When do expatriate executives become non-residents? Do they have to return their residence permits?

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Mr. A, a foreign executive who has been living in Korea, is liquidating his domestic assets and preparing to leave the country with his family.
When a foreign national leaves Korea, determining whether they are a "resident" or "non-resident" under tax law has significant tax implications. Accordingly, we will summarize the criteria for determining residency and related considerations.

1. Criteria for distinguishing between ‘resident’ and ‘non-resident’ under tax law

Under the Income Tax Act, a "resident" is defined as an individual who has a domestic address or resides in Korea for 183 days or more. Anyone who does not fall under this category is considered a "non-resident." In this case, the key factor is not citizenship or permanent residency, but rather the location of one's actual residence. The following criteria are comprehensively considered when determining this determination:

• Period of residence: Residing in the country for 183 days or more
• Occupation: Whether or not you are working in the country and its characteristics
• Family: Whether or not there is a family living with you in the country
• Assets: Whether or not you own real estate or other assets located in Korea

In other words, even if a person is a foreign national, he or she can be classified as a resident if the above conditions are met in Korea. Conversely, even if he or she has a residence permit, he or she can be considered a non-resident if he or she has no basis for living in Korea.

2. Determination of non-resident status and conversion timing

If Mr. A leaves the country with his family and has settled all domestic assets, employment, and other living arrangements, he is considered to meet the non-resident requirements under general standards. However, this only applies if there are no special circumstances, such as being dispatched to a known overseas business location.

Meanwhile, if a resident moves abroad, he or she is considered a non-resident from the day after the departure date, and his or her tax status changes based on that point in time.

3. Is it mandatory to return the certificate of residence?

The presence or absence of a residence certificate is not a decisive factor in determining residency for tax purposes. This is because the income tax law focuses on actual living arrangements. However, in practice, returning a residence certificate has the following implications:

• According to the Overseas Koreans Act, if you do not intend to re-enter the country, you must return the item. Failure to return the item may result in a fine.
• It serves as a means of officially indicating that the taxpayer has no intention of re-entering the country.

Therefore, if Executive A does not plan to reside in Korea for the long term, it is advisable to voluntarily return the residence certificate to comply with the tax authorities' judgment and prevent unnecessary legal disadvantages.

4. Conclusion

Under the Income Tax Act, residency is determined not by nationality or residence, but by the location of one's center of residence. If a resident leaves the country for relocation, they are considered non-resident from the day after departure. While returning their residence permit is not mandatory, it is advisable if they do not plan to reside in Korea long-term.

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