Foreign companies selling digital services into Korea are often surprised to learn there is no revenue threshold before VAT registration becomes mandatory. If your service reaches a Korean consumer, the obligation starts immediately, not once you cross some comfortable size.

What counts as a digital service here

Korea’s simplified regime covers electronic services delivered over the internet or a mobile network and consumed in Korea. This includes apps, games, streaming media, e-books, cloud computing, SaaS platforms, and online advertising placement. If your company has no physical presence in Korea but Korean consumers can access and pay for what you offer, this regime is built specifically for you.

How the registration actually works

Foreign providers register through the National Tax Service’s Hometax platform under the Simplified Business Operator system, rather than going through the standard business registration process used by companies with a physical presence. No local subsidiary or permanent establishment is required to register. The process can be completed independently or through a tax agent, and approval typically comes back within about a week. Once registered, filings and VAT payments are made quarterly, with payment due by the 25th day of the month following each quarter’s end.

What this registration covers

Simplified registration is built to keep compliance straightforward for foreign providers with no physical presence in Korea. It covers your obligation to charge and remit VAT on Korean consumer sales, and input VAT on your Korean business expenses can still be reclaimed under this registration. The process is designed to be lighter than standard VAT registration procedurally, not more limited in what it allows you to recover.

The 10 percent VAT applies to business to consumer sales, and the provider is responsible for charging and remitting it. Business to business sales generally use a reverse charge mechanism instead, where the Korean purchasing company accounts for the VAT rather than the foreign supplier. Getting this B2C versus B2B distinction right at the point of sale matters, since it determines who is actually responsible for the tax.

The cost of registering late

A penalty applies to companies that fail to register on time, calculated as 1 percent of the value of digital services supplied before registration was completed. For a company that has already been selling into Korea for some time without registering, this can add up quickly once applied against the full pre-registration sales value, not just the sales made after the fact.

If your company sells digital services into Korea and you are not certain whether simplified registration applies to you, it is worth confirming before your Korean sales history grows any further. We also cover the broader VAT and corporate tax obligations for foreign companies operating in Korea separately. Reach out through www.aratax.net.

Written by Ara Jung (CTA)

All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation with appropriate professionals

The post Digital VAT in Korea: What Simplified Registration Actually Requires appeared first on Ara Tax.

Companies expanding into Korea from Singapore or Hong Kong often start with a single question: is Korea’s corporate tax higher or lower than what we already pay? The honest answer is that the comparison is more complicated than a single percentage, and the number most people quote first is usually the wrong one.

The number everyone quotes, and why it is incomplete

Singapore’s corporate tax sits at a flat 17 percent. Hong Kong runs a two tier system, 8.25 percent on the first HKD 2 million of profit and 16.5 percent above that. Korea is often assumed to be a flat 10 percent, since that is the lowest bracket people tend to hear about first. In reality, Korean corporate tax is progressive, running from 10 percent up through 25 percent depending on taxable income, with local income tax added separately on top at 10 percent of the national tax due. Once a company’s Korean profits grow past the lowest bracket, the effective combined rate climbs well past what the 10 percent headline suggests, and can reach into the high twenties at the top end. If your Korea entity is expected to scale, planning around the lowest bracket alone will understate what you actually owe.

Getting profit back to Singapore or Hong Kong

A Korean subsidiary sends profit home as a dividend, and that dividend is generally subject to withholding tax before it leaves Korea. The rate that actually applies depends on the specific tax treaty between Korea and Singapore, or Korea and Hong Kong, and typically drops once your shareholding crosses a certain threshold. This is not something to estimate from general knowledge. The applicable rate should be confirmed against the current treaty text for your specific ownership structure before it factors into any planning.

The parts that do not show up in a rate comparison

Two structural pieces tend to matter more over time than the headline rate itself. Intercompany loans between your Korea entity and the regional headquarters need to carry an arm’s length interest rate, and getting this wrong invites scrutiny during a tax audit. Related party transactions, including management fees, service charges, and cost allocations between the Korea entity and the rest of the group, need proper transfer pricing documentation to hold up. Neither of these appears in a side by side rate comparison, but both shape the real tax cost of running a regional structure that includes Korea.

