Korean Tax Service Relaxes Audit Regime For Domestic Firms

by Mary Swire, Tax-News.com, Hong Kong

27 April 2005

In contrast to its recent hard line stance on the activities of foreign investment funds based in South Korea, the National Tax Service has announced a more softly-softly approach to compliance amongst domestic firms.

In a move designed to take some of the friction out of a dragging economy, the NTS has revealed its intentions to exempt newly-established small and medium-sized enterprises from tax audits this year.

In addition, the tax service has decided against launching new tax audits of firms investigated within the last three years which were found not to have evaded tax.

At present, domestic firms are exempt from tax audits for a period of two years, provided all due taxes uncovered in previous probes have been paid.

Earlier in the month, the NTS launched an investigation into several foreign investment fund firms over allegations that they avoided Korean taxes by sending profits offshore.

However, some observers have speculated that the investigation has more to do with growing discontent over the levels of profit being made by some foreign funds, an accusation which the tax office has refuted.

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