South Korean employees using personal credit cards for work expenses may deduct up to 25% of total salary, according to Jisoo Accounting Firm. The rule applies to amounts exceeding 25% of annual compensation, verified by tax accountant Jeong Sung-hoon. This threshold, effective as of June 2026, impacts corporate reimbursement policies and individual tax planning.
The credit card deduction rule, confirmed by Jisoo Accounting Firm, mandates that personal card expenses for business purposes qualify for tax relief only after exceeding 25% of an employee’s total salary. For example, a worker earning 40 million KRW annually (approximately $32,000) could claim deductions on expenses surpassing 10 million KRW. This policy aligns with South Korea’s broader tax code, which limits personal expense deductions to prevent excessive corporate tax avoidance.
How the 25% Threshold Affects Corporate Finance
The 25% cap creates a financial incentive for companies to formalize reimbursement processes. Korea Eximbank data shows that 68% of firms in 2025 reported increased administrative costs due to informal expense claims. By restricting deductions to amounts beyond 25% of salary, the policy encourages businesses to issue corporate cards or establish structured reimbursement systems, reducing tax evasion risks.
For employees, the rule introduces a trade-off. While personal credit card usage offers flexibility, the 25% threshold means deductions are marginal for lower earners. A worker with a 20 million KRW salary would only qualify for deductions on expenses over 5 million KRW, versus 10 million KRW for someone earning 40 million KRW. This disparity disproportionately affects mid-tier professionals, who may face higher out-of-pocket costs compared to high-income earners.
Market-Bridging: Impact on Financial Institutions and Consumer Spending
The policy indirectly influences financial institutions by altering credit card usage patterns. Bank of Korea data from Q1 2026 reveals a 7% decline in personal credit card transactions for business-related expenses, suggesting employees are shifting to corporate cards or cash advances. This trend could reduce banks’ interchange fees, impacting revenue for institutions like Kookmin Bank (KRX: 054120) and Shinhan Financial Group (KRX: 055550).
Consumer spending dynamics also shift. KIS Securities analysts note that the rule may curb discretionary spending among middle-income workers, as deductions become less valuable. This could slow growth in sectors reliant on personal credit, such as travel and hospitality, though the effect remains modest compared to broader macroeconomic factors like inflation.
The Bottom Line
- The 25% salary threshold for credit card deductions limits personal expense claims, favoring high-income earners and structured corporate reimbursement systems.
- Financial institutions may see reduced interchange fees due to decreased personal card usage for business expenses.
- Employees must balance flexibility against limited tax benefits, potentially altering spending habits and corporate financial planning.
Expert Analysis: Tax Policy and Economic Implications
Dr. Min Jong-kyu, an economics professor at Seoul National University, explains, “This rule aims to close tax loopholes but inadvertently penalizes mid-tier workers. It’s a trade-off between fairness and administrative simplicity.” His research, published in the Journal of Korean Economic Policy, highlights similar measures in Japan and Germany, where deduction caps range from 20% to 30% of income.
“The 25% threshold is a pragmatic approach to prevent abuse, but it risks discouraging small businesses from adopting formal expense tracking,” says Lee Hye-jin, CEO of TaxSolutions, a Seoul-based advisory firm. “We’ve seen a 15% increase in clients requesting hybrid reimbursement models—part corporate card, part personal expense reporting.”
The policy also intersects with South Korea’s broader tax reform agenda. Ministry of Finance data shows a 4.2% rise in corporate tax compliance since 2024, attributed partly to stricter expense rules. However, critics argue the measure disproportionately affects freelancers and small businesses, which lack formal reimbursement structures.
Comparative Context: Global Deduction Policies
South Korea’s 25% cap compares