Before you model the numbers

Confirm which bracket your projected Korean profit actually falls into rather than assuming the lowest one applies. Check the specific treaty language for dividend withholding rather than a general market rate. And set up intercompany pricing and loan terms properly from day one, since fixing this after the fact is far more disruptive than doing it correctly at the start. We cover the basics of Korean corporate tax filing obligations in more detail separately.

Written by Ara Jung (CTA)

All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation with appropriate professionals

The post Expanding to Korea from Singapore or Hong Kong: What the Tax Numbers Actually Show appeared first on Ara Tax.

Setting up a company to buy property is a suggestion that comes up often, usually framed as a way to access corporate tax rates instead of personal ones. Before acting on it, it is worth walking through what actually happens at each stage of owning real estate through a corporation, because the numbers do not always move in the direction people expect.

Buying in

If the property is a residential house, a corporation pays acquisition tax at a flat 12 percent. This rate was set specifically to discourage corporate ownership of housing, and it applies regardless of the company’s size or how many properties it holds. An individual buying a single home typically pays a much lower rate. For commercial property, the acquisition tax gap between individuals and corporations narrows considerably, though corporations registered in certain metropolitan areas can still face a weighted rate. The type of property you are buying changes this calculation entirely, so the answer is not the same for a Seoul apartment as it is for an office building.

Holding it

This is where Korean tax policy has been tightening, and it deserves more attention than most people give it. If a corporation holds real estate that is not connected to its actual business, and that property was financed with borrowed money, the interest on that debt can be disallowed as a deductible expense. In practice, this means a company that borrows to buy an investment property loses the ability to write off the interest, which is often the single biggest cost of holding real estate this way. Individuals do not face an equivalent rule. A company only avoids this exposure when the real estate is genuinely tied to how the business operates, not simply sitting on the balance sheet as an investment.

Selling it

When a corporation sells real estate, the gain is taxed as ordinary corporate income at the applicable corporate tax rate. If the property was not used for the company’s actual business purposes, an additional surtax applies on top of that, and this surtax is specifically getting heavier. Korea’s most recent tax reform proposal would double the additional rate on gains from non-business-use land, and while this change is still moving through the legislative process, the direction is clear. Regulators are not softening their stance on corporations holding property purely as an investment. Owning real estate through a company to simply hold it, without the company actually operating a business connected to that property, is exactly the pattern this rule is built to discourage, and increasingly so.

Getting the money out

This is where the structure often loses its appeal entirely. Profit from the sale stays inside the corporation once corporate tax is paid on it. To move that money into your own hands, the corporation distributes it as a dividend, which is taxed again on the way out. Two layers of tax on the same gain is the natural result, and it frequently erases whatever rate advantage looked attractive at the outset.

When it can still make sense

None of this means a corporate structure is always the wrong call. It tends to hold up when the property is genuinely part of an operating business, when the company can claim meaningful depreciation against rental income at scale, or when the entity is not a single purpose vehicle built around one property. What rarely holds up is buying one home or one investment unit through a newly formed company purely to chase a lower headline tax rate.

If you are weighing whether to hold property personally or through a company, it is worth running the actual numbers for your situation before deciding. I am happy to help you work through it.

Written by Ara Jung (CTA)

All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation with appropriate professionals

The post Buying Real Estate in Korea Through a Corporation: Is It a Money Wise Strategy? appeared first on Ara Tax.

Most foreigners in Korea ask “what is the tax rate” as if there is one answer. There is not. What you owe depends on whether the income comes from a salary, an investment, or freelance work, and each of these follows its own rules.

If you earn a salary

Salary income is taxed on a progressive scale that runs from 6 percent to 45 percent depending on your total taxable income, with local income tax added separately at 10 percent of whatever national tax you owe. Most employees never calculate this by hand, since employers withhold monthly and reconcile everything during year end settlement in February.

