Taxing Wages 2026

Korea

Abstract

This chapter includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by their employers. Results reported include the marginal and average tax burden for eight different family types.

Methodological information is available for personal income tax systems, compulsory social security contributions to schemes operated within the government sector, universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

 

 

The national currency is the Won (KRW). In 2025, KRW 1 422.44 were equal to USD 1. In that year, the average worker was expected to earn KRW 56 749 797 (Secretariat estimate).

Personal Income Tax System

Central government income tax system

Tax unit

Each individual is taxed on his/her own income.

Non-taxable wage income includes the:

• National pension, National health insurance, Employment insurance and Workers’ compensation insurance that are borne by employer.

• Overtime payment to productive workers: up to KRW 2 400 000 of overwork payment of productive workers in manufacturing and mining sectors whose monthly wage is less than KRW 2 100 000 and whose yearly wage is less than KRW 30 000 000.

Allowances and tax credits

Standard reliefs

• Employment income deduction: the following deduction (up to KRW 20 000 000) from gross income is provided to wage and salary income earners:

Salary	Deduction
Up to KRW 5 000 000	70%
KRW 5 000 000 to KRW 15 000 000	KRW 3 500 000 plus 40% of the salary over KRW 5 000 000
KRW 15 000 000 to KRW 45 000 000	KRW 7 500 000 plus 15% of the salary over KRW 15 000 000
KRW 45 000 000 to KRW 100 000 000	KRW 12 000 000 plus 5% of the salary over KRW 45 000 000
Over KRW 100 000 000	KRW 14 750 000 plus 2% of the salary over KRW 100 000 000

• Basic allowance: a taxpayer can deduct KRW 1 500 000 from his/her income for each person who meets one of following conditions:

  • the taxpayer him/herself.

  • the taxpayer’s spouse whose taxable income (gross earnings net of employment income deduction) is less than KRW 1 000 000 (Spouse only have a salary earned income is less than KRW 5 000 000).

  • the taxpayer’s (including the spouse's) dependents (parents, siblings, children) within the same household whose income after accounting for the employment income deduction is less than KRW 1 000 000 (Dependent only have a salary earned income is less than KRW 5 000 000) and whose age is:

    1. parents: 60 years or older.

    2. brother/sister: 60 years or older or 20 years or younger.

    3. children: 20 years or younger (if both partners in the household earn wage-income, this Report assumes that the principal wage earner will claim the allowance).

• Additional allowance: a taxpayer can deduct KRW 1 000 000 (500 000 in the case of (c), KRW 2 000 000 in the case of (b)) from his/her gross income when the taxpayer or his/her dependents fall into one of the following categories (for this report, only cases (c) and (f) are modelled):

  • a person aged 70 years or older(a)

  • a handicapped person (b)

  • a female wage earner who is the head of a household with dependents (but without spouse) or a female wage earner with spouse when her taxable income is not more than KRW 30 million (c)

  • a single parent with descendants including adoptees*(f)

  • * Overlapping of deductions for (c) and (f) is not allowed. So a taxpayer should select only one.

• National pension deduction: employees can deduct 100% of their National Pension contributions.

• Insurance premiums: the National health insurance premium and the Employment insurance premium can be entirely (100%) deducted from taxable income.

• Working Tax credit: wage and salary income earners obtain the following tax credit:

Calculated tax	Amount of tax credit
Up to KRW 1 300 000	55% of calculated tax
Over KRW 1 300 000	KRW 715 000 plus 30% of the calculated tax over KRW 1 300 000

Total wage and salary income	Ceiling on credit amount
Not more than KRW 33 million	KRW 740 000
Not more than KRW 70 million	The greater of KRW 660 000 and KRW 740 000- [(total wage and salary income -KRW 33 million)* 0.8%]
Not more than KRW 120 million	The greater of KRW 500 000 and KRW 660 000- [(total wage and salary income- KRW 70 million)* 50%]
Exceeding KRW 120 million	The greater of KRW 200 000 and KRW 500 000- [(total wage and salary income- KRW 120 million)* 50%]

Main non-standard tax reliefs

Wage and salary income earners may deduct from gross income the expenses for the following items during the tax year:

• Saving/Payment for housing: 40% of deposits of an account for purchasing a house, which is held by a person who does not own a house, and 40% of repayments of loans including interest borrowed in order to lease a house smaller than 85 square meters in size by a person owning no house may be deducted up to four million won per year.

