【October 2015】
☞ The following tax information is translated from Korean for foreign-invested companies, and is not legally binding.
(Q) I plan to invest or start a business in Korea but some tax-related matters are unclear. Is there a system that provides a clear interpretation of tax laws ahead of a business transaction?
(A) Yes, the National Tax Service operates the advance ruling system to reduce tax-related uncertainties arising from business transactions or investments.
About the Advance Ruling System
The advance ruling system provides a clear ruling with regard to a specific transaction of a taxpayer's business, provided that a ruling is requested by the legal due date for tax return filing with the disclosure of the taxpayer's identity and the specific fats and circumstances of the transaction in question.
Before the system was introduced, many taxpayers inquired on the interpretation of tax laws under another person's name or a false name. In some cases, taxpayers' inquiries distorted or omitted certain facts, so it was difficult to provide a clear and accurate answer.
Because of the difference with actual facts, the protection of taxpayers based on the principle of good faith was limited.
Benefits of the Advance Ruling System
With the introduction of the advance ruling system, both domestic companies and foreign companies can receive a fast and accurate answer on their inquiries on the interpretation of tax laws.
Also, taxpayers can handle tax-related matters based on the answers provided under the system, which will resolve tax-related difficulties in doing business.
How to request a ruling
Download the application form at the National Tax Service website (http://www.nts.go.kr Korean only). Complete and submit the form to the NTS Commissioner (Manager of Legal Affairs Division) via postal mail.
(Q) How does the National Tax Service prevent faulty taxation?
(A) Taxpayers can receive a remedy against incorrect taxation by filing an appeal, and the National Tax Service has a system in place to prevent faulty taxation.
System for assessing the cause of objections to taxation
For administrative appeals for taxation review (i.e., review of legality prior to taxation, appeal for review, appeal for examination, appeal for judgement) that have been accepted, an analysis is conducted on why the appeals were filed. If the analysis finds that a faulty taxation was caused by poor fact-checking or improper application of law, the tax preparer is held accountable. Also, research is done to identify and improve laws and regulations that cause faulty taxation. Such measures are to prevent the recurrence of similar faulty taxations.
Operation of an advisory committee on tax disputes
In respect to tax-related disputes with taxpayers that require deliberation, an advisory committee offers practical advice before taxation in order to prevent faulty taxation.
National Tax Law Information System
The National Tax Law Information System provides various tax law-related information so that taxpayers can better understand tax-related laws and tax officials can accurately examine the conditions for taxation.
The National Tax Law Information System (Korean only) can be accessed through the NTS website (http://nts.go.kr).
☞ For more information, please contact the International Tax Resource Management Office of the National Tax Service (82-44-204-2882~5).
