PAYMENT, COLLECTION & DISPUTES
1. Payment of National Taxes
2. Collection of National Taxes
3. Tax Disputes
4. Penalties on National Taxes
1. Payment of National Taxes
	Range of tax rates
		Under the Korean tax law, the tax rates applied to different types of tax are broadly
		classified into proportional and progressive rates.  Proportional tax rates are further
		divided into regular and differential proportional rates. Regular proportional rates are
		applied to value-added tax (10%) and asset revaluation tax (3%). On the other hand,
		differential proportional tax rates are levied on securities transaction tax, special
		consumption tax, liquor tax, and transportation tax.
		Corporation tax, income tax, and inheritance & gift tax are subject to progressive tax
		rates, varying upon the tax bracket. For instance, progressive tax rates imposed
		upon corporation tax are 13% for the amount less than 100 million won and 25% if the
		amount exceeds 100 million won. Individual income is divided into 4 tax brackets and
		is subject to tax rates ranging from 8% to 36%.  Taxable amounts in the inheritance
		& gift tax are divided into 5 tax brackets and are subject to tax rates between 10% and
		50%.
	Occurrence of tax liability
		Certain taxes such as income tax, corporation tax, and value-added tax are
		established at the end of a taxable period, as prescribed in provisions of the tax law.
		On the other hand, liability on inheritance tax is established when there is a bequest.
		Liability on gift tax is established when property is acquired through a gift. Liability on
		asset revaluation tax is established when the asset is subject to revaluation.
		With respect to special consumption tax, liquor tax, and transportation tax, an
		obligation of tax payment occurs when the taxable goods leave the factory or are
		sold, and in case of imported goods, when they are declared for importation at
		customs.  Liability on stamp tax is established when taxable documents are drafted,
		and in case of securities transaction tax, when transactions are confirmed.
		Finally, liabilities on earmarked taxes such as education tax and special tax for rural
		development are established at the same time as when their principal taxes are due.
	Different assessment methods
		The present tax collection system in Korea uses three separate methods: the
		self-assessment method, the official assessment method, and the special collection
		method.
		Under the self-assessment method, taxpayers themselves assume the primary
		responsibility for calculation of the tax base and the amount of tax, filing a tax return
		based upon their calculation and paying the tax due.  The tax authorities, however,
		reserve the right to adjust taxpayers' returns with correction notices.  When a
		taxpayer fails to file a tax return, the tax authorities send by notification the tax base
		and the amount of tax payable. The self-assessment method is applied to income
		tax, corporation tax, value-added tax, special excise tax, liquor tax, transportation
		tax, and securities transaction tax.
		On the other hand, the official assessment method is applicable to inheritance & gift
		tax, asset revaluation tax, and excess profits tax.  Under this system, the government
		determines the tax base and the amount of tax due, and issues a notice requiring the
		taxpayer for the tax payment.   Tax file returns are regarded as information different
		from that used under the self-assessment method.
		Finally, the special collection method applies to stamp tax; portions of income tax and
		corporation tax are subject to withholding tax, and income tax collected by certain
		taxpayer associations and portions of corporation tax are subject to estimated
		prepayment.
2. Collection of National Taxes
		National taxes are collected in accordance with the National Tax Collection Law, with
		the objective of securing tax revenue in a predictable manner. The principles of the
		National Tax Collection Law may also be applied to the compulsory collection of local
		taxes and other public charges.  The Basic Law for National Taxes and other tax
		laws take precedence over the National Tax Collection Law containing general
		provisions and procedural regulations.
	Procedure for mandatory collection of delinquent taxes
		When a taxpayer fails to pay tax of the tax return, or the amount of adjustment or
		determination by the due date, the tax authorities must collect delinquent taxes in
		accordance with the National Tax Collection Law.
		(1) The primary and secondary notice
			Primary and secondary notice of demand requiring payment within the specified
			time period prescribed by the Basic Law for National Taxes is sent by the director
			of the tax office exercising jurisdiction over the taxpayer when a taxpayer fails to
			pay tax in full by the due date.
		(2) Attachment
			If a taxpayer fails to pay the tax due within the date specified on the notice, the tax
			authorities have the right to attach the taxpayer's property. Attached property is
			classified into four categories and different procedures for each category are
			provided: (1) movable property and securities, (2) immovable property, (3) claims,
			and (4) other property rights.
		(3) Request for share distribution
			If the property of a delinquent taxpayer is sold at a public auction, or in
			connection with bankruptcy liquidation procedures, the tax authorities may claim
			a share of the proceeds distributed from the sale.
		(4) Sale of property
			In principle, the attached property is sold publicly by way of tender or auction.
			The tax authorities publicly notify the property to be sold at least ten days before
			the date of sale, notifying the delinquent taxpayer and other parties interested in
			the public sale.
