That "3.0%" on the Bank's Poster Isn't Your 3%
The special-rate deposit banner says 3.0% per year in big letters. Put in ₩10 million, get ₩300,000 after a year. You do the math and wait for maturity.
Then the interest lands: ₩253,800. Where did ₩46,200 go?
It didn't disappear. It was taken as tax before you ever saw it — and this isn't unusual. It happens on nearly every deposit and savings account in Korea, every time.
15.4% — what that number actually is
Interest is taxed. Precisely, by two things at once:
| Item | Rate |
|---|---|
| Income tax | 14% |
| Local income tax | 1.4% |
| Total | 15.4% |
The 14% is the National Tax Service's withholding rate on a resident's interest income (NTS); local income tax brings it to 15.4%.
The key word is withholding. It means you don't file or pay anything. The bank takes it off first and deposits the rest. Which is why most people never notice they paid tax at all.
So what's the real rate?
Multiply the advertised rate by 0.846 (100% − 15.4%) and you get what actually reaches you.
| Advertised | On ₩10 million | You receive | Effective rate |
|---|---|---|---|
| 3.0% | ₩300,000 before tax | ₩253,800 | 2.538% |
| 4.0% | ₩400,000 before tax | ₩338,400 | 3.384% |
3% is really 2.538%. Even ₩50 million at 3% pays not ₩1.5 million but ₩1,269,000.
There's one reason this matters: so your comparisons are honest. Comparing advertised rates to each other is fine — but when you judge "is 3% beating inflation?", you have to use the after-tax 2.538%.
The ₩20 million line
Everything above applies to most people. But there's one more line worth knowing.
- Annual financial income (interest + dividends) of ₩20 million or less → the 15.4% withholding ends your tax obligation. This is separate taxation; nothing to file.
- Above ₩20 million → the excess is aggregated with your other income (employment, business) and taxed as comprehensive income tax, at rates that climb with your income.
For scale: earning ₩20 million of interest at 3% requires roughly ₩670 million in principal. So for most savers that line is far away, and 15.4% is the whole story. (NTS call center)
What I won't claim
There are schemes that reduce this tax — ISAs, tax-exempt savings for eligible people, various preferential products.
Honestly: I'm not going to tell you to sign up for one. Eligibility depends on age, income, and what you already hold — conditions differ per person, and rules change. The moment I generalize, I'd be giving someone wrong information.
Do this instead. At the bank counter, or via Hometax, ask once: "Am I eligible for any tax-exempt or tax-preferred savings?" If you are, they'll tell you. If you don't ask, usually nobody volunteers it.
One piece of good news
If this read as gloomy, remember one thing: paying this tax means you earned interest. Losses aren't taxed.
And 15.4% applies only to the interest. Never to your principal. Whether you break the deposit early or hold to maturity, the money you put in is never reduced by this tax.
Three lines
- Interest is taxed 14% income + 1.4% local = 15.4%, withheld up front. Nothing to file.
- Advertised rate × 0.846 = what you get. 3% is really 2.538% (₩253,800 on ₩10 million). Compare after tax.
- Financial income up to ₩20 million a year ends at 15.4% (that's ~₩670 million of principal at 3%). For exemptions, you have to ask.
This article is for information only and is not tax advice. Tax law and rates change, and exemptions depend on personal circumstances. Check your own situation with the NTS/Hometax or a tax professional. Last checked: July 2026. If you spot an error, tell me and I'll correct it right away.
Method: interest = principal × rate; tax = interest × 15.4%. Assumes simple interest, one-year maturity, no early withdrawal.
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