South Korea and US Taxes: What American Expats Need to Know

South Korea's top income tax rate is 45% on income over KRW 1 billion, with an additional 10% local income surtax, so the Foreign Tax Credit generally eliminates US tax on employment income for expats working in Korea. The US-Korea tax treaty addresses income from employment, pensions, dividends, and royalties, though the saving clause limits what US citizens can claim under it. South Korea has a totalization agreement with the US, which prevents double contributions for most workers. Korean retirement accounts such as the IRP (Individual Retirement Pension) and DC pension plans are not recognized as tax-deferred by the IRS, so contributions and earnings may be subject to current US taxation each year. US expats who invest in Korean mutual funds or ETFs should also be aware that those funds are likely PFICs, with the associated harsh tax treatment on gains and distributions.