Income from leasing real estate or rights over real estate located in Korea is a non-resident’s domestic-source real-estate income (Income Tax Act, Art. 119, subpara. 3). A non-resident with such income is taxed on an aggregated basis (Art. 121(2)), so filing and payment in Korea must be prepared even while living abroad.
Living abroad does not take Korean rent out of tax
Many people moving abroad keep a Korean flat or shop and let it rather than sell. The usual question is: “I am a non-resident now — do I still owe tax in Korea?” The short answer is yes. Article 119 of the Income Tax Act classifies a non-resident’s domestic-source income, and subparagraph 3 defines domestic-source real-estate income as income arising from the transfer, lease or other operation of real estate or rights over real estate located in Korea, and of mining rights, rights to extract minerals, rights to develop and use groundwater, fishing rights and rights to extract earth, sand and stone acquired in Korea. The proviso to the same subparagraph excludes domestic-source gains on the transfer of real estate under subparagraph 9, so selling property is dealt with separately under the capital gains rules. Rent for letting property located in Korea is therefore classified as income arising in Korea wherever the owner lives. Becoming a non-resident changes not whether it is taxed but how it is taxed and the filing procedure.
Resident or non-resident status changes what is aggregated
Before preparing a rental return, check whether you might still be treated as a resident. Article 1-2(1) of the Income Tax Act defines a resident as an individual with a domicile in Korea or a place of residence there for 183 days or more, and a non-resident as anyone who is not a resident. Even after leaving, if the family stays in Korea or a Korean job and main assets remain, domicile may still be found in Korea regardless of day count. A resident may have income earned abroad brought into the scope of aggregation as well as Korean rent, which changes the result considerably. A non-resident, by contrast, settles Korean tax by reference to domestic-source income. Organising the facts — when you left, the family and property left behind, your occupation and immigration status abroad — makes the determination easier. The detailed criteria are set by Presidential Decree, so case-by-case confirmation is needed.
Real-estate income means aggregated, not separate, taxation
The method of taxing non-residents is set by Article 121 of the Income Tax Act. Paragraph (3) taxes a non-resident without a domestic place of business separately by category of domestic-source income, but paragraph (2) taxes a non-resident with a domestic place of business, or with domestic-source real-estate income under Article 119(3), on an aggregated basis. An overseas Korean with no place of business in Korea who earns rent from Korean property therefore falls under the aggregated taxation of paragraph (2). The scope of aggregation needs care. Paragraph (2) names the income under subparagraphs 1 to 7, 8-2 and 10 to 12 of Article 119, and excludes in parentheses income withheld under the special withholding provisions. If you receive other Korean income besides rent, each item must be sorted into either aggregated income or income settled by withholding. That depends on the type of income and how it is paid, so it needs individual review.
Plan around May of the following year
Once aggregated taxation applies, the filing timetable should be fixed in advance. Article 70(1) of the Income Tax Act requires a resident with global income for the tax year to file a return of global income with the district tax office between 1 and 31 May of the following year. Article 124(1) then applies the residents’ filing and payment rules to non-residents taxed on an aggregated basis, so a non-resident with Korean-source real-estate income works to the same May final-return timetable. The usual difficulty when filing from abroad is the paperwork: the lease, records of rent received, receipts for maintenance and repairs, and statements exchanged with whoever manages the property tend to be scattered between Korea and abroad. Using a single account for rent throughout the year and collecting expense evidence as you go makes May far less rushed. What is allowed as a deduction or expense depends on the property and the lease, so it needs individual review.
Appoint and report a tax administrator before leaving
Receiving and responding to notices from a Korean tax office in time is hard from abroad. Article 82(1) of the Framework Act on National Taxes requires a taxpayer who has no domicile or residence in Korea, or who moves their domicile or residence abroad, to appoint a tax administrator to handle national tax matters. Article 82(2) allows an attorney, a certified tax accountant or a certified public accountant registered for tax agency work to be appointed, and Article 82(3) requires the taxpayer to report the appointment to the district tax office, as well as any change or dismissal. If you leave Korea with property let out, the right order is to appoint and report a tax administrator before departure, so that filing notices or document requests can be dealt with in Korea straight away. Even where family members manage the letting, be clear about who handles tax matters — and remember that a change of tax administrator must also be reported.