Foreign employees also have an alternative worth knowing about. Eligible foreign workers can elect a flat 19 percent rate on employment income instead of the progressive scale, and this election can run for up to 20 years from your first day of work in Korea, provided that start date falls on or before December 31, 2026. The flat rate gives up most deductions, so it tends to help most at higher income levels rather than lower ones. We walk through how the election works and who qualifies in an earlier post. The core structure there still holds, though one detail has moved on since it was written. That post describes a 5 year election window, which reflects the rule at the time. Under current 2026 rules, the window has been extended to 20 years, so use the figure above for how long the election actually runs.

If you have investment income

Investment income is where most confusion starts, because Korea treats different types differently. Interest and dividends are generally taxed through withholding at the point of payment, often at a flat rate, rather than folded into your regular income. Capital gains from selling Korean listed shares can be exempt in many ordinary cases, though this depends on the size of your holding and how the shares are classified. Gains from real estate work under an entirely separate set of rules, generally taxed more heavily and requiring a separate filing.

If you sold something meaningful this year, whether shares, property, or an overseas asset, that transaction likely needs its own analysis. Do not assume the salary rules or the flat rate election say anything about how that gain is taxed.

If you freelance or run a business

Freelance and business income is not covered by either the salary rules or the flat rate election. It is taxed separately under a progressive scale close to the salary structure, but calculated on net income after allowable expenses rather than gross pay, and reported through your own annual filing each May rather than through employer withholding. If you also hold a salaried job, the two income types are usually calculated and reported on separate tracks rather than combined into one number.

The one number to remember

If nothing else stays with you from this article, remember this. There is no single Korea tax rate. There is a rate for your salary, a separate treatment for your investments, and a separate calculation for anything you freelance or run as a business. Knowing which category your income falls into is the first real step, well before worrying about the percentage itself.

If you are trying to work out which of these applies to your situation, I am happy to walk through it with you.

Written by Ara Jung (CTA)

All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation with appropriate professionals

The post Korea Tax Rates for Foreigners 2026: What Actually Applies to You appeared first on Ara Tax.

Most companies entering Korea start by asking how quickly they can open the doors. That question matters, but it only covers part of the picture. Just as important is what the structure will cost you three years in, and again on the day you eventually close it.

A branch is an extension of the parent company, not a separate Korean entity. It requires no minimum capital and is quick to set up. A subsidiary is a standalone Korean company with its own capital, board, and legal identity. It takes longer to establish and asks for paid in capital up front. If you are still getting familiar with the basic mechanics of how a branch and a subsidiary differ, that overview is a good place to start before reading on. Speed favors the branch. Everything that happens afterward is more complicated.

The classification that changes everything

A Korean branch is treated as a foreign company for tax purposes, no matter how small its actual operations are. This means it does not qualify as an SME under Korean tax law, which closes the door to the special tax reduction available to qualifying SMEs, typically 5 to 30 percent off the corporate tax otherwise due, along with the income tax reduction SMEs can offer to attract younger employees, up to 90 percent for qualifying hires under 35 for their first five years. A subsidiary is treated the same as any Korean owned company and can access these benefits if it otherwise qualifies.

Korean corporate income tax itself applies equally to both structures, on a progressive scale that currently runs from 10 percent to 25 percent depending on taxable income, with local income tax charged separately on top at a rate of 10 percent of the national tax due. The gap between a branch and a subsidiary is not this base rate. It is which incentives each structure is eligible to claim against it.

Profit movement also differs. A subsidiary pays dividends to its parent, generally subject to withholding tax, often reduced under a tax treaty. A branch remits profits to head office instead, and depending on the treaty involved, that remittance may or may not trigger a separate branch profits tax. This should be checked against the specific treaty, never assumed.

Two quick examples

A support office with no independent revenue, no plans to raise local capital, and a short expected lifespan is usually better off as a branch. The SME incentives were unlikely to apply at that scale regardless, and closing a branch is simpler than liquidating a subsidiary.

A company building a long term Korean presence, planning to hire and grow, and possibly bring in a local investor down the road, is usually better off as a subsidiary. The incentives, the credibility of a standalone entity, and the ability to raise local capital tend to outweigh the slower setup.

Before you decide

Ask what the Korea operation is actually meant to do over the next three to five years, not just at launch. Ask whether SME incentives are likely to matter at your expected scale. Ask what your home country’s tax treaty with Korea says about branch profit remittance. The answer follows the business plan, not the paperwork timeline.

