[Korean Law Insights] Changing Criteria for “Tax Residency”

[Published on November 25, 2025 edition of the "Korean Law Insights" column in the Korea Daily’s Economic Expert Section]

• Days of stay are counted continuously even across calendar years

• Residence plans must include tax planning

Among Korean Americans, it is common to hear plans such as “I’ll spend half the year in Korea and half in the U.S.” There are also increasing cases of long-term stays in Korea due to family matters. However, many people are not aware that, starting in 2026, the scope of who is considered a tax resident under Korean tax law will expand.

Under Korean tax law, a resident is, in simple terms, a person who has a domicile in Korea or who has a place of abode in Korea for 183 days or more in a year. Once classified as a resident, Korea has the right to tax that person on their worldwide income (global income). In contrast, a non-resident is taxed only on Korea-source income, meaning that if there is no income arising in Korea, there is generally no Korean tax liability. In short, whether one is classified as a resident or non-resident completely changes the scope of taxes owed to Korea and the related filing obligations.

The issue is that, beginning in 2026, the range of individuals classified as residents will broaden, and the criteria for determining residency will become more stringent. Through amendments to the tax law and subsequent enforcement decrees, a new provision has been added: any person who has maintained a place of abode in Korea for 183 days or more continuously across two consecutive tax years (from the immediately preceding tax period) will also be deemed a resident.

Simply, it will become much harder to avoid resident status by splitting one’s stay around the turn of the year. For example, if a Korean American stays in Korea continuously from the second half of 2025 through the first half of 2026, it may appear that they did not meet the 183-day threshold in either year individually. However, when the two years are viewed together, the total stay may exceed 183 days, in which case the individual may be treated as a resident. Importantly, regardless of nationality or resident registration status, if one’s actual living arrangements, number of days stayed, family ties, and center of economic interests are deemed to be in Korea, that person may be classified as a resident.

Once classified as a resident, one must report worldwide income to Korea. This can include interest and dividends from U.S. investment accounts, rental income, and even employment income. Even if taxes have already been paid in the United States, additional reconciliation may be required in Korea through reporting and the foreign tax credit system.

In addition, residents may be subject to separate reporting obligations for overseas financial accounts above certain thresholds, as well as for overseas real estate and ownership interests in foreign corporations. Failure to report when the thresholds are exceeded can result in significant penalties and sanctions. For U.S. citizens and permanent residents—who already report worldwide income to the United States—adding Korean tax obligations means that the Korea–U.S. tax treaty and related rules must also be considered. This increases complexity and the risk of mistakes or omissions.

This does not mean that one should avoid staying in Korea or owning assets there. Rather, it means that residency determinations and the resulting tax obligations can change depending on the length of stay and where one’s life is centered. With this understanding, it is essential to plan stays and asset holdings together with proper tax planning.

The strengthened residency standards effective from 2026 are part of a broader global trend toward greater tax transparency. What is needed is early preparation, accurate information, and concrete planning with professional advice— this is the most fundamental form of tax risk management. 

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Jin Hee Lee/K-Law Consulting Korean Attorney

[Reference link in original Korean] 

https://www.koreadaily.com/article/20251125220040740