Korean Tax Newsletter (February 2022)

Creating the future, together

Korean Tax Newsletter is a monthly publication of Deloitte Anjin LLC. We hope you will find useful information in this newsletter.

▲ Tax law revisions 

Various Korean tax laws were revised in December 2021. The following is a summary of the key changes.
Local Tax Collection Act (No. 18794, 28 January 2022)
  • Article 11-4: If a taxpayer has been delinquent in the payment of local taxes, without good cause, three or more times for over a year and the sum of all delinquent national taxes is at least KRW 50 million, a court may sentence the delinquent taxpayer to up to 30 days imprisonment. 
  • Article 35 paragraph 1, Article 71 paragraph 2, Article 61 paragraph 3
    • A tax official who intends to attach the property of a delinquent taxpayer may require the taxpayer or a third party, including a virtual asset service provider, to transfer the property.
    • The head of a local government may directly sell virtual assets through a virtual asset service provider.

▲ News from the tax authorities 


Advance ruling procedure for R&D tax credit simplified

Since 2020, Korea’s National Tax Service (NTS) has operated an advance ruling system that confirms whether a taxpayer is eligible for the “Tax Credit for Research and Human Resources Development Expenses” (R&D tax credit). Although taxpayers are not required to obtain an advance ruling, taxpayers who claim the R&D tax credit after getting one are exempted from having to verify reported information and managing follow-ups. Moreover, they are exempt from the underreporting penalty if the tax treatment ultimately is different from the conclusion of the advance ruling.

As from 1 January 2022, the R&D tax credit advance ruling process has been simplified: the NTS has revised the ruling template as well as clarified and simplified the documents needed to apply.

▲Recent tax rulings and cases


Below is a summary of recent tax decisions.

A. Used points deducted from open-market operator service fee could be treated as operator’s sales allowance

In a decision issued on 3 January 2022, the Tax Tribunal held that, because used points deducted from a taxpayer’s service fee could be treated as a sales allowance from the taxpayer, the tax authority’s refusal to reassess the taxpayer’s value added tax (VAT) was mistaken (Tax Tribunal 2021 Jung 0841).

Facts and background

The taxpayer operated an online platform for trading goods and services and allowed its customers to accumulate and use points in affiliated franchise stores. The taxpayer deducted the amount of the discount (used points) from its service fee. The taxpayer filed and paid VAT, including the used points in its tax base, from 2014 through the first quarter of 2017.

The taxpayer claimed a refund for VAT on 24 July 2019 (for tax year 2014) and 23 July 2020 (for the period from 2015 to the first quarter of 2017) on the basis that the used points should have been excluded from the tax base as a sales allowance. The tax authority rejected the claims on 20 September 2019 and 24 September 2020, respectively.

Dissatisfied that the VAT refund had been rejected for 2014, the taxpayer filed an objection on 17 December 2019 and filed a request for adjudication on 19 November 2020. The claimant also filed a request for adjudication on 19 November 2020, dissatisfied with the rejection for the period from 2015 to the first quarter of 2017.


Whether the discount could be deemed a sales allowance from the taxpayer when customers used the taxpayer’s points in the open market to get discounts and the discounts were deducted from the taxpayer’s service fee.

Tax Tribunal decision

The Tax Tribunal decided that the tax authority’s rejection of the taxpayer’s VAT refund claims was mistaken for the following reasons:

  • If the concluded contract provides that the supplier offers a discount when the customer satisfies specific conditions (“discount contract”), the discount corresponds to a sales allowance as it is “the amount of discount applied directly to the normal price of goods based on conditions of supply.”
  • The points are simply a quantified version of a discount amount in accordance with the discount contract, so it is reasonable to deem the amount of the discount as a sales allowance.
  • Because the discount amount is deducted from the service fee of sales corporations, it can be deemed a sales allowance.

B. Stock valuation following capital restructuring

When a corporation reduces its entire capital without consideration to cover its losses and increases its paid-in capital through a third party allocation, a corporation that participated in the paid-in capital increase in accordance with its existing shareholding ratio should include the book value of its shares before the capital reduction in the value of the shares acquired in the paid-in capital increase (Sajeon-2021-BeopRyungHaeSeokBeopIn-1634, 20 December 2021).


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For further questions or inquiries, please kindly contact representatives listed below.

Inbound Tax Leader, Scott Oleson, +82 (2) 6676-2012 /
Indirect Tax Partner, Hong Seok Han : +82 (2) 6676-2585 /
M&A Tax Partner , Young Pil Kim : +82 (2) 6676-2432 /
BPS Tax Partner, Park Sung Han, +82 (2) 6676-2521 /
TP Partner, Lee Yong Chan, +82 (2) 6676-2828 /
GES Partner, Seo Min Soo, +82 (2) 6676-2590 /

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