2018 세법개정안

매년 7-8월에는 기획재정부에서 세법개정안을 발표하고, 그 내용이 연말 국회를 통과할 시에 적용되고 있습니다.

기획재정부에서는 올해 8월 2일 2018년도 세법개정안을 발표하였습니다.

아래 링크를 통해 세법개정안 보도자료를 참고하시기 바랍니다.

2018 Tax Reform Proposals

Changes in the external audit requirements

Under the current Act and its Enforcement Decree, the mandatory (external) audit requirements apply to the below companies in Korea:

  • Listed in Korea; or
  • Total asset exceeds KRW 12 billion; or
  • Total asset and liability exceed KRW 7 billion; or
  • The number of employees is over 300 and total asset exceeds KRW 7 billion

It’s been controversial that the above criteria are too loose for certain business in Korea. For example, limited liability companies (LLCs) with huge revenue were not required for external audit in Korea.

On April 19, 2018, the Financial Services Commission (FSC) announced and proposed amendments to the Enforcement Decree of the Act on External Audit of Stock Companies that will provide for enhanced independent external audit regime.

The amended Act brings a revenue threshold (KRW 10 billion) to the existing criteria. Also, in additional to listed companies and prospective listed companies, other companies will be subject to external audit unless they are small-sized companies. 

The amended Act becomes effective on November 1, 2018. It is advisable the companies to review this Act and be prepared for external audit, if necessary.

If you have questions on this article, please contact at itos@theclacc.com

 

If you are looking for the accounting firm in Korea,

We, THECL Accounting Corporation ITOS (International Tax and Outsourcing Services) team, will be the right choice for your Korean business.

Our team provides supporting services to companies’ important functions such as finance, accounting, treasury, tax, HR, and administration. We are focused on effectively servicing clients for different phases of their business, from setup to the exit.

Our services include

  • Business set up  in Korea (Incorporation, branch, liaison office)
  • Bookkeeping (Preparation of financial Statements)
  • Tax filings (VAT, corporate income tax, individual income tax, etc.)
  • HR (Payroll, Korean social insurances, retirement tax calculation, etc.)
  • Audit (External, voluntary)
  • Tax audit defense
  • Cash management, etc.

Tel: 02-535-6768

Email: itos@theclacc.com

Value-Added Tax in Korea

VAT is levied at a rate of 10% on the supply of goods and services, except zero-rated VAT on certain supply of goods and services (i.e.  services rendered to non-residents earning foreign currency, etc.) and exemption on certain goods and services (e.g. basic life necessities and services, such as unprocessed foodstuffs and agricultural products; medical and health services; finance and insurance services; duty-exempt goods).
Electronic VAT invoicing in Home Tax system is a compulsory requirement. If a taxpayer fails to issue the electronic VAT invoice or report electronically to tax authorities, the relevant penalties shall be imposed.

VAT returns shall be filed to the tax office every quarter (25th day from the quarter ending date) in Korea.

 

Basic Reporting Requirements in Korea

Under the Korean Commercial Law and related tax laws, a company is required to keep its accounting records using “double-entry” bookkeeping system, and prepare financial statements and maintain them for at least five (5) years.

Also, once you start a business in Korea, you would be required for following reporting requirements :

  1. Value Added Tax Return filings (on every quarter)
  2. Payroll report (on a monthly or half-yearly basis)
  3. Corporate Income Tax Return (on a yearly basis)

Please feel free to contact us for any questions regarding those mandatory requirements in Korea!

itos@theclacc.com

 

Increase in dispatched workers’ withholding tax rate and expansion of scope of withholding agents

Article 156-7 (1) of the Income Tax Act, Article 207-10 (1) of the Enforcement Decree of the Act

□In order to tighten control on the tax source from foreign dispatched workers, the following revisions will be made:

○Expansion of scope of withholding agents:

-Current: A domestic company whose total payment in return for labor provided paid to a foreign company exceeds 3 billion won per year

-Revised: A domestic company whose total payment in return for labor provided paid to a foreign company exceeds 2 billion won per year

○ Expansion of scope of businesses subject to withholding

– Current: Air transportation, construction and professional, science and technology services

– Revised: Vessel construction and finance businesses added to the list

○ Increase in withholding rate: 17% (current) → 19% (revised)

(Reason for revision) To strengthen management of tax source from foreign employees dispatched to Korea

(Application) Applied to payment for labor provided paid on or after Jul. 1, 2018

Income Tax Return Filing Requirements for Foreigners

Filing due: May 31 for the previous year’s tax report

Who should file: Tax resident or Non-resident, whoever there was income generated in Korea

Exempted from filing:

Any resident falling under any of the following may choose not to file a finalized return of the tax base of the relevant income (Article 73 (1) of the Income Tax Act):
1) A resident with only wage & salary income
2) A resident with only retirement income
3) A resident with only public pension income
4) A resident with only business income subject to year-end settlement
☞ Insurance solicitors, door-to-door salespersons and door-to-door salespersons under sponsorship with only business income generated from insurance solicitation, door-to-door sales, or door-to-door sales under sponsorship, respectively, whose income in the immediately preceding year is less than 75 million won (limited to cases where income tax is paid through year-end settlement)
5) A resident with only wage & salary income and retirement income
6) A resident with only retirement income and public pension income
7) A resident with only retirement income and the income mentioned in 4)
8) A resident with only interest income, dividend income, pension income or other income which are subject to separate taxation
9) A resident who falls under 1) to 7) and has interest income, dividend income, pension income or other income which are subject to separate taxation