I have just been informed that the tax office has recently told all schools to include bonus payments, settlement allowances and airplane fees in their tax calculations from now on.
This means that as well as paying tax on our earnings (no problem with that of course) we will also be paying tax on money we dont earn. eg. the round trip airplane tickets that we are reimbursed for at the start and end of our contracts.
On tax forms in the US we are also asked to account for housing allowances, travel expenses, and other items, but in the case of airfare reimbursement for foreign teachers in South Korea it is of course teachers' own money being fronted at the beginning and end of contracts and isn't "earned" income. Poster eunny continues:
I just got notification from my school that they want to start taxing housing stipends, flight reimbursements, settlement allowances, and overtime pay. This is strange to me because I currently pay 5% of salary to the health insurance organization. I called the health insurance organization and they told me that this tax has always been in effect. There policy has always been that salary is inclusive of housing stipends, flight reimbursements, settlement allowances, and overtime pay. Supposedly, this had not been enforced for some time. They want to start enforcing it again. So, all those people that came before us were not taxed in this way. Another problem that I have is making retroactive payments.
. . .
According to my co-teacher, every foreign teacher in Gyeonggi province will be notified sooner or later. I have tried to talk to the gepik coordinator Dain Bae but she is honestly useless [...]
. . .
My chief complaint with this whole taxation law is that I have to make retroactive payments. I have told my school that I am willing abide by the new taxation law as long as I don't have to make any retroactive payments. However, my school isn't willing to negotiate. I want to dispute this matter through the proper channels but don't know where to go about doing this.
The issue of retroactive payments and other costly amendments was first discussed on the forums and this site in October 2009 regarding vacation time when schools started retroactively fining teachers who took time greater than contractually allowed. As poster Gillian wrote on Dave's ESL Cafe at the time from Naju:
This actually happened to me and the othe foreign teacher at my school. Our pay for the month of September was reduced by the amount of time we had spent "Out of Korea beyond our 2 weeks" for summer vacation AND they went back to last WINTER vacation and did the same! All of this was deducted in one lump sum from September's pay.
Apparently the school received the memo stating this change in enforcement policy, but my "Co-teacher" neglected to read the dang thing, so the other foreign teacher and I went our merry way none-the-wiser.
28 comments:
They tax on housing stipends, but what about free housing? Are they going to calculate how much it's "worth" and tax that too?
There is no flight reimbursement now. It's just called a 2,000,000 won bonus, if you renew, and 1,300,000 won if came for the first time. This is a bummer for non Americans, but Americans don't pay tax for the first two years anyway.
When I was transferred from Toronto to Seattle, certain moving expenses the company reimbursed me for were not taxed but others were. For example, a car rental for a couple weeks until my car was shipped was taxed. My airline ticket out there wasn't taxed.
Most tax jurisdictions in western countries tax fringe benefits like subsidized meals, cars, etc. Not sure why Korea should be different. A free apartment is surely a fringe benefit, even if viewed as a necessity by the teacher. It's quite reasonable then to tax it.
Yet another reason not to work for public schools in addition to their phonebook-sized contract.
Puffin.... Really!? That's lame of OTHER countries then too.
But the biggest problem is definitely the retro-active payments.
I've also been hit with fines of having to pay back my over-time earnings from Winter of 2010 (even though it's now Sept) because of the Office of Education's mistakes. That's unfair. Especially because this is something happening to a lot of foreigners who all got such payments (most of them much more than I)...but so many left in August, and god knows THEY don't have to pay back their earnings. UNFAIR.
Nobody likes paying taxes. Koreans don't like it, Americans (or Canadians, or British, etc) don't like it, and especially Americans in Korea don't like it. But it is something we all have to do. Until recently, we have been paying a much lower tax rate than the locals. I suppose the fairness of that stemmed from the fact that we would be less likely to benefit from the services that our taxes were paying for if we were only living in the country for a year or so. Now that the number of expats living (and staying) in Korea is becoming big enough to take notice of, things are changing. People around the world are not just taxed on salary. They are taxed on any income they receive, on gifts over a certain amount, on investment dividends, property, imported goods, and even the fast food that we eat.
Paying taxes is something we all have to do wherever we live. If we don't pay them properly, eventually, we'll have to pay what was due in the past. Just because the tax codes were not being enforced doesn't mean one is not responsible for them.
If your employer did not include your housing and bonuses in your tax deductions doesn't mean you are not responsible for them if they were part of the tax code but simply not enforced. Shame on them for making the mistake, but it doesn't change the law. And we all know that they are not going to pay our back taxes out of the kindness of their hearts.
