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12. Penalty Tax

A penalty tax for a failure to meet the prescribed obligations is added to the tax due.

a. Penalty Tax on Failures in Bookkeeping or Filing Returns:

Where a corporation has failed to file returns or where the obligation of bookkeeping has

not been met, the penalty tax of 20% of the calculated tax amount determined by the

government, or an amount equivalent to 0.07% of the amount of gross receipts,

whichever is greater, is imposed. However, when the under-declared amount exceeds 5

billion won, 30% of the tax amount due or an amount equivalent to 0.1% of the amount of

gross receipts, whichever is greater, is to be paid. Note that the penalty tax for the failure

in bookkeeping does not apply to non-profit corporations.

b. Penalty Tax on Understatement of Income:

When a taxpayer fails to accurately report his tax amount due, he or she is subject to the

penalties described below.

(i)  If the under-declared amount is more than one-third of the tax base and an

"unjustifiably under-reported tax amount" as prescribed by the Presidential Decree

exceeds 5 billion won, 30% of the tax amount due on the under-declared amount is to be

the penalty payment. However, if the tax amount due represents less than 0.1% of the

gross receipts or is zero, 0.1% of the gross receipts will be considered as the amount

due.

(ii)  In other cases, 10% of the tax amount due on the under-declared amount (20% of

"unjustifiably under-reported tax amount") will be considered the penalty.  If the

calculated tax amount is zero, then this rule does not apply.

c. Penalty Tax on Non-payment or Insufficient Payment:

Where the corporation tax has not been paid in full or in part, the penalty tax is an

amount equivalent to 0.03% per day of the amount of corporation tax unpaid or left to be

paid.

d. Penalty Tax for Failure to Withhold Tax

(1)

Where tax withholders have failed to withhold tax at the source or have failed to pay

the withheld tax to the government within the payment period, the penalty tax applied

is the larger of

i)   An amount that multiplies 0.03% by the number of unpaid days (limited to 10% of unpaid tax)

ii)  An amount equivalent to 5% of unpaid tax.

(2)

Exceptions are made where the tax withholder is the government, local autonomous bodies

e.  Penalty Tax on Failure to Submit Consolidated Financial Statements

Where a domestic corporation fails to submit its consolidated financial statements to the

appropriate tax office, the greater amount of: (i) 2% of the reported tax amount or (ii)

0.008% of the gross receipts recorded in the same fiscal year shall be added as penalty

tax to the corporation income tax.

f.  Penalty Tax on Failure to Receive Verifying Documents

Where a corporation (except those exempted under the Presidential Decree) is provided

with goods or services in connection with the business and does not collect verifying

documents required, the corporation is subject to penalty tax equivalent to 20% of the

uncollected amount surcharged on corporate income tax, except as otherwise provided

in the article.  Even when the taxable amount is zero, the penalty tax is still to be paid.

g.  Penalty Tax on Failure to File a Stock Transfer Status Sheet

If a corporation fails to file a stock transfer status sheet by the due date, or if it is filed by

the corporation with incorrect information or omissions of required information, a penalty

of 2% of the total par value of the stocks not reported shall be imposed.

h.  Penalty Tax on Failure in Reporting

Where a corporation has failed to submit a payment statement or where the details of

transactions submitted by the company are found to be unclear, an amount equivalent to

2% of the amount of the transactions in the reports not submitted or unclear is assessed

as penalty tax.

i.  Penalty Tax for Failure to Submit Receipts

The head of each of the local tax offices is responsible for surcharging 1% of receipts in

question as a penalty tax on the corporation tax in the following situations 1 and 2. Even

where the corporation does not have any tax amount liable, it still must pay the

surcharged penalty tax. When situation 2 applies to a certain corporation, situation 1

does not apply to the same corporation and the exception can be made to the situation

where additional tax is imposed in accordance with the Value Added Tax Article 22,

situations 2 through 4.

1. A corporation does not issue tax invoices, or the tax invoices contain missing or

incorrect information;

2. A corporation fails to submit an aggregate summary of tax invoices classified by sales

place and purchase place by January 31 of the following year, or the tax invoices do not

contain items as required by the Presidential Decree.