--- title: "Income Tax Basics and How to File" description: "Comprehensive income tax combines six income streams and gets filed every May in Korea. This CPA-written guide walks hospitality operators through what counts, how deductions work, and why May matters for your business finances." published: 2020-08-24T00:00:00+00:00 author: "ONDA 편집팀" category: "Insights" image: "https://zqcfqfqgiyckyhazcfrk.supabase.co/storage/v1/object/public/blog-images/webflow/6316f3f75130788ec2d762dd/65a9e11c0bb15ff09d928abf_62e9ec41bbc78257c95f011e_5f435943b12876f5513710d4_Photo_2520by_2520Oliver_2520Menyhart_2520on_2520Pixabay.jpeg" canonical: https://global.onda.me/en/blog?slug=sodeugse-weonriwa-singo-nabbu locale: en --- # Income Tax Basics and How to File ### **column Tax Journey with Yesong** ### 03\. Income Tax Basics and How to File **Writer Song Yong-kwon, CPA, Yesong Tax & Accounting** **Editor ONDA Lee Chae-eun, Manager** ![](https://zqcfqfqgiyckyhazcfrk.supabase.co/storage/v1/object/public/blog-images/webflow/6316f3f75130788ec2d762dd/65a8b2338e434747787d3c61_62ce59de9e01c63f0f145e6d_5ef081f9f354c94911b57552_200622_2520_25E1_2584_258B_25E1_2585_25A8_25E1_2584_2589_25E1_2585_25A9_25E1_2586_25BC_25E1_2584_2589_25E1_2585_25A6_25E1_2584_2586_25E1_2585_25AE_25E1_2584_2592_25E1_2585_25AC_25E1_2584_2580_25E1_2585_25A8_25E1_2584_2582_25E1_2585_25A6_25E1_2584_258B_25E1_2585_25B5_25E1_2586_25B7_25E1_2584_258F_25E1_2585_25A1_25E1_2584_2583_25E1_2585_25B3_25E1_2584_258E_25E1_2585_25AC_25E1_2584_258C_25E1_2585_25A9_25E1_2586_25BC.001.jpeg) At Yesong Tax & Accounting, our team of young CPAs provides specialized tax services to business owners across various industries. We've built a system where you can consult directly with a tax professional anytime — no pressure, just straightforward advice on tax strategy and business operations. We've seen too many cases where business owners pay taxes they shouldn't have to, simply due to lack of information. We're starting this series to help hospitality operators avoid that fate. We hope these columns on ONDA can offer some real value to you. > **Blog :** [**https://blog.naver.com/tax5339**](https://bit.ly/taxtrip_blog) > **KakaoTalk Channel :** [**http://pf.kakao.com/\_udxcPT/chat**](https://bit.ly/taxtrip_kakao) ![Photo by Oliver Menyhart on Pixabay](https://zqcfqfqgiyckyhazcfrk.supabase.co/storage/v1/object/public/blog-images/webflow/6316f3f75130788ec2d762dd/65a9e11c0bb15ff09d928abf_62e9ec41bbc78257c95f011e_5f435943b12876f5513710d4_Photo_2520by_2520Oliver_2520Menyhart_2520on_2520Pixabay.jpeg) Hello, this is Yesong Tax & Accounting. Every May, business owners in Korea file and pay comprehensive income tax. Since this covers an entire year's income and expenses, there's a lot to keep track of. Let's walk through the key points. ### 1\. Types of Income The term "comprehensive income tax" tells you this isn't about one type of income — it's about combining multiple streams. Individuals in Korea can earn eight types of income: interest, dividends, business, employment (salary), pension, other, capital gains, and retirement. Capital gains and retirement income are calculated separately on a case-by-case basis. **In May, you combine the other six types into your comprehensive income tax return.** For hospitality operators, this usually means business income is your primary (or only) income source. ### 2\. Simplified vs. General Taxpayer? In our previous column on VAT, we explained that businesses are classified as "simplified" or "general" taxpayers based on sales volume, with different calculation methods for each. Some people think income tax works the same way — it doesn't. The simplified/general distinction only applies to VAT. Comprehensive income tax uses the same calculation method regardless of business size. Even if you're a simplified VAT taxpayer, you'll owe income tax if your revenue exceeds your expenses. ### 3\. How Income Tax Is Calculated Assuming you only have business income (no other income types), here's the structure: ![](https://zqcfqfqgiyckyhazcfrk.supabase.co/storage/v1/object/public/blog-images/webflow/6316f3f75130788ec2d762dd/65a8b2338e434747787d3c6c_62e9ec42bbc7826d145f0124_5f435eca243bb1c0e7cbed28_200824_2520_25E1_2584_258B_25E1_2585_25B1_25E1_2584_258F_25E1_2585_25B3_25E1_2586_25AF_25E1_2584_2585_25E1_2585_25B5_25E1_2584_258B_25E1_2585_25A9_25E1_2586_25AB_2520vol18_2520column.001.jpeg) ![](https://zqcfqfqgiyckyhazcfrk.supabase.co/storage/v1/object/public/blog-images/webflow/6316f3f75130788ec2d762dd/65a8b2338e434747787d3c46_62e9ec42bbc7825b105f0123_5f435ed2147e1c36f95c99bf_200824_2520_25E1_2584_258B_25E1_2585_25B1_25E1_2584_258F_25E1_2585_25B3_25E1_2586_25AF_25E1_2584_2585_25E1_2585_25B5_25E1_2584_258B_25E1_2585_25A9_25E1_2586_25AB_2520vol18_2520column.002.jpeg) ### 4\. Who Doesn't Need to File in May: Year-End Settlement Some taxpayers are exempt from the May filing. Here are two common cases: First: **If you only have employment income and already completed year-end tax settlement (연말정산).** For example, if you work a regular job and your employer handled year-end settlement, you don't need to file separately. Second: **Insurance agents, door-to-door salespeople, and contract delivery workers whose prior-year revenue was under ₩75 million, who have no other income, and whose employer completed year-end settlement.** Note that regular business owners (outside these specific categories) are **not** eligible for year-end settlement — you must file in May. ### 5\. Tax-Saving Strategies > 1) Qualified Receipts Are Everything Some business owners mistakenly think they can "create" expenses. Under Korean tax law, deductible expenses must be supported by qualified documentation: tax invoices, credit card receipts, or cash receipts. An expense must be legitimately business-related. Not all spending qualifies, and you need proof. Here's a common mistake: Some vendors offer a 10% cash discount if you skip the receipt (to avoid VAT). New business owners sometimes think, "Why pay 10% VAT upfront if I'll just get it refunded later? Or if I'm a simplified taxpayer and can't claim it back anyway?" The problem: Even if you're a general VAT taxpayer (where VAT nets out), not having qualified receipts means you can't deduct the expense when filing income or corporate tax — unless you're willing to pay a penalty for missing documentation. **Bottom line: Always get proper receipts.** Make it a habit. > 2) Phone Bills: Get Tax Invoices Under Your Business Registration Number (Except Card Payments) As a business owner, you're constantly on the phone with clients and vendors. Phone bills are deductible. But if you set up auto-pay from your personal account without getting proper documentation, you might forget to give your accountant the payment slip — and lose the deduction entirely. If you pay by (business) credit card, the transactions auto-import. If not, call your telecom provider and ask them to issue tax invoices under your business registration number. **This also lets you claim input VAT credit when filing VAT returns.** > 3) If You Have Both Employment and Business Income, Run It Through Business Expenses Many people nowadays have side hustles on top of a day job. If you earn both salary and business income, it's usually better to **run expenses through your business rather than claiming credit card deductions on your salary**. Business expenses (outside specific items like entertainment) are deductible without limit as long as they're business-related. Salary income credit card deductions, on the other hand, have caps — and if you spend a lot, you'll hit them. So if the expense legitimately supports your business, claim it there. --- That covers **the basics of income tax and key filing considerations**. Use this as a reference when preparing your May comprehensive income tax return. Next time, we'll dive into **tax issues specific to different types of hospitality businesses** — a topic many of you have asked about. **\[Series Index\]** 1\. What Taxes Do You Pay Over the Year? 2\. VAT Basics and Types **3\. Income Tax Basics and How to File** 4\. Tax Issues by Hospitality Business Type 5\. Commission Settlement and Taxes by Sales Channel 6\. Q&A ## [\>>Subscribe to Weekly ON](http://bit.ly/WeeklyOn)