Korea Tax Accountant key terms

Taxation follows the person who actually owns or controls income or assets, not merely the name on a document; authorities may recharacterize a transaction whose form differs from its substance.

A rule allowing tax authorities to disregard a transaction between related parties that unfairly reduces tax burden, such as an abnormally low or high price, and recalculate income at arm's length value.

Related parties defined by ownership percentage, family connection, or control, such as a shareholder holding 30 percent or more, or a relative within a specified degree; special rules apply to transactions between them.

A person whose address or residence is in Korea, or who has stayed in Korea for 183 days or more in a taxable year; residents are taxed on worldwide income.

Aggregated individual income comprising interest, dividends, business income, employment income, pension income, and other income, taxed together on a progressive rate schedule after deductions.

A deduction subtracted from gross income to arrive at tax base, granted for items such as personal allowances, national pension contributions, and housing savings; it reduces taxable income rather than tax directly.

An amount subtracted directly from calculated tax, such as foreign tax credit, wage income tax credit, or medical expense credit; it reduces the final tax payable one-for-one.

An interim prepayment of tax, generally half of the prior year's tax, made by individuals and corporations during the year to smooth revenue collection before final settlement.

A withholding mechanism where the payer deducts tax at source when paying wages, interest, dividends, or service fees, and remits it to the government on the taxpayer's behalf.

The year-end adjustment where an employer recalculates an employee's annual wage income tax using deductions and credits, settling any over- or under-withholding against the monthly prepayments.

The tax base for corporate tax, computed as net income after adjustments for tax-exempt items, non-deductible expenses, and tax credits and losses carried forward.

An expense recorded in accounting books that is disallowed for tax purposes, such as fines, penalties, or excessive entertainment expense, and is added back to income.

Revenue recognized in accounting but excluded from taxable income, such as certain capital surplus or tax-exempt government subsidies, and is subtracted from book income.

A tax loss that cannot be fully offset in the current year and is carried forward, generally up to 15 years, against future taxable income subject to statutory limits.

A person who independently supplies goods or services for consideration in the course of business; taxable transactions are subject to 10 percent VAT, with input tax generally creditable.

A deduction of VAT paid on business purchases from the output tax collected on sales, allowed only when the purchase relates to taxable supplies and is supported by a valid tax invoice.

A tax invoice issued by a registered supplier to a registered purchaser, showing supply value and VAT; it is the main documentary basis for input tax credit.

A zero percent VAT rate applied to exports and certain international services; output tax is zero but input tax is fully refundable.

A simplified VAT taxpayer with annual sales below the statutory threshold, taxed at a reduced rate on a value-added margin rather than the standard 10 percent, with limited input credit.

A local tax levied when a person acquires real estate, vehicles, or certain other property, calculated on the acquisition value at rates that vary by property type and buyer status.

An annual local tax imposed on owners of land, buildings, and housing, based on assessed value with progressive rates and separate taxation for housing and land.

Taxes levied by local governments, including acquisition tax, registration license tax, property tax, resident tax, and automobile tax, governed by the Local Tax Act.

A credit against Korean tax for income tax paid to a foreign country on foreign-source income, preventing double taxation; limited to the Korean tax attributable to that income.

A bilateral treaty allocating taxing rights between Korea and another country, setting residence and source rules, reducing withholding rates, and providing mutual agreement and exchange of information.

The price charged for transactions between related entities across borders; tax law requires it to reflect arm's length pricing, with adjustments and documentation obligations.

An accounting basis recognizing revenue when earned and expenses when incurred, regardless of cash timing; it underpins accrual adjustments and matching of costs with revenues.

Systematic allocation of the depreciable cost of a tangible asset over its useful life, using methods such as straight-line or declining balance, subject to tax-law useful life ranges.

Assignment of indirect costs to cost objects such as products or departments using an allocation base like machine hours or labor cost; accuracy depends on choosing a cause-and-effect base.

A cost that changes in total in proportion to activity volume while remaining constant per unit, such as direct materials; it supports contribution margin analysis.

Sales revenue minus variable costs; it measures the amount available to cover fixed costs and generate profit, and is central to break-even and short-term decision analysis.

The value of the next best alternative forgone when a resource is used in one way rather than another; it is relevant to decision making even when no cash outlay occurs.

A cost already incurred that cannot be recovered by any future decision; it should be ignored in incremental analysis because it does not differ among alternatives.

The percentage change in quantity demanded divided by the percentage change in price; demand is elastic when the absolute value exceeds one, meaning revenue falls as price rises.

The additional cost of producing one more unit; profit is maximized where marginal cost equals marginal revenue under competitive conditions.

A company whose capital is divided into shares, with shareholders bearing limited liability up to their contributions; it requires directors, an auditor or audit committee, and a general meeting.

The supreme decision-making body of a corporation, resolving matters such as amendments to articles, appointment of directors, and distribution of profits by shareholder vote.

The board that decides business execution matters and supervises directors; it can delegate day-to-day management but retains oversight and conflict-of-interest approval duties.

A bookkeeping system recording every transaction as equal debits and credits, keeping the accounting equation in balance and enabling trial balances and financial statements.

The journal entry that identifies accounts, amounts, and debit or credit side for a transaction before it is posted to the ledger.

The periodic filing of VAT returns, generally quarterly or semi-annually depending on taxpayer type, reporting output tax, input tax, and the resulting payable or refundable amount.