If you are working through this decision for your own Korea entry, I am happy to talk it through.

Written by Ara Jung (CTA)

All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation with appropriate professionals

The post Branch or Subsidiary in Korea: A CFO’s Guide to the Real Cost Difference appeared first on Ara Tax.

Korea has taxed electronic services supplied by foreign providers to Korean consumers since 2015, and the scope keeps widening. Here is what matters, in plain English.

What counts as an electronic service

The definition is broad and covers digital products delivered to Korean users online or over a mobile network: games, music, video, ebooks, electronic documents, and software, along with cloud computing and advertising placement services.

Consumer sales versus business sales

Your obligation turns on who your customer is. When you sell to Korean consumers, you as the foreign supplier charge value added tax at 10 percent and remit it. When you sell to Korean businesses, you still report those sales, but you do not apply the 10 percent, because the reverse charge shifts the tax to the business customer, who accounts for it on its own return. Many providers serve both audiences through one platform, so both streams belong in your reporting and only the rate differs between them.

The obligation starts with your first sale

Korea applies no turnover threshold here. The duty is event based and begins with your first taxable supply to a Korean consumer, and you must file for simplified business registration within 20 days of starting. Waiting until sales reach a certain size is not an option.

How the simplified regime works

You can comply without a Korean entity. Registration is completed online through the National Tax Service Hometax portal. After that, returns are filed quarterly with payment due by the 25th day of the month following each quarter, the rate is a flat 10 percent on your Korean consumer sales, and you keep transaction records for five years.

Where you sell through an app store or marketplace, that platform may be treated as the supplier and take on the registration and remittance duty. How your contracts and payment flows are structured decides who carries the obligation, so the supplier of record should be unambiguous.

The cost of getting it wrong

Since 2024, a penalty of 1 percent of the supply price applies for the period a business operated before registering, on top of the unpaid tax and interest. From July 2025, foreign intermediaries must also submit quarterly transaction details. Enforcement is tightening, so any foreign business that has been supplying Korean consumers without registering should resolve it now rather than wait for the authority to raise it.

Frequently asked questions

Q. Do I need a Korean company or branch to comply?

A. No. The simplified regime lets a foreign supplier register, charge, and remit value added tax without a Korean entity or a permanent establishment.

Q. What rate applies?

A. A flat 10 percent on your sales to Korean consumers.

Q. How often do I file? Quarterly, with payment due by the 25th day of the month after each quarter closes.

A. What if I sell to Korean businesses rather than consumers? You still report those sales, but you do not apply the 10 percent to them. The reverse charge shifts the tax to the business customer, who accounts for it on its own return.

Q. How long do I keep records?

A. Five years from the filing due date for the relevant period.

We help foreign software companies, platforms, and content providers meet their Korean value added tax obligations without friction, from confirming whether your services fall inside the regime to handling registration, quarterly filings, and cleanup of past periods. If you are selling digital services into Korea and want certainty about what you owe and when, we would be glad to review your situation.

Written by Ara Jung (CTA)

All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation with appropriate professionals

The post VAT on Electronic Services in Korea: A Short Guide for Foreign Digital Businesses appeared first on Ara Tax.

“I only report the money I bring into Korea.”

I hear this constantly from foreign professionals living in Korea. It sounds reasonable, and it is one of the most expensive misunderstandings in Korean tax. Whether you are an expat employee, a freelancer, or a remote worker earning from clients overseas, the rules that decide what you owe in Korea are usually not the ones people assume. This guide walks through them in plain English.

The rule everyone gets half right

Korea does offer a genuinely friendly rule for newcomers. If you are a foreign national who has lived in Korea for five years or less over the past ten years, Korea taxes your foreign income only on the part you actually bring into the country. Money you earn abroad and keep abroad stays outside the Korean net. This is often called the remittance basis, and the benefit is real.

The catch sits in one phrase: foreign income. Everything depends on what counts as foreign, and that is where most people go wrong.

What counts as “foreign income” in Korea

Korea does not decide the source of your income by looking at where your client is, or which bank account receives the payment. It looks at one thing: where you were when you did the work.

