South Korea’s five-year rule for foreign-source income
The rule depends on tax status, residence history and the source of income. It does not create a blanket five-year tax holiday from the date a residence visa is approved.
First establish foreign tax residence. Look back ten years from the tax-period end, total domicile or residence, then assess foreign income paid in or remitted to Korea.
Article 3 of South Korea’s Income Tax Act provides a limited rule for certain foreign residents. Where the aggregate period of having a domicile or place of residence in Korea is no more than five years during the ten years ending with the relevant tax period, taxable foreign-source income is subject to Korean tax only to the extent paid in or remitted to Korea.[1]
Establish tax residence before counting the years
The National Tax Service distinguishes residents from non-residents by reference to tax-law criteria concerning domicile and residence.[3] An investment residence approval is a useful date in a relocation record, but it does not by itself determine the person’s tax position or the period covered by this rule.
Nor does the calculation simply restart with the latest move. The legislation looks back ten years from the end of the relevant tax period and totals the periods of domicile or residence in Korea.[1] Someone who lived there previously needs to include that earlier history in the assessment.
Identify the income before examining the transfer
The provision concerns taxable income from foreign sources. Korean-source income does not fall within that category merely because it is deposited into an overseas account.[1] The origin and character of a receipt therefore need to be established before its payment or remittance can be assessed.
It is useful to list investment capital, interest, dividends, rent and employment payments separately, with records of when they arose and how the money moved. These headings organise the evidence; they do not imply identical tax treatment. Mixed accounts, multiple transfers and receipts spanning different tax years warrant an assessment based on the complete records, rather than a conclusion drawn from one bank transfer.
Review the position for each tax year
The ten-year lookback moves with the tax period. Once accumulated residence exceeds five years, the foreign-income limitation reserved for qualifying foreign residents can no longer simply be carried forward. Other statutory provisions and any applicable tax treaty must still be considered on their own terms.[1]
The NTS guide published on 30 April 2026 addresses returns for the 2025 tax year.[2] This article also checks the current text of article 3, keeping the guide’s publication year separate from the year of income. Updating residence and income records annually gives a Korean tax adviser the information needed to establish the applicable position before a substantial remittance or a tax filing.
Official sources
General policy information; individual circumstances and the competent authority’s requirements govern each application.