Interim Tax Returns
Some of my clients recently enquired about the interim payment of corporate income tax, global income tax, and VAT.
I’d like to explain these interim payments, since the end of August is the deadline for interim returns and payment for corporate income tax for those corporations whose fiscal period is January through December.
1. Corporate Income Tax
Almost all Korean entities’ fiscal year-end is the end of December, so these companies need to file and pay their yearly corporate income tax return by the end of March. But these entities also need to pay half of their corporate income tax due by the end of the following August, without even having done a financial closing. If a business is experiencing a lack of profit or estimate that it needs to pay less than half the amount of the last filing, however, this entity needs to close the financial statements and file by the end of August to prove it.
2. Global Income Tax
Every resident of Korea needs to file his income (or lack thereof) by the end of May for global income tax purposes, especially if he or she had any income other than Class A income (salary or wage), which is typically withheld by one's employer and settled accordingly.
As a result of this law, all sole proprietors need to file and declare their income (or loss) by the end of May without exception. Afterwards, if he or she paid the global income tax in May, the taxpayer needs to pay half of the prior income tax bill by the end of November (the interim payment). Under the same law, if a taxpayer experienced some deficit, he or she needs to close their financial statements and file to prove it to avoid incurring a penalty.
VAT is simply calculated as below:
10% of your revenue - 10% of your purchases with tax invoices (other than wages).
Every corporation needs to file and pay VAT quarterly, except for sole proprietors, who need to file only twice a year but still need to pay it quarterly.
For help with tax filings or for a deeper explanation of the applicable laws in Korea, please don't hesitate to get in touch with us through firstname.lastname@example.org