• Credit card purchases: Employees may deduct 15% of their credit card (30% of their debit card, prepaid card or cash receipt) purchases that exceed 25% of their total income up to the lesser of KRW 3 000 000 or 20% (up to the lesser of KRW 2 500 000 in the case of the total income from over KRW 70 000 000) However, for expenditures spent for traditional markets and public transportation, the allowed deduction is equivalent to 40% of the expenditure (30% for the expenditures of books, performances, theatres, museums, swimming pools, and fitness centers, only if their total income is less than KRW 70,000,000) and the ceiling is raised by an additional KRW 2,000,000 (KRW 3,000,000 if their total income is less than KRW 70,000,000).

Child tax credit

• Where a resident with taxable income has dependent children from 8 years old including adoptee, he/she gets annual tax credit of KRW 250 000 for having a child, KRW 550 000 for having two children and KRW 550 000 plus KRW 400 000 per an excess child over two children in case of having more than three children.

• Resident gets tax credit of KRW 300 000 for the first child, KRW 500 000 for the second Child, and KRW 700 000 for the third child or more for birth and adoption of the year.

• Refundable CTC (child tax credit)

Refundable CTC can be received in families with children under the age of 18, regardless of the existence of a spouse. From 2024, the income standard for Refundable CTC has been Raised from KRW 40,000,000 to KRW 70,000,000. It must meet the requirements (less than KRW 70,000,000 in income per household and less than KRW 240,000,000 in property per household) and be paid according to the calculation table for each child.

 

Household Gross Earnings		Child care subsidies
More than Gross Eatnings	Less than Gross Eatnings	Single-income Households	Dual-income Households
40,000	6,000,000	1,000,000	-
6,000,000	21,000,000	1,000,000	1,000,000
21,000,000	21,500,000	1,000,000	1,000,000
21,500,000	22,000,000	995,000	1,000,000
~
69,000,000	69,500,000	511,000	512,000
69,500,000	69,999,990	506,000	506,000

Credit for Pension Insurance Premiums

• A resident who paid pension contributions to a pension account may deduct the amount equal to 12% of the premiums paid from his/her global income tax amount, only up to KRW 6 million for pension savings account as well as KRW 9 million for sum of the pension savings account and retirement pension account.

• A resident whose labour income is not exceeding KRW 55 million when he has labour income only or whose global income is not exceeding KRW 45 million would deduct 15% of the premium.

Special tax credit

Wage and salary income earners may obtain following tax credit during the tax year:

• Insurance premiums (a): 12% of the general insurance premium up to KRW 1 000 000 can be deducted from his/her income tax amount.

• Medical expenses (b): 15% of the medical expenses exceeding 3% of taxable income can be deducted from his/her income tax amount. The medical expenses for taxpayer’s dependents who are eligible for the basic deduction are limited to KRW 7 000 000 and the medical expenses for the taxpayer himself, taxpayer’s dependents who are 6 years or younger as of the start date of the tax year, taxpayer’s dependents who are aged 65 years or older and handicapped persons are not limited.

  • In addition, 30% of medical expenses for the treatment of infertility can be deducted from his/her income tax amount. There is no deduction limitation.

  • In addition, 20% of medical expenses for the treatment of premature baby and congenital abnormality can be deducted from his/her income tax amount. There is no deduction limitation.

• Educational expenses (c): 15% of tuition fees for pre-school, elementary, middle school, and college (but the graduate school fee deduction is allowed only for the taxpayer himself), either for the taxpayer himself or his/her dependents (including the taxpayer's spouse, children, and siblings), can be deducted from his/her income tax amount. The tuition fee for the taxpayer himself is not limited. For the taxpayer’s dependents, the limits of tuition fees are as follows:

  • For pre-school: up to KRW 3 000 000 per child.

