U.S.-Korea Tax Navigator
Your interactive guide to cross-border tax issues for 2025.
Step 1: Determine Your Tax Residency
U.S. taxes citizens globally, while Korea taxes residents. If you're a U.S. citizen in Korea, you're likely a "dual resident." The U.S.–Korea Tax Treaty has a "tie-breaker" rule to assign primary taxing rights to one country. Answer the questions to see how it assigns residency.
Test 1: Do you have a permanent home available in only one country?
Step 2: Manage Your Salary Income
As a U.S. expat in Korea, you can use the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC) to avoid double taxation. Because Korean tax rates are often higher than U.S. rates, the FTC is frequently more beneficial. Use this calculator to see the financial impact.
$150,000
Key Takeaway:
For most professionals in Korea, taking the FTC provides a greater long-term benefit due to carryover credits.
Step 3: Report Your Foreign Accounts
Filing a tax return isn't enough. The U.S. requires you to report foreign accounts on separate forms. Answer the questions to see if you need to file.
Step 4: Understand Investment Tax
The tax treaty reduces the withholding tax the "source" country can take on investment payments made to a resident of the other country.
Permanent Establishment (PE) Risk Meter
If your U.S. company has sufficient presence in Korea, it can create a "Permanent Establishment," making your profits taxable by Korea's NTS. This is a complex area, but this simple quiz can help you gauge your potential exposure.
Your Estimated PE Risk Level:
Your risk level will be calculated as you answer.
Practical Case Studies
U.S. Employee in Seoul (FEIE vs. FTC)
An employee earning $150k will find that while FEIE eliminates tax on the first $130k, the FTC strategy eliminates ALL U.S. tax and generates valuable carryover credits for the future, making it the superior long-term choice.
U.S. Startup with Korean Clients (PE Risk)
A U.S. startup hires a single "Business Development Manager" in Seoul. Even if contracts are signed in the U.S., the manager's role in negotiations creates a high risk of an Agency PE, potentially exposing the startup's profits to Korean tax.
Audit Defense Checklist
Resources & Professional Guidance
This guide is for informational purposes only. Always consult a qualified tax professional for your specific situation.
- IRS: International Taxpayers Portal
- NTS (Korea): English Website
- Podcast: Cross-Border Tax Tips on Spotify
