How retirement income tax is calculated
- Years-of-service deduction: ₩1M/yr for up to 5 years; 6–10 years ₩5M + ₩2M/yr; 11–20 years ₩15M + ₩2.5M/yr; over 20 years ₩40M + ₩3M/yr
- Converted pay = (severance − years-of-service deduction) × 12 ÷ years of service
- Converted pay deduction: all of it up to ₩8M; up to ₩70M, ₩8M + 60% of the excess; up to ₩100M, ₩45.2M + 55%; up to ₩300M, ₩61.7M + 45%; over ₩300M, ₩151.7M + 35%
- Computed tax = basic rates on (converted pay − converted pay deduction) × years of service ÷ 12
- Local income tax = 10% of retirement income tax
Partial years of service are rounded up to a full year. Taking severance into an IRP (individual retirement pension) and receiving it as a pension cuts the tax by 30–40%.
This calculator gives estimates based on published laws and criteria and is not legal advice. Before acting, be sure to check with the official agencies below.
FAQ
Why is the tax on severance so low?
Because income built up over many years is paid at once, the "annual averaging" method divides it by years of service to lower the rate, and large deductions apply.