, or the Act on Long-Term Care Insurance for Older Persons;

(q) An allowance received by a worker prescribed by Presidential Decree in consideration of the level of wages, categories of work, etc., who engages in production and work related thereto, for overtime work, night-shift work, or holiday work prescribed by Presidential Decree;

(r) Meals or meal expenses prescribed by Presidential Decree;

(s) The amount of money not exceeding 100,000 won a month, as an allowance received from an employer in connection with childbirth of a worker or a spouse of a worker or childcare of a child of six years old and under (to be determined based on the date of commencement of the relevant taxable period);

(t) Pay and a lump sum allowance for retirement received by a prisoner of war of the ROK Armed Forces under the Act on the Repatriation, Treatment of the Republic of Korea Armed Forces Prisoners of War;

(u) Scholarship received for labor rendered by undergraduate students, among scholarship received pursuant to Article 28 (1) of the Framework Act on Education (limited to undergraduate students attending a uni