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Korea, Republic of Corporate - Tax administration

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Taxable period

In Korea, the taxable year is on a fiscal-year basis as elected by the taxpayer. However, it cannot exceed 12 months.

Tax returns

A corporation must file an interim tax return with due payment for the first six months of the fiscal year, and the filing/payment must be made within two months after the end of the interim six-month period.

A corporation must file an annual tax return with due payment for the fiscal year, and the filing/payment must be made within three months (four months for the consolidated tax return) from the end of the fiscal year. In case the external audit is not completed and the financial statements are not fixed, a corporation can request for extension of tax filing by one month with delinquent interest of 1.8% per annum.

Payment of tax

Where the tax amount to be paid by a resident corporation is in excess of KRW 10 million, part of the tax amount to be paid may be paid in instalments within one month of the date of the expiration of the payment period (two months for SMEs).

Where the tax amount to be paid is KRW 20 million or less, the excess of KRW 10 million may be paid in instalments; and where the tax amount to be paid exceeds KRW 20 million, 50% or less of the tax amount may be paid in instalments.

Functional currency

In instances where the taxpayer adopts to use a foreign currency as its functional currency, there are three ways to calculate the CIT base: (i) calculate the tax base using the financial statements in functional currency and translate it into Korean won; (ii) prepare the financial statements in Korean won and calculate the tax base; or (iii) translate the financial statements into Korean won and calculate the tax base. Once elected, the same method must be consistently used.

Tax audit process

Companies whose sales revenue exceeds KRW 150 billion would be subject to a five-year periodic tax audit.. Other audit target companies are selected by certain standards, which are announced by the National Tax Service (NTS). An official notification of an intended tax audit must be made 15 days prior to the audit.

Statute of limitations

The statute of limitations is generally five years from the statutory filing due date of the annual CIT return. However, the statute of limitations is extended further in the following cases:

  • Seven years if a taxpayer does not file its tax base by the statutory due date.
  • Ten years if a taxpayer evades taxes by fraud or unjustifiable means.
  • 15 years for fraud or unjustifiable means involving cross-border transactions. For this purpose, a ‘cross-border’ transaction means when a party or parties to the transaction include(s) non-resident(s) or foreign corporation(s) (excluding domestic business places of non-resident(s) or foreign corporation(s)).

Period of extinctive prescription for collection of national taxes

The period of extinctive prescription for collection of national taxes is five years (ten years for national tax payable worth KRW 500 million or more) from the date on which the government’s right to collect a national tax becomes exercisable. Along with the five-year extinction prescription period of national tax collection, the extinction prescription period of tax refund request of taxpayers is extended to five years, which was previously three years from the tax return filing due date, effective for tax refund requests made on or after 1 January 2015.

Topics of focus for tax authorities

The recent topics of focus for tax authorities are as follows:

  • Implementation of new tax information reporting systems as planned in the BEPS project.
  • Increased tax audit on tax avoidance through internal transactions or gifts among group companies and major shareholders.
  • Increased scrutiny over the prevention of offshore tax evasion through a cross-border tax information exchange program.
  • Selection of tax audit targets through a sophisticated analysis and verification system and expansion of the number of corporate taxpayers subject to the regular five-year period audit cycle.
  • New provision in the National Tax Basic Law to add accounting credibility to the existing tax audit selection criteria. Accounting credibility includes auditor’s opinion, hours spent for external audit, etc.
  • Increased application of forensic and electronic audit schemes and use of big data analysis to examine potential tax avoidance.

Additionally, the tax policy that the newly elected president has pledged during his campaign should be noted. To finance spending on expanded social welfare investment, the taxation systems on corporate taxpayers and high income earners are expected to be reinforced.


Last Reviewed - 18 December 2018

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