Foreign Taxpayers to Benefit from New Policies
The basic purpose of a tax audit is to establish a voluntary self-assessment system by spreading the idea that compliant return filing from the beginning is in one's favor rather than being audited intensively.Therefore, the basic policy of tax audit management hereafter will be focused on making a tax climate to encourage voluntary tax compliance as well as collecting evaded taxes from each taxpayer. NTS will operate tax audits fairly and transparently in accordance with tax laws and principles.Tax audit policies are equally applied to both domestic and foreign companies without discrimination.NTS has been striving to create a better investment environment for foreigners. For this, NTS is actively catering the needs of foreign companies, and managing tax audits fairly and transparently to reduce the audit burdens on honest foreign companies. Candidate Selection Criteria for Tax Audits & the Ratio of Selected Taxpayers
In principle, a tax audit focusing only on the transfer pricing issue will not be conducted unless there is a clear indication of tax evasion or the period for the tax authority to assess taxes is almost expired by the statute of limitations. Instead, a transfer-pricing audit will be incorporated into the course of routine corporate-tax audits.The number of business years subject to an audit on transfer pricing issues will be shortened from five to three reducing audit burdens on taxpayers in providing requested documents. Before a tax assessment by a district or regional tax office on transfer-pricing audit is finalized, the headquarters of the NTS will review its validity in advance to preclude unreasonable tax assessment and enhance consistency among taxpayers.Tax Audits to Be Done in More Flexible Way
Expansion of "In-Tax-Office Audit: " To ease the audit burdens, NTS will apply the "In-Tax-Office Audit" to foreign companies that are estimated as relatively honest by conducting the audit in the tax office rather than the company's office.
In case the result of a tax audit reveals relatively high level of compliance, the concerned taxpayer will be designated as an "Exemplary Taxpayer" and will be rewarded with various benefits such as exemption of tax audit for three years.Protecting the Taxpayers' Rights through the "Tax Audit Service Center"
Dedicated duty officers are assigned in the "Tax Audit Service Center" to deal with tax problems of foreign taxpayers during a tax audit in a fair and transparent manner. Main tax issues arising in tax audits will be discussed at the "Tax Disputes Committee "to raise consistency and adequacy of tax assessments on cross-border transactions.Precluding False Assessments through
the "Tax Administration Real Name System"
NTS has initiated the "Tax Administration Real Name System" for the prevention of false assessments and the protection of taxpayers' rights. Under this system, all tax administration processes such as assessments, appeals and collections are accumulatively computerized in the name of the officer in charge of each process, and the officer is regularly evaluated through this system.Introduction of the "Prompt Review System"
NTS will relieve compliant taxpayers from their uneasiness by resolving ambiguity promptly and spot tax evaders at an early stage by monitoring tax returns through the "Prompt Review System" so that an audit will take place not too long after the filing of returns. With the set up of this system, an audit on a taxpayer would be conducted within two years from the date the return is filed, which is currently three to five years.
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