Freelancer Contract Guide for Korea: 3.3% Withholding Tax, Copyright & Essential Clauses

If you are working as a freelancer in Korea — or hiring one — understanding the contract landscape is critical. Unlike employees, freelancers are not covered by Korea's Labor Standards Act (근로기준법), which means there is no statutory severance, paid leave, or employer-provided social insurance.

A well-drafted contract is the freelancer's only real protection. This guide covers everything you need to know.

Legal Status of Freelancers in Korea

Not an Employee — A Business Income Earner

Freelancers in Korea are classified as business income earners (사업소득자), not employees (근로자). This means:

• No employer-provided 4대보험 (four major insurances: pension, health, employment, industrial accident)
• No severance pay
• No paid annual leave
• No advance notice requirement for termination

This lack of statutory protection is precisely why a contract matters so much.

Watch for Disguised Employment

If a "freelancer" works under conditions that resemble employment — fixed working hours, direct supervision, exclusive engagement — Korean courts may reclassify the relationship as disguised employment (위장도급), granting the worker employee protections retroactively.

Understanding the 3.3% Withholding Tax

When a client pays a freelancer in Korea, 3.3% is withheld at source:

Component	Rate
Income tax	3.0%
Local income tax	0.3%
Total	3.3%

What Happens After Withholding

1. The client withholds 3.3% and remits it to the National Tax Service
2. The freelancer files comprehensive income tax (종합소득세) in May of the following year
3. Business expenses are deducted against income
4. The difference between actual tax liability and withheld amount results in either additional payment or a refund

Business Registration

If annual revenue exceeds a certain threshold, freelancers must register as a business entity (사업자). This triggers VAT reporting obligations but also allows broader expense deductions.

Essential Freelancer Contract Clauses

1. Scope of Work

The most important clause. Without a specific scope, clients can demand unlimited additional work.

Weak: "Website development" Strong: "Design and development of 1 main page and 5 sub-pages. Includes up to 3 rounds of revisions. Additional revisions billed at X KRW per round."

2. Payment Terms

• Total fee and payment schedule (deposit, milestone, final)
• Clarify whether amounts are before or after 3.3% withholding
• Late payment interest clause
• Separate compensation for additional work

3. Timeline & Deadlines

• Overall project duration
• Interim milestones and deliverables
• Extension clause if client delays in providing materials

4. Copyright / IP Ownership

Under Korean Copyright Act (저작권법), the creator retains copyright by default unless there is a written agreement to transfer it.

Copyright clause considerations:

• Full assignment: All economic rights transferred to client
• License: Client gets usage rights; freelancer retains copyright
• Derivative works: Rights to modifications of the original
• Moral rights: Cannot be transferred (right of attribution, right of integrity)

5. Confidentiality

Obligation not to disclose client's business information encountered during the project. Specify scope and duration.

6. Termination

• Grounds for termination (non-performance, deadline breach)
• Notice period (e.g., 14 days written notice)
• Settlement for completed work upon early termination

Subcontracting Act Protections

Freelancers may qualify for protection under Korea's Fair Subcontracting Transactions Act (하도급법) in certain situations.

The Act prohibits:

• Unfair reduction of fees
• Payment delays (must pay within 60 days of receiving deliverables)
• Unfair cancellation of orders
• Misappropriation of technical data

Violations can be reported to the Fair Trade Commission, which may impose penalties.

Freelancer Contract Checklist

Before signing, verify:

• Scope of work is specifically defined
• Total fee and payment schedule are stated
• 3.3% withholding is addressed
• Additional work compensation is specified
• Copyright ownership is clear
• Confidentiality scope and duration are reasonable
• Termination conditions and settlement are defined
• Dispute resolution mechanism is included

Sharing Contract Drafts Securely

When exchanging contract drafts between freelancer and client, sending via iMessage or email leaves sensitive compensation details in chat history.

LOCK.PUB lets you share contract drafts through password-protected encrypted memos. Only someone with the password can view the content — keeping fee negotiations and sensitive terms private.

Conclusion

Freelancers in Korea operate outside the Labor Standards Act, making a well-drafted contract their strongest protection. Always include the three core clauses — scope of work, payment terms, and copyright ownership — and understand the 3.3% withholding tax structure.

When you need to share contract drafts securely, use LOCK.PUB to create encrypted memos that protect your sensitive business terms.