Comprehensive Income Tax

Question

Accepted Answer

What are the limits and documentation for the expenses related to the payments made to clients for celebrations and condolences? 
 
   Only expenses related to events associated with the business are recognized. 
   There are invitation cards, obituaries, text messages, and KakaoTalk records. 
   The limit can be processed as expenses if it is less than 200,000 won per case. 
 
 What is the method for calculating the provisional tax payment for individual entrepreneurs? 
 
   1.The previous tax period's comprehensive income tax amount is 2/1 
   2.If the estimated amount of the mid-term payment in the first half of the year is less than 30% of the comprehensive tax amount of the previous year, you can report and pay the estimated amount by December 1st. 
   3.Mid-term estimated payment calculation method: [(This year's first half comprehensive income amount × 2 - carried forward losses - comprehensive income deduction) × basic tax rate] / 2 - this year's first half tax credit and previously paid tax. 
 
 How is the additional tax calculated for those subject to honest reporting? 
 
   1. Late Filing Penalty for Non-Submission of Self-Reporting Confirmation 
   A 5% late penalty will be imposed on the assessed tax amount 
   2. Penalty for Non-Reporting or Underreporting 
   Non-reporting penalty = 20% (40% for wrongful non-reporting) 
   Underreporting penalty = 10% (40% for wrongful underreporting) 
 
 Who are the individuals subject to faithful reporting confirmation and what are the benefits? 
 
   Target 
   1. If the income amount by sector exceeds the standard for the applicable year 
   2. Includes not only the general income amount but also deemed rent, sales incentives, and the market value of inventory assets during business transfer 
   Benefits 
   1. The deadline for filing and paying comprehensive income tax is extended by 1 month 
   2. Tax deductions for medical expenses, education expenses, and monthly rent 
   3. Tax deduction for verified reporting expenses (60% deduction within the limit of 1.2 million won) 
 
 What is the limit for the Yellow Umbrella Deduction? 
 
   1. Sole Proprietor 
   Annual income less than 40 million KRW: 6 million KRW 
   Annual income between 40 million and 100 million KRW: 4 million KRW 
   2. Corporate Representative 
   Tax deduction benefits available for total salary less than 80 million KRW 
 
 When should I file a corrected income tax return? 
 
   1. Possible within 5 years after the legal reporting deadline 
   2. If underreported, additional tax may occur 
 
 What are the reporting requirements for business accounts and how are additional taxes assessed? 
 
   1. Subject 
   Double-entry bookkeeping obligors, individuals subject to verification of honest reporting, corporate taxpayers 
   2. Additional Tax 
   0.2% of the income amount during the unreported period, 0.2% of the unused amount 
 
 How is the comprehensive income tax calculated using the simple expense ratio? 
 
   [Total Income Amount -(Total Income Amount × Standard Expense Ratio for Relevant Industry)] × Tax Rate 
 
 What are the criteria for recognizing freelancer expense processing? 
 
   Examples of expenses that can be recognized 
   1. Business-related software purchase costs 
   2. Transportation and travel expenses 
   3. Freelance workspace rental fees 
   4. Online tools, design resources, etc. 
   5. Costs for purchasing equipment such as laptops, monitors, etc. 
   However, expenses used for personal purposes are excluded, and receipts, card statements, bank transfer records, etc., that can prove the expenses must be kept. 
 
 What is the effect of transferring goodwill? 
 
   1. Individual Tax Savings Effect 
   When an individual transfers goodwill to a corporation, the remuneration is classified as other income. 
   At this time, 60% of the evaluated goodwill amount is recognized as necessary expenses, and only the remaining 40% is subject to comprehensive income tax. 
   2. Corporate Tax Savings Effect 
   A corporation can account for the acquired goodwill as an intangible asset and can expense it through depreciation over five years. 
 
 Can I also expense a used car or a car purchased for business? 
 
   1. Even if the vehicle was personally purchased before starting the business, it can be treated as a business asset if evaluated based on the date of business commencement and registered as an asset in the books. 
   2. A used car can also be registered for business use if it has proper documentation at the time of purchase. 
 
