International Association of Korean Lawyers 2019 Annual Conference

International Association of Korean Lawyers 2019 Annual Conference, Seoul Tax Disputes in Korea 2019. 9. 20. Jooheon Lee Partner at Yulchon LLC. Copyright 2019 Yulchon LLC.

1. Tax investigation(when? ) Periodic selection • Companies with KRW 100 bil. annual income or more every 5 yrs • Suspected to be non-compliant based on periodic compliance analysis Occasional selection • Fails to fulfill his/her tax compliance obligations • Suspected of false transactions • Concrete information on a taxpayer’s tax evasion • Evident material to admit a suspicion of omissions or errors in tax return • Taxpayers bribing a tax official or helping a bribery 2

1. Tax investigation(procedure) Advance Notice (or Notice of tax investigation) Investigation (inspection of documents, inquiry, etc. ) Closing (20 days) Notice on result (30 days) Request for early decision (exemption of penalty taxes) Notice of Tax Payment Review by Request for Pre(30 days) assessment review(30 days) NTEC Notice 3

1. Tax investigation(Recent trend) Deeper for Conglomerates heavier inspection infra for information on overseas evasion Relevant Organization (FIU, FSS, etc) Improvements of system Tax experts needed Additional burden Focusing on revenue hikes Training of investigation experts systemization Pool of experts on diverse areas No further negotiation 4

1. Tax investigation(Recent trend, cont’d) Less cases, Heavier investigation • Financial investigation, information from FIU • Increased seizure of account books and computers • Simultaneous audit with trade partners or relevant companies Increased information • Sharing of information inside investigation units • Information exchange on overseas tax dodge(ex. MCAA) • External informers like KCS, FTC, FSS Specialization • Pool of experts on each field • Experts on international audits or high-tech incl. computers Increased prosecution • More complaints with prosecution against tax fraud accusers • Increased filing for even simple non-compliance with tax return 5

2. Dispute resolution procedures ▣ Overall structure Self-Assess/ Reporting/ Payment Administrative Relief • NTS examination • Tax Tribunal adjudication • Board of Audit & Inspection examination Tax Imposition - adm decision <advance remedy> Judicial Relief • Nat’l Tax – Doctrine of Exhaustion (cf. Local Tax) 6

2. Dispute resolution procedures ▣ Non-judicial review Appeal for review (NTS) Request for Pre -assessment review (competent regional tax office) Reconsiderati on appeal (competent regional tax office) Adjudgment request (Tax Tribunal) Courts (90 days) Examination request (BAI) (filing in 30 days after preliminary notice & decision within 30 days) (filing within 30 days after notice of disposition & decision within 30 days) (filing within 90 days after notice of disposition or notice of reconsideration appeal decision & decision within 90 days) 7

2. Dispute resolution procedure ▣ Judicial review Courts handling tax litigations - Special Panels or Divisions § Seoul Administrative Court • Seoul Adm Ct • District Ct • High Ct • Supreme Ct (Tax Law Division) § Seoul High Court 8

2. Dispute resolution procedures ▣ Statistics (2017) No. of cases submitted No. of cases settled Acceptance ratio(%) 3, 309 3, 159 24. 4 440 453 27. 8 Adjudgment request 5, 237 5, 116 27. 3 Examination request 169 125 4. 8 1, 466 1, 842 11. 4 Reconsideration appeal Administrative relief Judicial relief Appeal for review 9

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