Why the meal allowance is 200,000 won: tax-free income

The meal allowance for employees has been raised from the previous monthly 100,000 won to 200,000 won from January 1, 2023, and the 200,000 won meal allowance is tax-free. This means that no taxes will be levied on the meal allowance, and as a result, less insurance premiums (four major insurances) will be paid. This tax exemption has the effect of paying less taxes even if you receive the same salary.

 

For example, let's consider the case of worker A receiving a salary of 4 million won and worker B receiving a salary of 3.8 million won. A is subject to taxes on the entire salary of 4 million won. On the other hand, B receives a salary of 3.8 million won and a meal allowance of 200,000 won, so even though the total amount is the same, A has to pay taxes on 4 million won, while B has to pay taxes on 3.8 million won.

 

Here are the main non-taxable incomes:

• Meal expenses up to KRW 200,000 per month
• Vehicle maintenance expenses up to KRW 200,000 per month
• Allowances for extended work, night work, and holiday work (up to KRW 2.1 million per month for production workers with a salary of KRW 30 million or less and an annual income of KRW 24 million or less)
• Childcare allowance of KRW 100,000 per month
• Parental leave allowance of KRW 100,000 per month
• Bonuses
• Daily allowance, fixed allowance, and travel expenses (up to the amount of actual expenses incurred)
• Employee's own scholarship
• Research subsidies or research activity expenses up to KRW 200,000 per month
• Childcare teacher compensation improvement expenses paid by the national or local government
• Press coverage allowance, wallpaper work allowance, and local relocation support allowance up to KRW 200,000 per month
• Remote area allowance of KRW 200,000

 

From 2023, the meal expenses will be adjusted upwards to KRW 200,000 per month, which could reduce the taxes and four major insurance premiums that need to be paid. Note that even if the non-taxable income increases, it will not affect the total annual salary, and therefore, the retirement benefits will not be affected either. If the meal expenses increase to KRW 300,000, the effect could be greater. The cost of lunch is rising every day, so the bill to adjust the non-taxable level of meal expenses to KRW 300,000 has been proposed. Even a slight increase in the non-taxable income could be a significant benefit for salaried workers. Another item that needs to be adjusted as much as meal expenses is the childcare and parental leave allowances.

 

The total fertility rate in Korea was the lowest in the world at 0.78 births per woman in 2022. The childcare and parental leave allowances were established in 2004 and have remained unchanged at KRW 100,000 per month per worker for more than 20 years. It is uncertain whether raising these allowances would have a positive effect on the birth rate, but there seems to be a need for such an adjustment.

 

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