 What are the items for the individual business owner tax deductions? 
 
   1. Special Tax Reduction for Small and Medium Enterprises (including Start-up Tax Reduction) 
   Reduction of income tax and corporate tax from 5% to 30% 
   2. Start-up Tax Reduction (Youth Start-up Tax Reduction) 
   50-100% tax reduction by industry and region for 5 years after starting a business 
   3. Employment Increase Tax Credit 
   Possible deduction of 4,000,000 to 15,500,000 won per year if employees are hired 
   4. Tax Credit for Honest Reporting Confirmation Costs 
   60% of the fee for honest reporting confirmation (up to 1,200,000 won) as a tax credit 
 
 Income tax mid-term payment, why do I have to pay taxes again? Who is the target? 
 
   A system for pre-paying next year's taxes in May, implemented in November 
   Excluded parties 
   1. New business owners 
   2. Business owners who closed before June 30 
   3. Income earners with only withholding income such as wages, interest, or dividends 
   4. In cases where the previous year's total income tax payment amount was low, resulting in an interim payment amount of less than 500,000 won 
 
 What are the requirements for issuing a cash receipt? 
 
   1. If the payment is over 100,000 won 
   It must be issued regardless of whether the consumer requests it, if it is a mandatory issuance category 
   If not issued, a penalty of 20% of the transaction amount will be imposed 
   2. If the payment is under 100,000 won 
   It will be issued only if the consumer requests it 
 
 What is the tax on lottery winnings? 
 
   Up to 300 million won is taxed at 22%, and the amount exceeding 300 million won is taxed at 33% as a separate tax conclusion. 
   However, withholding tax is applied to the amount received monthly, not based on the total prize money. 
   Since 7 million won is received monthly, a tax rate of 22% is applied, resulting in approximately 5.46 million won received each month. 
 
 What are the reasons for early withdrawal from an IRP account? 
 
   1. Preparation for home purchase or rental deposit for those without a home 
   2. Diseases/injuries requiring care for more than 6 months: subscriber, spouse, or dependents 
   3. Personal rehabilitation or declaration of bankruptcy 
   4. Natural disasters or social disasters: in cases of damage due to natural disasters, etc. 
 
 What is the National Tax Service issuance details for the cash receipt inquiry? 
 
   This is a cash receipt issued by the National Tax Service regarding transactions where the consumer has reported or refused to issue a cash transaction verification report, or cases of non-issuance. 
 
 The pros and cons of the yellow umbrella deduction 
 
   Advantages 
   1. Income deduction (up to 6 million won per year) 
   2. Assets that cannot be seized 
   3. Support in case of business closure (similar to severance pay) 
   Disadvantages 
   1. Loss of principal disadvantage upon early termination (up to 20% of the principal) 
   2. Additional income tax rate of 16.5% applied upon early termination 
 
 Tax savings for study rooms in academy tutoring centers 
 
   1. Diligently manage your expense evidence > Registering a business credit card makes expense management convenient and increases tax savings. 
   2. Save on taxes through payroll reporting > Hiring employees enrolled in the four major insurances results in greater tax savings. 
   3. Rent, management fees, communication fees, rental fees, utility costs. 
   4. Check health insurance, national pension, yellow umbrella deduction, and pension savings > Yellow umbrella deduction: Income deduction benefits of up to 2 to 6 million won per year, pension savings: Tax deduction available up to 6 million won per year! 
   5. Consider switching to a corporation if taxes are burdensome. 
 
 Transfer of goodwill 
 Application of Young Entrepreneur Income Tax Reduction in Metropolitan Area Overcrowding Control Zone 
 Tax savings for real estate rental businesses 
 
   1. Processing loan interest expenses 
   2. Managing repair and maintenance costs 
   3. Brokerage fees and tenant-related costs 
   4. Handling land-related expense processing 
   5. Utilizing depreciation on buildings 
   6. Handling tax and public utility expenses 
   7. Taking advantage of rental housing tax reduction benefits