A Freelancer's First Tax Return: A Field Report

What Happened at My First Tax Filing

When I was employed full-time, the company handled year-end tax adjustments so I never gave taxes a second thought. I switched to freelancing in early 2025 and filed my comprehensive income tax for the first time this May.

Bottom line: I owed an additional 4.87 million won. (I stared at that number in a daze for about three minutes.)

The 3.3% Withholding Trap

Freelance contracts in Korea typically withhold 3.3% from your pay. On a 5 million won monthly contract, you receive 4,835,000 won. A lot of people assume that means their taxes are fully paid. I was one of them.

That 3.3% is just a provisional tax. Your actual tax rate on annual income ranges from 6% to 45% depending on the bracket. If you earn 60 million won a year, your effective tax rate is roughly 15-18%. Since you only paid 3.3%, the rest comes due in May all at once.

On an annual income of 72 million won (600,000 won/month), the calculated tax is around 11.4 million won. Withholdings only covered 2,376,000 won, leaving a gap of nearly 9 million won. You need to claim business expenses to bring that down, and if you don't do it properly, you get hit hard.

What Counts as Business Expenses?

From what I've seen, expense deductions for developer freelancers are pretty limited.

Equipment purchases: Laptops, monitors, keyboards. These are definitely deductible. This year I claimed a MacBook Pro at 3.29 million won and a monitor at 580,000 won.

Telecom costs: Internet, phone bills. In principle, you claim the portion used for work -- typically 50-70% gets accepted.

Education: Online courses from Udemy, Inflearn, etc. Technical books count too.

But meals are a gray area. If you have a business office, meal expenses can be deducted, but remote freelancers have a hard time proving they have a business premises. Same goes for cafe work expenses. Tax accountants disagree on this one.

Simple Books vs Double-Entry Bookkeeping

If your annual income is under 75 million won, you qualify for simple bookkeeping. Simple bookkeeping is way easier -- you just record income and expenses.

But here's the thing: double-entry bookkeeping gets you a 20% bookkeeping tax credit. That's 20% of your calculated tax or 1 million won, whichever is less. It adds up.

I went with simple bookkeeping for my first year, but when I consulted a tax accountant, they said "switch to double-entry next year -- the bookkeeping credit is significant." Double-entry requires tax software or hiring an accountant, which costs about 600,000-1,000,000 won per year. If the tax savings from the credit exceed that cost, it's worth outsourcing.

To Hire a Tax Accountant or Not

You can file on HomeTax (the Korean tax portal) yourself. But if it's your first time, you'll get stuck on terminology right away. Simple expense ratio, standard expense ratio, estimated filing -- I saw these terms for the first time and completely blanked.

I ended up paying a tax accountant 330,000 won. They handled expense claims meticulously and saved me about 1.2 million won compared to what I would've owed filing on my own. A 330,000 won investment for 1.2 million won in savings -- not a bad ROI.

Notes for Next Year

Register a business credit card with the National Tax Service. If you don't, you have to manually collect every expense receipt, which is a real pain. Purchases made with a registered business card automatically show up as expenses.

I also signed up for the Small Business Mutual Aid (Noran Woosan). Contributing 300,000 won monthly gives you 3.6 million won in annual income deductions. In the 24% tax bracket, that's about 860,000 won in tax savings.

The one thing I'm sure of: I should have known all this before going freelance. That 4.87 million won additional payment in my first year hurt. Setting aside about 25% of income each month for taxes seems right, but following through on that is easier said than done.