  • For elementary, middle and high school: up to KRW 3 000 000 per student.

  • For college/university: up to KRW 9 000 000 per student.

• Charities (d):15% of the amount of donation (in case of the donation exceeding KRW 10 000 000, 30% of the excess amount over KRW 10 million) is deducted from income tax amount. The limits of donations are as follows:

  • donations to a government body, donations for national defence, natural disaster, and certain charitable associations: up to gross income.

  • donations to public welfare or religious associations: up to 30% of gross income.

• Standard Credits: Alternatively, a taxpayer may choose an annual standard credit of KRW 70 000 (KRW 130 000 for wage and salary earners and KRW 120 000 for business owners meeting certain requirements), if he or she fails to claim deductions for insurance premium, saving/payment for housing and special tax credit.

Tax schedule

Over (KRW)	Not more than (KRW)	Marginal tax rate (%)
0	14 000 000	6
14 000 000	50 000 000	15
50 000 000	88 000 000	24
88 000 000	150 000 000	35
150 000 000	300 000 000	38
300 000 000	500 000 000	40
500 000 000	1 000 000 000	42
1 000 000 000		45

Local income tax

Tax base

The local income tax base is the income tax paid to the central government.

Tax rate

A uniform rate of 10% is applied. However, the local government can adjust the rate between the lower limit of 5% and the upper limit of 15%.

Tax rate (selected for this study)

A country-wide rate of 10% is used in this Report.

Compulsory Social Security Contribution to Schemes Operated Within the Government Sector

Employees’ contribution

National pension

The National pension contribution rate is 4.5% of the standardised average monthly wage income as of 2020.

The scope of the standardised average monthly wage income is from KRW 390 000 to KRW 6 170 000 until 30 June 2025, from KRW 400 000 to KRW 6 370 000 starting 1 July 2025.

If the average monthly wage income of a person is less than the lower limit, the average monthly wage income of the person is regarded as the lower limit, and the rate (0.045) is applied. If the average monthly wage income of a person is more than the upper limit, the average monthly wage income of the person is regarded as the upper limit, and the rate (0.045) is applied.

The minimum annual National Pension contribution for 2025 is KRW 213 300 if a person’s average monthly wage income consistently remains at the minimum limit throughout the year. This amount is calculated by adding the contribution for the first six months (January to June 2025, based on a monthly income of KRW 390 000: KRW 390 000 x 0.045 x 6 months = KRW 105 300) and the contribution for the latter six months (July to December 2025, based on a monthly income of KRW 400 000: KRW 400 000 x 0.045 x 6 months = KRW 108 000).

The maximum annual National Pension contribution for 2025 is KRW 3 385 800 if a person’s average monthly wage income consistently remains at the maximum limit throughout the year. This amount is calculated by adding the contribution for the first six months (January to June 2025, based on a monthly income of KRW 6 170 000: KRW 6 170 000 x 0.045 x 6 months = KRW 1 665 900) and the contribution for the latter six months (July to December 2025, based on a monthly income of KRW 6 370 000: KRW 6 370 000 x 0.045 x 6 months = KRW 1 720 000).

National health insurance

The National health insurance premium, which has a rate of 4.004078 % (National health insurance: 3.545%, Long term care insurance 12.95 % of National Health insurance premium rate), is levied on average monthly wage income as of 1 January 2025.

The scope of the monthly National health insurance premium (excluding long term care insurance premium) is from KRW 9 890 to KRW 4 504 170. To include long term care insurance, we should multiply 1.1295. Thus, the scope of the total monthly premium is from KRW 11 171 to 5 087 597. If the calculated premium is less than KRW 11 171, the worker should pay KRW 11 171. Likewise, if the calculated premium is more than KRW 5 087 597, the worker only pays KRW 5 087 597.

Employment insurance

0.8% of gross income as of 1 October 2019.

0.9% of gross income as of 1 July 2022.

Workers’ compensation insurance

Compulsory application, premiums paid only by employers.

