Religious leaders to pay income taxes from next year

Religious leaders to pay income taxes from next year. December. 02, 2017 08:09. by Hee-Chang Park ramblas@donga.com.

If the legislation to tax religious leaders takes effect next year, how much should they really pay in taxes? Suppose you are a pastor with average income, for a family of three, including yourself, wife and a child. You have to pay the withholding tax of 1,330 won every month.

South Korea’s Ministry of Strategy and Planning presented to the public the simplified tax withholding table, which shows the base income tax rate, for the nation’s first clergy tax bill. The tax amount to be withheld is calculated based on this simplified table and according to the end-of-year tax settlement in January of the following year, the income tax is either refunded or collected more.

According to the clergy’s simplified tax withholding table, a pastor with an average annual income of 28.85 million won for a 3-person household (one child under the age of 20) will pay the monthly withholding tax of 1,330 won. A 2015 survey conducted by the Ministry of Employment and Labor shows the pastor’s annual average income is 28.55 million won. The average tax amount to be withheld for a general household with comparable income amounts to 10,560 won, eight times that of a religious leader.

Compared to a 4-person household with an average annual income of 50 million won, the amount to be withheld of the ordinary group is twice as much as that of the religious. Religious leaders will pay 50,730 won a month whereas 90,510 won is withheld from the wages of ordinary workers.

The primary reason for this difference is that the clergy including monks, pastors and priests receive more deductions and exemptions on their taxes. Religious leaders can choose their income as either “earned income” or “other income.” If a priest reports income as other income, he or she can get deductions up to 80 percent of income, easing the tax burden.

“As the amount to be withheld in advance by the simplified table does not give us accurate tax amount, we will be able to come up with actual tax amount by referring to insurance costs, medical expenses, and education spending through the end-of-year tax settlement,” a finance ministry’s official said.