Writer 관리자 Date 2011-07-27
 Content 4 TAXATION
4.1 Taxes in Korea
Taxes in Korea comprise national and local taxes. National taxes are divided into internal taxes, customs duties, and three earmarked taxes; the local taxes include province taxes and city & county taxes as shown below.

4.1.1 National Taxes (levied by the central government)
Internal Taxes
· Direct taxes
o Income Tax, Corporation Tax, Inheritance Tax, Gift Tax, Real Estate Holding Tax
· Indirect taxes
o Value Added Tax, Special Excise Tax, Liquor Tax, Stamp Tax, Securities
Transaction Tax
Customs Duties
Earmarked Taxes
· Transportation Tax, Education Tax, Special Tax for Rural Development

4.1.2 Local Taxes (levied by local government)
Province Taxes
· Ordinary Taxes
o Acquisition Tax, Registration Tax, License Tax, Leisure Tax
· Earmarked taxes
o Community Facility Tax, Regional Development Tax, Local Education Tax
City & County Taxes
· Ordinary Taxes
o Inhabitant Tax, Property Taxes, Automobile Taxes, Farmland Taxes,
Butchery Taxes, Tobacco Consumption Taxes, Motor Fuel Tax
· Earmarked Taxes
o Urban Planning Taxes, Business Place Tax

4.2 Administration of the Tax System
The Tax Bureau of the Ministry of Finance and Economy is responsible for drafting tax laws, negotiating international tax treaties and for the preparation of the tax revenue section of the national budget. The National Tax Service, an agency of the Ministry of Finance and Economy, is in charge of the assessment and collection of internal taxes.
The appeal of a contested tax assessment may begin at the district tax office level or at the level of the regional office of the National Tax Service, or the taxpayer may ask for a review directly from the National Tax Service. If these procedures do not resolve the dispute, the taxpayer has the right to file an appeal with the National Tax Tribunal, also an agency of the Ministry of Finance and Economy, but separate from the National Tax Service. If the decision of the National Tax Tribunal is adverse to the taxpayer, the taxpayer may file an action with the High Court, at which point the issue will be reviewed in a trial de novo. An appeal from the High Court may be taken to the Supreme Court. An alternative procedure is to appeal a tax assessment directly to the Board of Audit and Inspection, an independent agency directly under the president. An unfavourable ruling before this body may be reviewed by the High Court with right of appeal to the Supreme Court. This appeal procedure is not often used. The primary function of the Board of Audit and Inspection is to audit the operations of other government bodies. Its power to review tax assessments is only a small part of its authority. The National Tax Tribunal, on the other hand, is involved exclusively in the hearing of tax appeals.
The taxpayer is entitled to interest at the statutory rate on any refunds found to be owed to the taxpayer. Interest runs from the due date of the payment, or actual payment date, whichever is later, until the date a vested right to the refund is created at law.
In addition to the remedial procedures available under the Korean statutes, a resident taxpayer may request the National Tax Service’s Assistant Commissioner (International), the competent authority of Korea, to initiate mutual agreement procedures (also referred to as ‘competent authority assistance procedures’) if the taxpayer believes that a foreign tax authority in a jurisdiction with which Korea has a tax treaty in force has taken a position in contravention of the provisions of such treaty. Pursuant to these procedures, the taxpayer may request that the district
tax office delay issuance of a tax payment notice, or extend the time to pay tax after a tax payment notice has been given. Further, the taxpayer may request the authorities to extend the limitation for appeals to the National Tax Service or the National Tax Tribunal. The terms of settlement at the competent authority level may be enforced, irrespective of the running of the statute of limitations, within one year from the date of the settlement. The tax assessment authority is required to issue a pre-determination notice to the taxpayer before issuing the tax payment notice.
This gives the taxpayer an opportunity to file a complaint with the district tax office based on the notice before the actual tax assessment is made.

4.3 Filing and Payment
A corporate taxpayer must file a tax return and pay corporation tax as set out below.
4.3.1 Corporations Required to File Tax Returns
Filing is required of: (i) any domestic corporation having its main office in Korea; (ii) any foreign corporation which maintains a domestic place of business in Korea; and (iii) any foreign corporation which has domestic source income from real estate or from forestry.

4.3.2 Kinds of Tax Returns to Be Filed
Two types of returns are required: (ⅰ) returns for each complete fiscal year; and (ii) returns
for each six-month period commencing on the first day of the fiscal year of a corporate taxpayer. The former are referred to as “corporate tax returns,” and the latter as “semiannual tax returns.” Whenever a taxpayer’s fiscal year exceeds six months, except for the first fiscal year, a semi-annual as well a corporate tax return must be filed.

4.3.3 Documents to Be Submitted
A tax return consists of a corporation tax and taxable income report form, other detailed schedules as specified in the Enforcement Regulation of the Corporation Tax Law and financial statements prepared in conformity with the Korean Business Accounting Principles. Among the financial statements required are balance sheets, profit and loss statement, and statement of appropriation of earned surplus (or statement of disposal of deficit). Corporate taxpayers having transactions with foreign parties in a special relationship during the fiscal year are required to report such transactions to be filed with the annual return.

4.3.4 Deadline for Submission
A corporate taxpayer preparing its own tax return or prepared by an approved preparer is required to file within three months from the end of its fiscal year.

4.3.5 Payment upon Filing of Tax Returns
As a general rule, corporation tax must be paid on filing the tax return and no later than the deadline for filing. A corporate taxpayer may elect to pay the tax on an installment basis if the corporation tax payable exceeds 10 million won. In such a case, a portion of the corporation tax may be deferred for 1 month from the date of filing the tax return. Certain small corporations, as defined in the statute, may defer payment of tax for 2 months.

4.3.6 Semi-annual Tax Returns
A corporate taxpayer is required to file a semi-annual tax return if its fiscal period exceeds six months. Corporation tax payable on filing a semi-annual tax return is based on 50% of the corporation tax paid in the preceding fiscal period. This amount may vary if the preceding period is not a full calendar year. If a taxpayer determines that the amount of corporation tax to be paid based on the 50% rule is greater than the amount of corporation tax based on the actual profit or loss shown on its books for the pertinent 6-month period, the taxpayer may file the semi-annual tax return on the basis of its financial statements and pay corporation tax on the taxable income so computed. For interim payments, filing and payment is required within two months after the end of each six month period.

4.3.7 Amended Tax Returns
A taxpayer may file an amended tax return showing entitlement to a tax refund or an
increase in loss within three years from the statutorily determined deadline for filing the initial tax return. On the other hand, an amended tax return showing an additional tax payment or a decrease in loss may be filed at any time before the tax office advises the taxpayer of an adjustment as a result of the re-determination process. Filing an amended tax return may permit the taxpayer to reduce certain tax penalties.

Prepared by: Mr. Doo-Yeol Lee
Woori Accounting Corporation
Amended: November 2010
For further information on the services available from the DFK International Member firm in South Korea please contact:
Mr. Doo-Yeol Lee
Woori Accounting Corporation
Tel: +82 2 565 7083
Email: LDY1613@unitel.co.kr
Web: www.ventureplaza.co.kr/english