Employers’ contribution

National pension

The national pension contribution rate is 4.5% of the standardised average monthly wage income as of 2020.

The scope of the standardised average monthly wage income is from KRW 390 000 to KRW 6 710 000 until 30 June 2025, from KRW 400 000 to KRW 6 370 000 starting 1 July 2025.

If the average monthly wage income of a person is less than the lower limit, the average monthly wage income of the person is regarded as the lower limit, and the rate (0.045) is applied. If the average monthly wage income of a person is more than the upper limit, the average monthly wage income of the person is regarded as the upper limit, and the rate (0.045) is applied.

The minimum annual National Pension contribution for 2025 is KRW 213 300 if a person’s average monthly wage income consistently remains at the minimum limit throughout the year. This amount is calculated by adding the contribution for the first six months (January to June 2025, based on a monthly income of KRW 390 000: KRW 390 000 x 0.045 x 6 months = KRW 105 300) and the contribution for the latter six months (July to December 2025, based on a monthly income of KRW 400 000: KRW 400 000 x 0.045 x 6 months = KRW 108 000).

The maximum annual National Pension contribution for 2025 is KRW 3 385 800 if a person’s average monthly wage income consistently remains at the maximum limit throughout the year. This amount is calculated by adding the contribution for the first six months (January to June 2025, based on a monthly income of KRW 6 170 000: KRW 6 170 000 x 0.045 x 6 months = KRW 1 665 900) and the contribution for the latter six months (July to December 2025, based on a monthly income of KRW 6 370 000: KRW 6 370 000 x 0.045 x 6 months = KRW 1 720 000).

National health insurance

The National health insurance premium, which has a rate of 4.004078 % (National health insurance 3.545 %, Long term care insurance: 12.95 %of National health insurance premium rate), is levied on average monthly wage income as of 1 January 2025.

The scope of the monthly National health insurance premium (excluding long term care insurance premium) is from KRW 9 890 to KRW 4 504 170. To include long term care insurance, we should multiply1.1295. Thus, the scope of the total monthly premium is from KRW 11 171 to 5 087 597. If the calculated premium is less than KRW 11 171, the employer should pay KRW 11 171. Likewise, if the calculated premium is more than KRW 5 087 597, the employer only pays KRW 5 087 597.

Employment insurance

• the insurance premium is between 1.15% and 1.75% of total wage as of 1 January 2022.

• the insurance premium selected for this study is1.15%.

Workers’ compensation insurance

• the insurance premium consists of an industry-specific rate which is set by the Ministry of Employment and Labor multiplied by total wage;

• the average rate of all industries (announced by the Ministry of Employment and Labor and selected for this study) is 1.41%.

Universal Cash Transfers

Child Benefit

Child home care allowance is granted KRW 100 000 every month to those who have children aged 24 months to less than 86 months.

If a child attends a nursery or pre-school, monthly childcare service voucher is provided instead of the child home care allowance. The amount of the benefit differs by the age of the child, type of nursery, class of nursery etc.

Starting in 2022, a voucher of KRW 2 000 000 will be given to all newborns.

On top of those two benefits, universal child benefit of KRW 100 000 is paid monthly to those who have children if the child is under the age of 8.

From January 2024, parental benefits will be provided so that infants in need of intensive care can be comfortably taken care of at home. A child who turns 0 receives KRW 1 000 000 per month, and a child who turns 1 receives 500 000 per month. This system will be applied to children born after 2022.

Main Changes in Tax/Benefit System since 2000

 

