Starting next year, the tax withheld upfront from the pay of delivery riders, designated drivers and other workers who earn income from personal services will fall to 2.2% from the current 3.3%. For a single-person household earning 45 million won a year, annual withholding would drop to about two-thirds of the current amount.
The National Tax Service held a meeting on the 1st at the National Assembly Members' Office Building in Yeouido, Seoul, with groups representing personal-service workers, including the National Delivery Riders Association, the Korea Designated Driver Association, the caddy branch of the National Women's Trade Union and the Korea Broadcasting Writers Association, to explain the plan to lower the withholding rate. Lawmakers from both the ruling and opposition parties on the National Assembly's finance and economy committee attended.
The tax revision package the government announced in August would lower the withholding rate on personal-service business income to 2% from 3%. If the bill clears the National Assembly, the tax withheld when pay is disbursed would fall to 2.2% from 3.3%, including local income tax.
Personal-service workers currently pay 3.3% of their gross receipts as tax when they are paid. If that prepaid amount exceeds their actual tax liability once necessary expenses and various deductions are reflected in their annual income tax return, they receive the difference back as a refund.
The problem is that 3.3% of total receipts is withheld even from low- and middle-income workers in delivery and designated driving whose actual tax owed is small once expenses and deductions are counted. They can recover the difference through a filing the following year, but until then the money is tied up and unavailable for living expenses.
This structure — withholding a large amount first and refunding later — combined with the complexity of filing an annual income tax return, has fueled demand for paid refund-filing services such as SamJeomSam. According to the Fair Trade Commission, such services charge fees of 10% to 20% of the refund amount.
Lowering the withholding rate reduces the amount of money locked up in prepaid taxes. According to the National Tax Service, if the revision bill passes, annual withholding for a single-person household earning 45 million won would fall to 990,000 won from 1.485 million won, including local tax. That means 495,000 won more a year in take-home pay, or about 41,000 won a month on average.
"Withholding an appropriate amount from the start is more convenient for taxpayers than taking too much and giving it back later," National Tax Service Commissioner Lim Kwang-hyun said. "I ask for the National Assembly's active cooperation so that the government's tax revision package, which includes the lower withholding rate, can be finalized."
The National Tax Service is also expanding direct outreach so that workers can get withholding refunds without using private platforms. It is notifying a total of 820,000 people — including personal-service workers who did not file income tax returns for the 2021 through 2025 tax years and therefore never claimed their refunds — about 163.5 billion won in unclaimed money, at no fee.