There is no such thing as 'free' housing. If they provide the housing for you, the school is paying for the apartment. If your employer owns the building that you live in, what would they be able to get if they rented out your apartment? Whatever that rent would be is what they are "paying" for your housing.That payment is part of what it costs to hire a foreign teacher.
As far as airfare goes, if they are reimbursing you for your airfare, then they are paying for it. It is just a matter of when they pay for it. It is part of our 'benefit package' offered in many contracts. Why wouldn't it be taxed.
Interesting arguments Joe in Korea. I agree with several points you make but I disagree with several others.
There should be no reason whatsoever, for them to repeatedly bungle things up tax-wise. This isn't the first time they've done that. They know when the tax year is and they know how much we should be paying. It's seriously unprofessional to go back and take money that was paid out 9 MONTHS later. Busan EPIK I hear had some people who had to go back 3 YEARS. Since taxes are deducted from us directly (because paying taxes directly by ourselves would be practically impossible for most foreign Teachers here) we have no choice BUT to depend on them to do it correctly. Obviously, we pay our taxes regardless of the rates but it is THEIR job to set them properly from the get go.
I wish we had some korean teachers opinions on how they would react in the same situation.
The housing is indeed free for those who get provided housing. The irony is that those who get a housing allowance will be taxed on their subsidy, while those who get provided housing won't have to pay a tax on that. It's ironic because the government must invest a LOT of money to put down the key money for provided housing as an aggregate. Long-termers who opt for their own place demand much less manpower when it comes to paperwork when they opt for a housing allowance. Why should they pay taxes (when they foot the deposit directly - this helps Korean landlords make money too) when those with provided housing get exempt? Then again, fighting for that would just be making more lose out.
Perhaps some benefits should be untaxed. Think of the lunches, dinners, gifts, etc...that schools and offices have that are untaxed. You'd be surprised how money is blown in these places.
The whole point of an entrance and exit allowance is to get a teacher from their home to here and back again. Why tax that? Some have to pay more than what is provided. In the past, it was provided by the government (and the teacher was reimbursed for the flight) which while demanding paperwork wise, was fair. But since giving a flat rate to the teachers, now they want to tax that? That's not fair to tax it just because they give a flat rate.
My ranting won't change anything but I will say that this is just another nail in the coffin that is making teaching in public schools less and less attractive. While the raise in taxes isn't demanding, it's not the point. Salary levels haven't been adjusted in who knows how many years and if it's not going up by 2-4% (a pay level upgrade does not count - it only cancels out inflation at best) then we are effectively losing money as time goes on.
Once the global economy picks up again, I predict a serious exodus. Between assemblymen hell bent on squeezing us dry and journalists who smear us constantly, it's not looking like it's going to improve.
Oh well, you reap what you sow...
Thank you Joe in Korea for some perspective...!
To Alex...... it's not fair, it's not fair, it's not fair...
Are you a five year old whining???
Get real dude... Koreans pay taxes. Half of the posts in the blogosphere are about how racist Koreans can be (true..) and how foreign teachers get taken advantage of (true as well), but if you want to be treated fairly like a Korean in society, you should be pay taxes like them. You should try to learn some of the language too.
All those things mentioned in this forum are not unreasonable items to tax. They are income. Retroactively taxing is burdensome to teachers and should not happen; I agree.
Final Word
A lot of you teachers out there just out of college or maybe not but just like to whine and avoid responsibility.. need to grow up and stop crying...seriously. You make hard working teachers here look like shit and life harder on everyone. Pay your taxes and your case to get the civil rights we want here will be strengthened.
Puffin.... Really!? That's lame of OTHER countries then too.
What's lame, specifically? In North America few people, save for higher income earners, get such fringe benefits. Taxing them are a way of ensuring higher income earners don't avoid their so-called fair share in taxes. Most people, other than pure anarchists, would agree we need some minimal taxation for roads, courts, police, and defense.
Sometimes these laws have unintended consequences of hitting lower income earners. For example the AMT in the USA started hitting average joes during the dot.com boom who bought and held ISO stock options that were worth $200 a share at the time they bought and held them but now were worth 25 cents. The framers of the AMT law never considered a time when labor markets got so tight that companies would offer secretaries 10,000 shares of a company just to get a body behind a desk.
Anyway, my point is taxable fringe benefits are basic to North American tax codes. They seem entirely rational to me. The retroactive nature is a bitch, certainly, but trying to argue about fairness with any nation's tax department is usually an exercise in frustration unless you're willing to retain a lawyer and you've got case law on your side.
