Year-End Tax Savings Checklist 2026 - 4 Things Business Owners Should Do Before December 31

For foreign nationals: some of these rules apply differently depending on whether you are a resident or a non-resident for Korean tax purposes. Check your residency status before relying on this article.

For year-end tax savings, start with the items you cannot undo after December 31. The Yellow Umbrella Fund (노란우산공제) gives an income deduction of up to KRW 6 million, and pension savings and IRP give a tax credit on up to KRW 9 million. For both, only amounts paid within this year count for this year. If you also finish registering your business cards on Hometax (홈택스) and organizing your expense receipts, your January VAT (부가가치세) return and May comprehensive income tax (종합소득세) return will be much easier.

Yellow Umbrella Fund Income Deduction Limit: Up to KRW 6 Million

The Yellow Umbrella Fund is a mutual aid fund that owners of small businesses join. What you pay in is deducted from your business income. A recent amendment raised the limits, and there are now four brackets.

Business income	Income deduction limit
KRW 40 million or less	KRW 6 million
Over KRW 40 million up to KRW 60 million	KRW 5 million
Over KRW 60 million up to KRW 100 million	KRW 4 million
Over KRW 100 million	KRW 2 million

Amounts paid from January 1 to December 31 count for this year. If what you paid this year is below the limit, you can top it up within December.
From July 2026, the annual contribution limit is raised to KRW 18 million and the quarterly limit is removed, but the income deduction applies only up to the limits above.
For those who joined in 2019 or later, real estate rental income is excluded from the income that qualifies for the deduction (for those who joined in 2018 or earlier, rental income is also included).

Pension Savings and IRP Tax Credit: Up to 16.5% on KRW 9 Million

Pension savings and IRP (Individual Retirement Pension, 개인형 퇴직연금) give a tax credit to both business owners and employees. Up to KRW 9 million qualifies, which is KRW 6 million for pension savings plus IRP combined.

Income level	Credit rate (including local income tax)	If you pay in KRW 9 million
Total income of KRW 45 million or less (total salary of KRW 55 million or less)	16.5%	KRW 1,485,000
Above that	13.2%	KRW 1,188,000

A tax credit is subtracted directly from the tax you owe, so if your determined tax is less than the credit, you do not get the difference back. If you cancel early, you must pay back the tax you saved, so put in only an amount you can lock away for retirement.

Registering Business Credit Cards on Hometax

A sole proprietor can register up to 50 cards in their own name that they use for business on Hometax. Once registered, card usage is collected on Hometax, and at VAT filing you can claim the input tax credit by entering just the total instead of a list by vendor.

Only usage after the registration date is collected. For amounts spent before registration, you must get the records from the card company separately.
If you have a new card, register it before the January VAT final return.
Personal spending unrelated to the business does not qualify.

Proper Receipts for Expenses Over KRW 30,000

For business expenses over KRW 30,000, you must get proper receipts (적격증빙) such as a tax invoice, an invoice, a card receipt, or a cash receipt. If you get only a simple receipt, the expense may still be recognized, but you pay a 2% penalty for missing receipts on that amount (new businesses and small businesses with revenue under KRW 48 million in the previous year are excluded).

If you sort everything out at year-end, it is easy to miss receipts. If any expense paid by bank transfer has no receipt, ask the vendor now for a tax invoice or cash receipt.

Year-End Tax Savings Checklist at a Glance

Item	What to do	Deadline
Yellow Umbrella Fund	Check this year’s payments and top up to the limit	December 31
Pension savings and IRP	Pay in the shortfall out of KRW 9 million	December 31
Business cards	Register new cards on Hometax	Before the January VAT return
Expense receipts	Check proper receipts for spending over KRW 30,000	During year-end cleanup

When you can do it yourself · When to hand it over

You can handle it yourself if

You can make Yellow Umbrella Fund, pension savings, and IRP contributions and register business cards on Hometax right away yourself.

Better to hand it over if

Your income is high this year, and you need to work out how much to put into which deduction.
Your expense receipts are not organized.
You want someone to handle your comprehensive income tax return next May as well.

Barun Tax & Accounting handles bookkeeping and comprehensive income tax returns for sole proprietors who are foreign residents. We reply to emails within one business day. contact@barun-tax.com · KakaoTalk · +82-10-2701-6199

Frequently asked questions

What is the income deduction limit for the Yellow Umbrella Fund?

If your business income is KRW 40 million or less, the limit is KRW 6 million. It is KRW 5 million if your income is over KRW 40 million up to KRW 60 million, KRW 4 million if over KRW 60 million up to KRW 100 million, and KRW 2 million if over KRW 100 million.

If I pay into the Yellow Umbrella Fund in a lump sum in December, does it count for this year?

Amounts paid from January 1 to December 31 of the year count for that year’s income deduction. From July 2026, the annual contribution limit is raised to KRW 18 million with no quarterly limit, but the income deduction applies only up to the limits above.

How much of pension savings and IRP qualifies for the tax credit?

Up to KRW 9 million qualifies, which is KRW 6 million for pension savings plus IRP combined. If your total income is KRW 45 million or less (or your total salary is KRW 55 million or less if you have only salary income), you get back 16.5%. If it is higher, you get back 13.2% (including local income tax).

What is the benefit of registering a business credit card on Hometax?

The usage history of registered cards is collected on Hometax, so at VAT filing you can claim the input tax credit by entering just the total instead of a list by vendor. A sole proprietor can register up to 50 cards in their own name. For amounts spent before registration, you must gather the card company’s records separately.

What happens if I get a simple receipt for an expense over KRW 30,000?

For business expenses over KRW 30,000, you must get proper receipts such as a tax invoice, an invoice, a card receipt, or a cash receipt. If you do not, the expense may still be recognized, but you pay a 2% penalty for missing receipts on that amount (new businesses and small businesses with revenue under KRW 48 million in the previous year are excluded).

This article is general guidance based on Korean tax law as of the date written. It is not tax advice for your specific situation. Please consult us before acting on it.

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