As the Korean Tax Experts, we handle all kinds of accounting issues. Here is a summary of the bookkeeping services any reliable accountant will provide for you. Get in touch with us if you’d like to have these services delivered by a proactive accounting firm that will teach you how to save on your taxes.
The meaning of bookkeeping in Korea: a definition and scope of service
In Korea, a bookkeeper’s general work scope generally includes the following main services:
Korean National Tax Services (NTS) are aware of every transaction in Korea thanks to the Value Added Tax (VAT) levied on every transaction. For every entity in Korea, VAT return must be filed on a quarterly basis. Thus, when we introduce bookkeeping services in Korea, this VAT filing is central to the services and it’s something foreigners frequently find hard to understand. Unlike in the US or most of the rest of the world, a company must report net VAT payable or refundable to the Korean tax office each quarter. It is critical to review the accuracy as the penalties related to this VAT filing can be quite heavy.
Korean Corporate Tax Laws require that every Korean company record their accounting system using the double entry method and enter them into a computerized accounting system. Double entry bookkeeping refers to recording every single transaction into “debit” and “credit” entries. Financial statements such as balance sheet and income statement are a summary of these entries. Korean companies must adopt a computerized accounting system and report the type of the system they use when filing their year-end corporate tax return.
Payroll is the process by which a company determines payments to be made both to employees and government agencies for employee benefits. Similar to the other counties, a payer in Korea (a company) has a lot of reporting and withholding requirements in relation to its employees. A company must withhold taxes and report payroll tax return on behalf of its employees. Most of the time, the payroll tax returns filed by a company are deemed as the finalized individual tax return for employees. Even though Korean National Tax Service (KNTS) adopts a self-reporting tax filing system, for payroll-related taxes, they impose a lot of burden to Korean companies. The Korean government frequently changes rules often so that companies must pay close attention to the amendments. One example is that Korean national health insurance rates increases every year. Each of the four major Korean social insurance agencies (called 4대보험 in Korean – unemployment, pension, health care & worker’s compensation) also implement different rules for year-end settlements.
The big thing that is never included in the list of services is that a good accountant will be proactive. They will share with you ways to save on your tax bill through good strategic planning of how you use your resources. Everyone needs to pay their taxes. No one should pay unnecessary taxes.
Korea Bookkeeping basics: questions small and medium businesses should ask when hiring a bookkeeper:
- How much do your accounting services cost?
- Does that include payroll calculations? For how many employees?
- Do you have an English-speaking Korean Certified Public Accountant (KICPA) on staff?
- How often can you directly communicate with a bookkeeper or a CPA on your tax or accounting issues?
- Does your bookkeeper provide English summary for each tax filing?
In Korea, what’s the typical cost of bookkeeping and accounting services?
Fees typically start from about USD 150 per month for Korean-only bookkeeping services. Normally with this sort of fee, you will not receive monthly or quarterly financial reporting. You also cannot expect proactive tax consultation, which requires input from a KCPA’s. It only includes routine monthly payroll and quarterly filing. In general, unless it is specifically required by a company, a Korean bookkeeper only prepares the financial reporting once a year – just before filing the tax return. It’s relatively cheap, but you get what you pay for. In the world of accounting, that could actually end up being very expensive!
In addition to the monthly fee, there will be a year-end tax return filing fee which will be vary greatly depending on the company’s transaction types and sales volume, and etc.. Year-end tax returns must be filed by a Korean Certified Public Account.
Would you like a pro-active bookkeeper who speaks English? Contact us.