The National Tax Service (NTS) has begun notifying recipients of the 'Modu Chaeum (refund)' guidance by pre-calculating their comprehensive income tax refunds. Taxpayers with business income, employment income, pension income, or other income must file a comprehensive income tax return by combining these incomes in May of the following year. Missing the deadline means not only forfeiting the refund, but also potentially incurring additional excess refund surtax and payment delay surtax.

■ Eligible Income and Aggregation Criteria

Income subject to filing includes ▲business income (including income subject to 3.3% withholding) ▲employment income ▲pension income ▲other income.

For pension income, if the annual total of private pensions paid by financial institutions and others exceeds 15 million won, the taxpayer may either aggregate it with other income for filing or choose separate taxation at a 15% tax rate. Other income arising sporadically, such as lecture fees, is subject to aggregated filing only if the amount of other income—total payment minus necessary expenses—exceeds 3 million won.

■ Conditions for Refunds and Prepaid Tax

A refund arises when the tax prepaid last year (prepaid tax) exceeds the finalized tax payable (total determined tax) in this comprehensive income tax filing. Prepaid tax is divided into withheld tax and interim prepayment tax.

Withheld tax refers to the 3.3%—3% business income tax plus 0.3% local income tax—deducted in advance and paid by companies (withholding agents) when paying business income to personal service income earners such as door-to-door salespeople, insurance agents, beverage delivery workers, credit card recruiters, study guide instructors, after-school instructors, loan recruiters, home inspection agents, delivery riders, event assistants, and caddies. Employment income, pension income, and other income are also subject to withholding and advance payment by the payer according to tax law.

Interim prepayment tax is the amount prepaid equal to half of the comprehensive income tax for the immediately preceding taxable period, 2024, and applies only to some taxpayers whose comprehensive income tax payable for the 2024 taxable period was 1 million won or more.

■ How to File for a Refund: Additional Deductions Must Be Revised Directly

For refund recipients, the NTS pre-calculates the tax and provides guidance. Filing via ARS phone and other means allows taxpayers to receive refunds of both the comprehensive income tax and the local income tax. However, if there are additional items to deduct, the taxpayer must revise the details directly, and refunds are limited to the range of prepaid taxes.

■ Note the Possibility of Separate Payment for Local Income Tax

A point of particular caution is that even if a comprehensive income tax refund arises due to interim prepayments, the situation may differ for local income tax. Since local income tax has no advance payment system through interim prepayments, there may be cases where a taxpayer receives a comprehensive income tax refund but must still pay local income tax separately.

[This article was written based on NTS guidance. Detailed deduction items, tax rates, and filing procedures may vary depending on individual income composition, and relevant regulations may change. For accurate filing, it is advisable to verify through the NTS Hometax website, the competent tax office, or a tax professional. AI provided partial assistance.]