2000	Contributions to National Pension are to be deductible from 2001, upper cap of employment income deduction limit (KRW 12 000 000) is abolished from 2001
2001	Personal income tax rates are lowered by 10% (10, 20 ,30, 40% were reduced to 9, 18, 27, 36%, respectively) from 2002
2002	Limits of deduction for education fees are expanded from 2003. For pre-school: from KRW 1 000 000 to KRW 1 500 000. For elementary, middle school and high school: from KRW 1 500 000 to KRW 2 000 000. For college and university: from KRW 3 000 000 to KRW 5 000 000. Limit of deduction for interest of long-term mortgage loan for housing is expanded from KRW 3 000 000 to KRW 6 000 000 from 2003
2003	Employment income deduction and tax credit applicable to low income are increased. The deduction rate for the taxable wage income range of KRW 5 000 000 to KRW 15 000 000 is increased from 45% to 47.5%. The tax credit rate for calculated tax below KRW 500 000 is increased from 45% to 50% and the maximum tax credit is increased from KRW 400 000 to KRW 450 000.
2004	Limits of deduction for education fees are expanded. For pre-school: from KRW 1 500 000 to KRW 2 000 000. For college and university: from KRW 5 000 000 to KRW 7 000 000. Limit of deduction for interest on long-term mortgage loan for housing is expanded from KRW 6 000 000 to KRW 10 000 000. The marginal deduction rate for the taxable wage income range from KRW 5 000 000 to KRW 15 000 000 is increased from 47.5% to 50%. The tax credit rate for tax amounts below KRW 500 000 is increased from 50% to 55% and the maximum permitted tax credit goes up from KRW 450 000 to KRW 500 000.
2005	Personal income tax rates are lowered by 1% point (9, 18, 27, 36% were reduced to 8, 17, 26, 35%, respectively). Lump-sum tax relief are expanded from KRW 600 000 to KRW 1 000 000.
2007	Eligibility for the extra allowance amount has been changed. Previously, an income earner with a small number of dependents (e.g. spouse, child) eligible for basic allowance was eligible for an allowance of up to KRW 1 000 000 depending on the number of dependents. As from 2007, however, an income earner with two or more dependent children eligible for basic allowance is eligible for an allowance equivalent to KRW 500000 if there are 2 children plus an additional KRW 1 000 000 for every additional child (e.g., 2 children: KRW 500 000; 3 children: KRW 1 500 000; 4 children: KRW 2 500 000, etc.).
2008	Tax schedule has been changed: from KRW 10 000 000, KRW 40 000 000, KRW 80 000 000 to KRW 12 000 000, KRW 46 000 000, KRW 88 000 000. New items have been added to the additional allowance with respect to lineal descendants who are born or adopted during the concerned taxable year. Credit card purchase deduction has been changed: Employees may deduct 20% (previously 15%) of their credit/debit card purchases that exceed 20% (previously 15%) of their total income. Deduction for donations to public welfare or religious associations has been increased up to 15% of gross income. Previously, the limit was 10% of gross income.
2009	Personal income tax rates have been changed: from 8%, 17%, 26%, 35% to6%, 16%, 25%, and 35%. Employment income deduction has been changed: from 100%, 50%, 15%, and 10% 5% to 80%, 50%, 15%, and 10%. 5%
2010	Personal income tax rates have been changed: from 6%, 16%, 25%, 35% to6%, 15%, 24%, and 35%.
2012	Personal income tax rates have been changed: from6%, 15%, 24%, and 35% to 6%, 15%, 24%, 35% and 38%
2013	A new additional allowance is added: a single parent with lineal descendants or adopted children who are eligible for basic exemption can deduct KRW 1 000 000. Insurance premiums, medical expenses, education expenses, loans for house, designated donations, saving deposits for housing subscription, investment in employee stock ownership associations or in associations for investment in start-ups, and credit cards are allowed income deduction with a ceiling at KRW 25 000 000 in total. However, for the amount of designated donations exceeding the ceiling, deduction can be carried forward for 5 years.
2014	Tax schedule has been changed: KRW 300 000 000 to KRW 150 000 000 Personal and special income deductions (e.g. medical expenses, educational expenses) have been shifted toward tax credit Employment income deduction has been changed: 80% to 70%, 50% to 40%. The ceiling amount of earned income tax credit has been changed: KRW 500 000 to KRW 740 000(the salary <33 000 000), KRW 660 000(the salary < 70 000 000)
2015	Refundable CTC (Child Tax Credit) has established
2017	Personal income tax rate 40% is newly created over KRW 500 000 000
2018	Tax schedule has been changed: Tax base over KRW 150 000 000 up to KRW 500 000 000 divided into over KRW 150 000 000 up to KRW 300 000 000 and over KRW 300 000 000 up to KRW 500 000 000 The Highest income tax rate has been changed: 40%->42%
2019	Charities tax credit’s deduction rate has been adjusted. Regarding non-taxable overtime payment to productive workers, the upper limit of monthly wage for recipient of tax exemption has been increased to KRW 2 100 000.
2020	Regarding non-taxable overtime payment to productive workers, the upper limit of yearly wage for recipient of tax exemption has been increased to KRW 30 000 000. The employment income deduction’s limitation of KRW 20 000 000 has been newly set up.
2021	Tax schedule has been changed: tax base over KRW 500 000 000 is divided into over KRW 500 000 000 to KRW 1 000 000 000 and over KRW 1 000 000 000. Tax rate to be applied is 42% and 45% respectively.
2022	Special tax credit rate of medical expenses for the treatment of infertility has been changed: 20%->30% Special tax credit of medical expenses for the treatment of premature baby and congenital abnormality has been newly set up (20%).
2023	Tax schedule has been changed: KRW 12 000 000 to KRW 14 000 000 and KRW 46 000 000 to 50 000 000. The ceiling amount range of working tax credit has been changed: over KRW 70 000 000 is divided into over 70 000 000 to 120 000 000 and over 120 000 000. Ceiling on credit amount to be applied is 500 000 and 200 000 respectively.
2024	Limit of deduction for interest on long-term mortgage loan for housing is expanded from KRW 6 000 000 to KRW 20 000 000. Salaries received by workers with children under the age of 6 from employers in relation to childbirth and childcare are not taxed up to 200,000 per month. From 2024, The income standard for Refundable CTC has been Raised from 40,000,000 won to 70,000,000 won.
2025	From 2025, the Child Tax Credit is expanded: KRW 250 000 per year for the first child (up from KRW 150 000), KRW 300 000 per year for the second child (up from KRW 200 000), and an additional KRW 400 000 per child per year for the third child and every child thereafter (up from KRW 300 000).

