Korea has a similar tax system to many Western countries with taxes on both a national and provincial level. Depending on what you buy and what you do in Seoul (ie: are you working, accompanying your spouse, etc), you will be taxed accordingly. All foreign workers in Seoul will pay into the income tax system, and some will pay into pension plans and health insurance as well. Income tax is about 1.44% of your monthly income (unless you’re a contractor, in which case it is 3.3% of your monthly income). Unlike pension plans, in which many expats get refunded when they leave Korea to return to their home countries, you will not get refunded for income tax if you leave the country for good. If you want to know exactly how much you’re paying in income tax per month, make sure you ask your Human Resources department for a salary statement breaking down the deductions.
When shopping you will be pleasantly surprised as, most of the time, you will not pay extra for tax! If 10,000 won is on the price tag, 10,000 won is what you’re going to pay. This holds true for many items – including “Korean style” restaurant prices, some grocery prices and clothes. However, there is a tax known as VAT, or Value Added Tax, that you will sometimes have to pay while eating in a chain restaurant (Western chain restaurants often include VAT in your bill – which is about 10% of your total), shopping in a high end clothing store, or buying processed food at the grocery store.
Another lesser known tax that sometimes creeps into your restaurant bill is a Service Tax (another form of VAT), generally 5% of your total, which is given to restaurant staff as a “tip”. Tipping is not customary in Korean establishments and, indeed, is sometimes an offensive gesture, but in high-end restaurants or Western chains (such as Outback, TGI Friday’s, etc.) this tax is added as a form of tipping.
Another area in which you may be taxed is when getting air fare quotes from Korean airlines and travel agents. Just like any other country, when you fly you pay extra for fuel, baggage, and other add-ons. This varies between airlines and as the price of fuel changes, the cost of your ticket will change as well.