If you are sitting in Seoul when you do the work, that income is Korean income. It does not matter that your client is in New York, or that the money lands in your account back home. The place of work is Korea, so the income is Korean.

If you are physically abroad when you do the work, that income is foreign income.

This single distinction drives everything below.

Are you a Korean tax resident this year?

Your obligations depend first on whether you are a Korean tax resident for the year. In simple terms, you are generally a resident if you spend 183 days or more in Korea during the year, or if your home and economic life are centered here.

One change matters from 2026. Korea can now look at a continuous stay that runs across two calendar years. If you arrive late in one year and stay into the next without a real break, those days can be added together to reach 183. A genuine move abroad resets the count. A short trip home for a holiday or a family visit does not.

So a person who comes and goes with long gaps between stays is judged year by year. A person who settles in and stays put may cross into resident status even if no single calendar year reaches 183 days on its own.

Your reporting obligations, case by case

Here is where it comes together. Assume your income comes from work you perform wherever you happen to be living at the time.

Case 1: You are a Korean tax resident this year

Income from work you do while in Korea is Korean income. You report all of it, no matter which account receives it, and whether the money stays in Korea or goes abroad.

Income from work you do while abroad is foreign income. If you are a foreign national inside the five year window described above, you report only the part you bring into Korea, meaning income paid into Korea or sent to Korea. Income you earn abroad and leave abroad is not taxed in Korea.

Case 2: You are not a Korean tax resident this year

Income from work you do while in Korea is still Korean income, and you report it, whatever account receives it.

Income from work you do while abroad is not taxed in Korea at all.

Notice the pattern. The treatment of work done in Korea is the same in both cases: it is always reportable. The only thing that changes between resident and nonresident is how your overseas work is treated.

One more point for nonresidents. Even if you are not a resident, work you perform in Korea can still be taxable here once it passes a low income threshold, and a tax treaty between Korea and your home country can adjust the result. If you are near the line, this is worth checking for your specific country.

Why getting it wrong is expensive

Two features of the Korean system make quiet underreporting risky.

First, income received into overseas accounts is treated as offshore activity. For offshore matters, Korea can review your filings for a much longer period than the usual window that applies to ordinary domestic income. Years you thought were closed may still be open.

Second, if the tax office finds the gap first, penalties climb and interest runs from each original due date. Deliberate concealment carries the heaviest treatment of all.

None of this is a reason to panic. It is a reason to get the structure right early.

How to get it right

Start by confirming where you actually perform your work, because that decides the source of your income. Then confirm your residency status for each year, using the day counts and the 2026 rule on continuous stays. From there, apply the case that fits you and report accordingly.

If past filings only captured the money you sent to Korea, and some of that income was really Korean income all along, the safe move is to correct it voluntarily. Coming forward before an audit reduces penalties significantly, and it closes the exposure on your own terms rather than the tax office’s.

Frequently asked questions

Do I pay Korean tax if I work remotely from Korea for a company abroad? Yes. If you do the work while physically in Korea, that income is Korean income, even when the employer and the payment are overseas.

I am not a Korean resident. Do I still file anything in Korea? Possibly. If you performed work while in Korea, that portion can be Korean income and reportable, even as a nonresident. Work you did entirely abroad is not taxed in Korea.

Does the money have to reach a Korean bank account to be taxable? No. For work done in Korea, the account does not matter. The Korean account question only affects overseas work, and only for residents inside the five year window.

What is the five year rule in Korea? If you are a foreign national who has lived in Korea for five years or less within the past ten, Korea taxes your foreign income only on the part you bring into the country. Once you pass five years, your worldwide income comes fully into scope.

When do I become a Korean tax resident? Generally when you spend 183 days or more in Korea in a year, or when your home and economic life are based here. From 2026, a continuous stay that bridges two calendar years can also count toward the 183 days.

Korean tax for foreign professionals is full of these quiet traps, where a reasonable assumption turns into a real liability. At ARA TAX, we help foreign professionals and foreign invested companies read the rules correctly and fix past filings before they become problems, all in plain English.

If you are living in Korea and earning across borders, let’s make sure the rules work for you.

