Samsung Electronics and its labor union have agreed to partially pay performance bonuses in company stock, raising concerns about the tax implications of these high bonuses. With the semiconductor supercycle, bonuses could reach up to 600 million won, pushing recipients into the highest income tax bracket of 42%.
According to the National Tax Service on May 21, stock received as performance bonuses is classified as earned income under current tax law and is taxed in the same manner as cash bonuses. Taxes are assessed based on the market value at the time of payment, even if the stocks are not sold.
The agreement to include company stock in performance bonuses is a first for Samsung Electronics, as the company and its labor union reached a tentative wage and collective bargaining agreement the previous day.
A simulation by the National Tax Service indicates that for a family of three, with one spouse and one child over eight years old, a worker earning an annual salary of 100 million won without additional bonuses would face a tax liability of approximately 12.74 million won, with an additional payment of 2.66 million won after withholding taxes.
If the same worker receives an additional performance bonus of 600 million won, their total salary would rise to 700 million won, and the taxable income would surge to 675.5 million won. This would place them in the highest tax bracket, resulting in a tax liability of 247.19 million won. After accounting for withholding taxes, they would still owe an additional 7.19 million won.
However, this simulation does not include local income taxes. When factoring in local taxes, which are approximately 10% of the calculated tax amount, the total tax burden could approach 2.7 billion won.
Analysts warn that since performance bonuses are paid in stock rather than cash, a decline in stock prices could exacerbate the perceived tax burden. Taxes are assessed at the time of payment, meaning that even if stock prices fall afterward, the tax already paid remains unchanged.
The recent increase in performance bonuses among semiconductor companies is also impacting income tax revenues. In the first quarter of this year, income tax revenue rose by 4.7 trillion won year-on-year to reach 35 trillion won, largely due to increased bonuses at Samsung Electronics and SK Hynix.
* This article has been translated by AI.
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