The whole point of an entrance and exit allowance is to get a teacher from their home to here and back again. Why tax that?
Why not tax that? Taxes are used, at times, by governments to encourage or discourage behavior. In a tight labor market, you might want to make it more attractive for foreigners to come to Korea to teach therefore you might want to make the money they're given by the school to move tax free. But we're not in a tight job market and arguably many would happily pay their own airfare. If I was unemployed at home, I'd happily pay $1200 of my own money to take a job that lets me save $12,000 in the year.
How many Korean citizens get any portion of their moving expenses paid for by their employer? So why shouldn't the government tax what seems a luxury. Asking someone to pay $60 in taxes to be flown to Korea for a job that will let the person save $12K in his/her year does not seem like an onerous burden in my opinion.
Also while there are at times short term teacher shortages, like when the government changed the visa regs, I think there will always be a sufficient background level of young graduates eager to teach in Korea, regardless of the hoops and minor expenses. Predicting x will lead to the death of teaching english in Korea is, by this point, something of a cliche, akin to people who would always predict "x will cause the death of the internet!"
Puffin, you even said at your previous job that your prior airline ticket from your trip from Toronto to Seattle wasn't taxed. Sure, they can do what they want here, but it'd be nice to have some extra benefits at least. Now that the Won has appreciated against the dollar, it's harder to save the same amount of money in the short-term. Again, the salaries haven't changed in a while, and there still remains a salary cap for those who've been at the same school as a level 1 for 2 years. Look what the SMOE, many colleges and universities have effectively enforced (less benefits, fresher, younger, cheaper faces).
Many of the teachers who come here don't easily have that 1200 or more that it costs to fly here, hence that is why the entrance and settlement allowance are put there in the first place. The taxes on them aren't insane but it again defeats the purpose. Why not just give a bit less and then not tax it? Or if the government really wants to save money, just reimburse the ticket in it's value completely. Giving 1.3 million for someone flying from the UK is a steal.
I am sure there are some benefits that Koreans who working at say Samsung get when they move. Quite often they get free housing too in some circumstances. This happened to the previous couple who lived at our own apartment back in Suwon (which was why they moved out). Be interesting to see if they get taxed on that.
It's not that there will ever be a lack of potential graduates who want to come here (to travel, wander, pay off debt, run from their past, etc...) but this move does not make this job any more attractive to long-termers who've been here and know the ropes. The rehire rate is still pretty low (albeit higher now only because of the economy back home for most) and they money they could save there by making this more attractive in the long term would be quite a bit indeed.
Let me rephrase what I've written then: it will be an extra nail in the coffin for more long-termers here (and I know of several long-term peers who are saying the same thing).
In the end, my rant, our rants don't count for much because they won't change or deflect or alter policy. It would be nice to see some kind of positive or extra benefit go out (even if just a token one) one of these days though.
Puffin, you even said at your previous job that your prior airline ticket from your trip from Toronto to Seattle wasn't taxed.
I would guess North America values workforce mobility, hence allowing you to write off such expenses. Korea might not value workforce mobility or never gave much thought to why they might want to encourage it.
Yeah, I guess it is a cultural difference. I know public school teachers have to move every 4 or 5 years to new schools. I hope they get some kind of benefit for that...
Government workers, most notably Immigration officers, also have to move around every few years. Banks, too, if I'm not mistaken.
It sucks, but this is how taxation works anywhere... typically benefits are taxed as if they were income. After all if you didn't get free housing you would just be getting a higher salary and paying the rent yourself. Etc.
What really stinks is that the offices of education didn't bother to get it right from the start but that is par for the course. Of course nobody should be under the illusion that the typical hagwon would be any more competent or willing to comply with the law.
Paying the tax is no problem. I agree though that the retroactive angle is totally absurd.
Going back 3 whole years! Wow, that's just wrong.
And its times like these that I'm glad I work in the system I do. Foreign Earned Income Exclusion FTW!
My favorite story about Koreans coming back to you after 3 years...
I started my teaching job. Got my free apartment. As bills came in I would dutifully take them to my "whitey wrangler" so she could take me to the bank and get them paid out automatically of my account. We got the officetel "common fee" set up. We got the Internet bill set up. I took them the cable bill. My whitey wrangler said "ah don't worry about it. The school will pay the cable bill."
Okay. Bonus.
I never did see a phone bill, though I had a land line.