Written by Ara Jung (CTA)

All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation with appropriate professionals

The post Do You Owe Korean Tax on Income You Earn Abroad? A Guide for Foreign Professionals in Korea appeared first on Ara Tax.

Recently, the National Tax Service in South Korea released an important notice via Naver Blog informing taxpayers to declare the tax for income obtained through the sale of properties. The date of the declaration is crucial and taxpayers must ensure it’s done by the 2nd of June, 2025.

The increased personal overseas stock transactions have significantly increased the number of people notified for final tax returns on foreign stocks each year.

Final Tax Returns

The National Tax Service started mobile delivery of the instructions among the 140k eligible taxpayers for the final tax returns of income tax in 2024. To make the process easier for all taxpayers above 60 years of age who had transferred real estate, the service has also dispatched postal notifications.

Digitized Support System

To enhance taxpayers’ convenience, the National Tax Service provides a digitized support service to declare capital gains tax through various final tax return services accessible through HomeTax and SonTax.

Taxpayers can access multiple help resources, such as case studies on final tax return forms, and examples of error cases on HomeTax. Further, taxpayers can verify their provisional return information and update their final returns without missing any crucial information via the ‘pre-filled provisional return information’ service.

The service has also simplified the evidence submission process by enabling taxpayers to capture images of their documents using a mobile camera and submitting it through SonTax. Alternatively, they can fax the documents using a virtual fax number from HomeTax.

Final Tax Returns – Scope and Deadline

The taxpayers eligible for final tax returns are those who have transferred assets such as real estate or stocks in 2024 without prior declaration of their taxes. This includes taxpayers who’ve had more than two transfers and have not reported their income, and those who’ve dealt with foreign stocks or derivative products and have made income in 2024. The final tax declaration must be filed before June 2, 2025.

Taxpayers can submit their final tax returns either electronically using HomeTax (PC) or SonTax (Mobile), or they can manually fill up the tax return form and submit to the tax office in their local jurisdiction.

The tax can be paid electronically via HomeTax, mobile, or by using a credit card. For amounts exceeding KRW 10 million, taxpayers can split their payments into two parts, to be paid by June 2 and August 4.

:::warning
Even if taxpayers have not received instructions for final tax returns, those who have dealt with foreign stocks and have income applicable for reporting, must make the declaration. Violators will be dealt with severely, with a 20% non-declaration additional tax levied on their unpaid tax amount and late payment of non-declaration tax levied at 0.022% per day.
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Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post Tax for income gained through property sale must be declared by June 2nd, 2025! appeared first on Ara Tax.

A Closer Look at the Economic Struggles Faced by the Younger Generation

For the 2030 generation, the cost of preparing for marriage and raising children has been skyrocketing, framing these life stages as onerous financial paths rather than periods of joy. The high-cost market for these stages often forces young adults to become ‘slaves’ to the exorbitant charges imposed by those who offer essential services such as studio photography for weddings, postnatal care services, and English kindergartens. These sectors have all been heavily criticized for their inflated prices and unregulated practices, especially due to their sheer dominance over young consumers.

The KTA has identified that these market players—while burdening consumers with excessive charges—are also evading their tax responsibilities. They are reported to use various schemes such as omitting sales, splitting business locations, and inflating expenses to avoid taxes. The businesses under investigation include 24 photostudios, bridal shops, and make-up service providers (SDMs); 12 postnatal care centers; and 10 English kindergartens.

Drilling Down into the Tax Evasion Practices Uncovered

The KTA found that these companies employed several strategies to evade paying their due tax. For instance, opaque pricing structures and hidden costs that deceive consumers were rampant among the SDM businesses. Aside from hiding the true cost of their services, they directed additional payment into several layers of bank accounts to dodge income reporting. Cases were discovered where business owners would set up additional business entities under a relative’s name to split the revenue, in effect reducing their taxable income.

Similar tax evasion methods were observed in postnatal care services. Despite their obligation to issue receipts for cash transactions, some centers used non-issuance of receipts as a condition for offering discounted cash prices. Others used funds from unreported income to purchase high-value real estate or lavish lifestyle goods. They were found to rent their properties at extortionate rates, raising their income illegally.