		(5) Distribution of proceeds
			The proceeds of the property sold are appropriated in order of priority among (1)
			delinquent taxes for which the property was attached to, (2) other delinquent
			taxes or public charges for which a share of the distribution was requested, and
			(3) to creditors with secured private claims on the private property. The remaining
			proceeds go to the delinquent taxpayer.
3. Tax Disputes
	Procedures to be followed
		If a taxpayer believes that certain actions taken by the tax authorities are in violation of
		the existing tax law, he or she may appeal to the head of a regional or district tax
		office within 90 days from the date of receiving notice. On receiving a complaint from a
		taxpayer, the regional or district tax office shall issue a ruling within 30 days.  The
		taxpayer or anyone who guarantees payment of taxes may initiate the legal process
		of the appeal.
		If a taxpayer is not satisfied with an assessment made by the head of a regional or
		district tax office, they may appeal to the National Tax Service or the National Tax
		Tribunal within 90 days of receiving a written notice from the regional or district tax
		office.  The National Tax Service will make a decision on the case within 60 days.
		However, taxpayers have an option to appeal directly to the National Tax Service.
		The National Tax Tribunal will issue its decision within 90 days.  If the taxpayer is still
		unsatisfied with the decision rendered by the National Tax Service or the National Tax
		Tribunal, he or she may take the case before the judicial court for the final decision.
		Before taking the case to judicial court, reinvestigation of the case by the Board of
		Audit & Inspection may be elected by the discontented taxpayer within 90 days from
		the date of receipt of a written notice from the regional or district tax office instead.
		The Board of Audit & Inspection will issue a ruling within 3 months.  If a taxpayer is
		still not satisfied with the decision rendered by the Board of Audit & Inspection, he or
		she may then take the case to judicial court.
		* A decision should be made to appeal to the higher authorities within 90 days.
4. Penalties on National Taxes
	Penalties on failure to meet tax obligations
		Penalties are issued in both administrative and judicial forms if taxpayers, without a
		reasonable excuse, fail to meet their tax obligations by, for example, neglecting to file
		a tax return in accordance with the tax laws or by submitting an incorrect tax return
		by omitting any taxable items.
		A reasonable excuse, which justifies a deferral of tax payment includes the case
		where a taxpayer incurs serious losses from his or her  business. In this case, tax
		may be deferred with the permission from the head of a district tax office and with
		collateral worth 120% of the tax amount overdue.
		In addition, the Basic Law for National Taxes stipulates that taxes eligible for
		self-assessment and those withheld at source may be deferred for up to 6 months.
		The National Tax Collection Law(NTCL)  provides for the deferral of tax amount
		overdue after receiving the primary and secondary notice from a district tax office.
		The NTCL also allows for a delay of the disposal of attached property, when the tax
		amount overdue is likely to be collected in the near future.  More specifically, if there
		is a firm conviction that the overdue amount will be paid, then the business is allowed
		to continue by delaying the attachment of the property.  The taxpayer may make
		payments of the overdue amount in installments and may delay the attachment of
		property or the disposal of attached property for up to one year.
		The administrative penalty is a sanction taken against default such as a failure to file
		a tax return or a filing of an incorrect tax return. The purpose of imposing additional
		tax is to ensure the compliance of taxpayers with the existing tax laws and
		regulations. In such cases, the primary fine of 5% of the original tax amount due and
		is levied on the defaulting taxpayer. In addition, a secondary fine equivalent to 1.2% of
		the overdue amount  is charged each month for up to 60 months, starting from the
		due date in the primary notice. Fines are imposed in accordance with the NTCL.
	Judicial penalty against tax crimes
		Another sanction is the judicial penalty imposed against tax crimes in connection
		with the assessment and collection of tax. The grounds for such penalties as well as
		their extent, are stipulated in the Tax Evasion Punishment Law and Tax Evasion
		Punishment Procedural Law, respectively. The major feature of judicial penalties
		imposed against tax crimes is that certain tax criminals may be subject to both
		imprisonment and fines.  A tax administrator must file charges in order to punish tax
		criminals.
		With respect to legal punishment against tax crimes, people who commit tax evasion
		are subject to imprisonment of up to three years, or fines imposed of three to five
		times the under-reported amount.  Those who have tax amount in arrears for more
		than three times during the course of a fiscal year must serve a sentence up to one
		year, or are levied fines amounting to the amount in arrears.  On the other hand,
		people who fail to record bookkeeping on transactions are imposed a fine of 500,000
		won and those who destroy bookkeeping records or conceal them are subject to
		imprisonment of up to two years or a fine up to 5,000,000 won. If tax officials or
		administrators are involved in tax crimes, they may be subject to an additional penalty
		equivalent to one third of the punishment provided by the relevant law.