Memorandum Item

Identification of the Average Worker (AW)

• Sectors used: industry Sectors B-N with reference to the International Standard Industrial Classification of All Economic Activities, Revision 4 (ISIC Rev.4).

Geographical coverage: whole country.

Type of workers: wage workers (male and female).

Method to calculate wages

Establishment Labor Force Survey (ELFS) by the Ministry of Employment and Labor is used to calculate the AW. The statistics were obtained through a sample survey of approximately 13 000 firms with one or more permanent employees throughout the whole country.

Basic method of calculation used: average monthly wages multiplied by 12.

Employer’s reserve for employee’s retirement payment

An employer should pay to a retiree the retirement payment which is not less than 30 days’ wage and salary per one year of service (about 8.3% of gross income or more). An employer can contribute to the Retirement Payment Reserve Fund established within the company or Retirement Insurance Fund established outside the company to prepare for the retirement payment. Such contribution is treated as business expense under certain constraints. Because contribution to the Retirement Fund is not compulsory, this survey does not include such contribution except the contribution converted to employer's contribution to the national pension plan (see the National pension Section).

2025 Parameter values

Average earnings/yr	Ave_earn	56 749 797	Secretariat estimate
Tax allowances	basic_al	1500000
spouse	spouse_al	1500000
	spouse_al_lim	1000000
dependents including children	dep_al	1500000
additional allowance	add_all	500000
	add_all_lim	30000000
additional allowance 2	add2_all	1000000
Employment income deduction	empdedsch	0	0.7
		5000000	0.4
		15000000	0.15
		45000000	0.05
		100000000	0.02
	max_empded	20000000
Earned income special credit threshold	earntaxcred	0.55
		0.3	1300000
credit limit	credlimit	740000	Ave_earn < 33000000
		660000	Ave_earn < 70000000
		500000	Ave_earn > 70000000
		200000	Ave_earn > 120000000
Child tax credit	child_cred	150000
Lump sum tax credit	lump_cred	130000
	lump_thresh	866,667
Tax schedule	tax_sch	0.06	14000000
		0.15	50000000
		0.24	88000000
		0.35	150000000
		0.38	300000000
		0.40	500000000
		0.42	1000000000
		0.45
Local tax rate	local_rate	0.1
Cash Transfer for kids under 8 age	cash_child	2400000
max number of kids permitted to be under 7	child_und7_max	2
Social security contributions	SSC_pens	0.045
	SSC_pens_max	3385800
	SSC_pens_min	213300
	SSC_sick	0.04004078
	SSC_sick_max	61049520.2
	SSC_sick_min	134049.06
	SSC_unemp	0.009
Employer contributions	emp_pens	0.045
	emp_sick	0.04004078
	emp_unemp	0.0115
	emp_inj	0.0141
CTC - Child Tax Credit	ctc_earn_thr_min	500000
	ctc_earn_thr_max	70000000
	Ctc_schedule	Contained in the Taxing Wages model