My officetel bill included my electric meter, my water usage, etc. There was a line item on there that said "phone". I assumed that was my phone bill.
Again, I repeat, no phone bill ever was mailed to my unit. Never saw a phone bill. Until…
Roll forward three years. One day I come into the office and there are 36 phone bill envelopes on my desk, with a progression in envelope colors from white to "you're late" yellow to "you're really late" red and increasingly frantic and angrier shades of "we really mean it this time" red.
I notice the address on the bill is the school's address but it's for my unit.
Hmmm. After a few inquiries I discovered as the bills came in, the receptionist just tossed them in her drawer.
I went to my new whitey wrangler (my initial one had long since moved on) and explained I was happy to pay for this but, I mean, c'mon. She wondered why I never inquired about a phone bill. I explained 1) at some point the school said they'd just cover bills 2) there was that "phone" item on the officetel bill 3) if something really went unpaid for 3 years, someone would have cut off service after, oh, the first couple years of complete and utter non payment.
She said she would speak to the management. And I never heard anything ever again. Ever.
Curious as to whether any of you know how taxes are deducted in Korea. I worked there for a while and the only times I got taxes deducted was a 3.5% rate or so. I'm curious as to where that money went to, but more so on how I was legally classified.
It was with a six month contract, so I'm guessing it counted as a temp worker for tax purposes though we did get the one month salary bonus at the end. I was under a F-4. I know those that worked there without an F-4, like a E-2 had to pay to the national health pension system or it was deducted from their country of origin (e.g. South Africa).
Other times, it was just a brick of 10,000 won bills.
Yeah Dain Bae's useless! I can't believe that in her role as GEPIk co-ordinator she can't change the taxation laws! I mean...what is she doing?
Come on...really? "Eunni" blaming Dain Bae for taxes is like blaming my co-teacher for Christmas falling on a weekend. That was a cheap shot Brian...and I'm not sure why you added that quote seeing as how it weakened the credibility of your 'source'.
1st: It's not only americans who don't have to pay tax for the first 2 years. The Korean government has the same DOUBLE tax avoidance treaty with a few countries. (ie, if you pay tax on the money you earn in korea in USA/RSA/UK etc, you don't have to pay tax here. double tax treaty allows you to claim exemption in 1 country only)
2nd: Dain .. all I can say is that her answers differ all the time so ask again.. Her office told a school in my area that they did NOT have to abide by the contract, 2 days after stating the opposite.
I worked in Suwon for a year and yes I can concur that Dain Bae is basically useless for the most part. I got two emails from her the whole year and I can second that the office there is incompetent. Approachable? I don't think so...
When I left my job for (ever so slightly greener pastures south) they refused to give me the exit allowance as I was not leaving Korea. My wife (Korean) would call them to get information and they'd back us up, then my supervisor would call them and they'd get information to back them up...
For me, it's not the taxes I pay that I mind (I'm all for supporting a governments efforts in regards to roads, public services, education) and the rate I pay is cheap (compared to Canada) but for me, it's the chipping away of benefits that is eroding the small good things about this job. Oh well, they run the show...
Mark when you say exit allowance you mean your 1 month "bonus", not money for a flight, right?
Although various described as a bonus, it's a straight up benefit all salaried employees get. It's a kind of pension payment.
All Korean salaried workers, as far as I know, collect it yearly, even if they remain with the company.
Nope, I mean the exit allowance. Airfare home. It really, really pissed me off at the time because Hagwons give that to you, even if you stay in the country afterwards but my school refused to give this to me. The way the contract was worded was that this exit allowance was only to be given for someone leaving (fair enough, most people left). Wasn't really their business and at some point, I was going to go home anyhow but they adamantly refused. Now they give money and let us buy the ticket regardless (a good benefit).
If you do mean the airfare home, then I have to say in all honesty the school is probably not required to pay it. Depends on how your contract is worded of course but ethically I don't think I could take money for a flight home I wasn't planning to take or not for the intended purpose. Some will let you book your own flight and pay you upon receipt of the ticket. Others will book the ticket for you.
If you're staying you will theoretically get that paid at your next job for your flight home.
But for those schools that try to skip out on the final month payment, that contravenes basic labor law. Schools play so many to skirt this. You'd almost think Koreans are themselves accustomed to their employers ripping them off for their annual payout.
There's:
1) you're an independent contractor and not a salaried employee therefore not eligible (of course the E2 visa only allows you to hire under salaried employee terms).
2) Oops you're fired after 11 months!
3) Sign your right away right here!
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