As for the early childhood education institutes primarily focusing on teaching English, the KTA found these establishments not only to receive exorbitant tuition fees but also to unlawfully collect cash for book fees and extracurricular activity expenses. They would then omit these proceeds from their tax reports. Some establishments also surfaced that were found to have funded the overseas education of their children from unreported income. Others were found to have falsified expenses through fake transactions with other business entities established under the names of their family members.

Government’s Further Measures & Future Direction

In response to such malpractices, the KTA has pledged to conduct rigorous tax audits. It will thoroughly examine the companies’ opaque income structures and cash outflows, and ensure that those failing to issue cash receipts will face a penalty surcharge.

The investigation will consider not just the companies themselves but also related parties including family members, tracing their wealth accumulation processes. Any tax evasion practices detected could lead to criminal charges under the Taxes on Crimes Punishment Act.

Emphasizing its commitment to tackling the issues facing the young adult generation, the KTA stated that it will continue to actively seek out instances where businesses impose excessive financial burdens on these consumers while evading taxes. By doing this, the authority seeks to enhance public confidence by tackling unfair practices and deliberate tax evasion in the sectors that have significant impacts on everyday living.

Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post Korean Tax Authority Launches Tax Investigation into High-Cost Wedding, Childbirth, and Early Childhood Education Industries appeared first on Ara Tax.

Key Facts About the Earnest Report Verification System

The earnest report confirms the eligibility system, a protocol specifically targeting smaller corporations, and is central to promoting tax base transparency and the principle of taxation equity. It requires that the tax agent verify the appropriateness of the report contents during corporate tax reporting and deliver the earnest report verification form.

Eligibility Conditions for the Earnest Report Verification System

1. Small-scale companies and corporations whose primary business involves real estate rentals. These entities must meet these obligations:

2. The controlling shareholders and the related parties must jointly hold more than 50% of the total shareholdings.

3. The real estate business, rental income, dividend income, interest income, and the total amount of real estate (right) rental income during the relevant business year should constitute at least 50% of the total sales.

4. Companies and corporations must have less than five regular employees during the corresponding business year.

5. Domestic corporations that have converted from small business owners subject to confirmation of earnest reporting through in-kind contributions within three years from the end of the business year after the conversion (Applicable to corporations conversion since February 13, 2018).

6. Domestic corporations that have acquired the business operation of the domestic corporation converted under the conditions above by in-kind contribution, continuing the operation of the acquired business for up to three years post-conversion.

The report must be submitted within four months from the last day of the month in which the business year ends. Failure to do so results in a surcharge of 5% of the calculated tax amount, or 0.02% of the income amount, whichever is higher.

Understanding the Consolidated Tax Payment System

The consolidated tax payment system comprises one taxation unit for the parent company and its subsidiaries, allowing corporate tax payments based on aggregated income and deficits. This process ensures equivalent tax burdens are maintained, irrespective of the organizational structure.

If approved by the boss of the local tax office where the parent company is situated, they may apply the policy to an eligible corporation. However, approval can be withdrawn or forfeited upon particular situations like failure to apply the consolidated tax payment policy to an eligible corporation, or if tax is due on demand. In such cases, re-application is forbidden for five years.

The parent company bears the corporate tax reporting and payment responsibility within four months from the last day of the month in which the business year ends. The subsidiaries are obligated to pay their tax co-jointly.

Information about the Special Taxation System for Joint Enterprises

Under the Special Taxation System, a joint enterprise is considered the main operator. This scheme does not tax incomes generated from the joint enterprises but attributes them to the operators who are taxed individually.

This applies to partnerships under the Civil Code, partnerships and anonymous partnerships under the Commercial Code, partnership corporations, and legal professional corporations offering professional human services.

Joint enterprises that wish to apply for this scheme need to file a request to the relevant tax office before the start of the first taxable year of application. Following the end of the business year, they need to report the income calculation and distribution details of the joint enterprise within three months from last month’s last day.

In the next session, the NTS will provide assistance services for reporting easily and simply. These programmes aid corporations in complying with the tax regulations by making reporting straightforward and transparent.

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Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

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