2025 Tax equations

The equations for the Korean system are independent between spouses except that the principal earner has tax allowances for the spouse and for any children.

The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note about tax equations. Variable names are defined in the table of parameters above, within the equations table, or are the standard variables married and children. A reference to a variable with the affix total indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and “_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are as shown for the principal, with spouse values taken as 0.

 

	Line in country table and intermediate steps	Variable name	Range	Equation
1.	Earnings	earn
2.	Allowances:
	employment income	emp_al	B	MIN(Empincded(earn, empincdedsch),max_empded)
	basic	bas_al	B	basic_al
	spouse	sp_al	P	Married*spouse_al*(earn_spouse-emp_al_spouse<=spouse_al_lim)
	dependents	dp_al	P	Children*dep_al
	additional allowances	add_al_princ	P	IF(AND(Married='0,Children>0),' add2_all,0)
	additional allowances	add_al_spouse	S	IF(AND(earn_spouse>0,earn_spouse<=add_all_lim),add_all,0)
	national pension deduction	np_de	B	Min(earn*SSC_pens, SSC_pens_max)
	Main non-standard tax relief	non-std_al	B	IF(earn*(SSC_sick+SSC_unemp)>lump_thresh,earn*(SSC_sick+SSC_unemp),0)
	Total	tax_al	B	emp_al+bas_al+sp_al+dp_al+add_al+np_al
3.	Credits in taxable income	taxbl_cr	B	0
4.	CG taxable income	tax_inc	B	Positive(earn-tax_al)
5.	CG tax before credits	CG_tax_excl	B	Tax(tax_inc, tax_sch)
6.	Tax credits : earned income special tax credit child tax credit Refundable CTC lump-sum tax credit Total	earn_cr child_cr lump_cr tax_cr refund_child cred	B P B B J	MIN(earntaxcred(CG_tax_excl), credlimit(earn)) child_cred*(children-(cash_trans>0)) IF(non-std_al='0,' lump_cred, 0) earn_cr+child_cr+lump_cr IF(Gross earnings<ctc_earn_thr_max,(VLOOKUP(FLOOR(Gross earnings,ctc_earn_thr_min),ctc_schedule,3)*Children-tax cr),0)
7.	CG tax	CG_tax	B	CG_tax_excl-tax_cr
8.	State and local taxes	local_tax	B	local_rate*CG_tax
9.	Employees' soc security	SSC	B	MAX(SSC_pens_min,MIN(earn*(SSC_pens),SSC_pens_max))+MAX(SSC_sick_min,MIN(earn*(SSC_sick),SSC_sick_max))+earn*(SSC_unemp)
11.	Cash transfers	cash_trans	J	=cash_child*child_und7_max*(Children>0)
13.	Employer's soc security	SSC_empr	B	MAX(SSC_pens_min,MIN(earn*(SSC_pens),SSC_pens_max))+MAX(SSC_sick_min,MIN(earn*(emp_sick),SSC_sick_max))+earn*(emp_unemp+emp_inj)

Key to range of equation:

B calculated separately for both principal earner and spouse

P calculated for principal only (value taken as 0 for spouse calculation)

S calculated for spouse only

J calculated once only on a joint basis