Korea Tax Accountant flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Statute of limitations

The period within which tax authorities can assess and collect national taxes: generally 5 years, 10 years for fraud, and 15 years for failure to file and nonpayment.

Global income tax rates

Progressive rates from 6% to 45% applied to comprehensive income, with brackets starting at KRW 14 million and reaching 45% above KRW 1 billion.

Employment income deduction

A deduction from salary income calculated by formula based on total salary, with ceilings, aimed at approximating necessary expenses of employees.

Year-end tax settlement

The process by which an employer adjusts an employee's income tax withholding by January 20 of the following year, applying deductions and credits.

Capital gains tax

A tax on gains from transferring assets such as land, buildings, and stocks, with rates varying by asset type and holding period, e.g., 20% for land held over 2 years.

Taxpayer appeal period

A taxpayer may request a review or appeal within 90 days from the date of receiving a tax notice, to the tax tribunal or National Tax Service.

Corporate tax rates

Progressive rates from 9% to 24% on corporate taxable income, plus a 10% local income surtax, with brackets starting at KRW 200 million.

VAT standard rate

The general VAT rate is 10% on taxable supplies of goods and services, with zero-rating for exports and certain services, and exemptions for basic goods.

Input tax credit

VAT paid on purchases used for taxable supplies can be credited against output tax; not allowed for exempt supplies or non-business use, with refunds for exporters.

Loss carryforward

Tax losses can be carried forward for up to 15 years (10 years for SMEs) to offset future taxable income, subject to limitations.

Withholding tax on non-residents

Domestic payers must withhold tax on payments to non-residents: 25% on interest and dividends, 20% on business income, subject to treaty reductions.

Inheritance and gift tax

Progressive tax from 10% to 50% on inheritances and gifts, with deductions for spouse and dependents, and credits for prior gifts within 10 years.

Acquisition tax rates

Local tax on acquiring property: 4% for housing (1% for first-time buyers under KRW 600 million), 2% for land and buildings, with surcharges for heavy acquisition.

Local income tax

A local tax equal to 10% of national income tax (individual and corporate), collected by local governments as a surtax.

Foreign tax credit

A credit against Korean tax for foreign taxes paid on foreign-source income, limited per country or basket, with a 5-year carryforward of excess credits.

Transfer pricing arm's length

Cross-border transactions between related parties must be priced as if between independent parties; documentation required, with advance pricing agreements available.

Tax treaty withholding rates

Bilateral treaties reduce withholding tax on dividends (5-15%), interest (10-15%), and royalties (10-15%), and provide tie-breaker rules for dual residents.

Controlled foreign corporation rules

Passive income of foreign subsidiaries in low-tax jurisdictions (effective tax rate below 15%) is imputed to the Korean parent, with exceptions for active business.

Accounting equation

Assets = Liabilities + Equity. This fundamental equation underlies double-entry bookkeeping, where every transaction affects at least two accounts.

Revenue recognition five steps

Under K-IFRS 15: identify contract, identify performance obligations, determine transaction price, allocate price, and recognize revenue when control transfers.

Inventory valuation

Inventories are measured at the lower of cost or net realizable value; cost formulas include specific identification, FIFO, and weighted average; LIFO is not permitted.

Overhead allocation rate

Predetermined overhead rate = estimated manufacturing overhead / estimated activity base, used to allocate overhead to products during the period.

Material price variance

Calculated as (standard price - actual price) × actual quantity; a favorable variance occurs when actual price is below standard price.

Break-even point

The sales level where total revenues equal total costs: fixed costs / contribution margin per unit. Contribution margin ratio = (sales - variable costs) / sales.

GDP expenditure approach

Gross Domestic Product = Consumption + Investment + Government spending + (Exports - Imports). Real GDP adjusts for inflation using the GDP deflator.

Fiscal multiplier

The multiplier effect of government spending on GDP = 1 / (1 - marginal propensity to consume). A higher MPC leads to a larger multiplier.

Money multiplier

The maximum amount of money the banking system can create from a given reserve = 1 / reserve requirement ratio. Central bank controls money supply.

Phillips curve

Shows an inverse relationship between inflation and unemployment in the short run; in the long run, the curve is vertical at the natural rate of unemployment.

Stock company requirements

Under the Commercial Code, a stock company (jusik hoesa) must have at least one director and a statutory auditor if capital exceeds KRW 1 billion; shareholders have limited liability.

Porter's five forces

Framework for industry analysis: rivalry among existing competitors, threat of new entrants, threat of substitutes, bargaining power of buyers, and bargaining power of suppliers.

Commercial prescription period

Claims arising from commercial transactions are subject to a 5-year statute of limitations under the Commercial Code, unless otherwise provided.

VAT return filing

General taxpayers file VAT returns quarterly by the 25th of the month following the quarter; simplified taxpayers file semiannually. Electronic filing via Hometax is required for corporations.