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SOUTH KOREA ANNUAL COMPLIANCE STATUTORY REQUIREMENTS
In South Korea, companies must meet certain annual requirements to maintain their legal status and comply with local regulations. These requirements may include filing annual financial statements, paying south korea corporate taxes, and holding annual shareholder meetings.
SOUTH KOREA ANNUAL COMPLIANCE REQUIREMENTS
Corporate Tax Filing (Mandatory)
The company’s taxable income is imposed with corporate income tax as specified by the National Tax Guideline in South Korea.
For South Korean resident corporations, the company will be taxed on their income from outside and inside the country.
Meanwhile, for non-resident South Korean corporations, the company will be taxed toward its Korean-based income only.
The deadline for the income tax report is based on the fiscal year specified in the company’s Article of Incorporation. However, the fiscal-year date cannot exceed 12 months. The fiscal year extends from January 1st to December 31st.
Quarterly VAT Filing (Mandatory)
All South Korean incorporated companies must file periodic VAT returns detailing all taxable supplies (sales) and inputs (costs).
The VAT filing return deadline in Korea is 25 days from the period’s end, and any associated VAT liability must also be paid by this deadline. In the event, the company has a tax credit (where the VAT incurred by the company exceeds the VAT charged on its sales in the reporting period), approved credits will be paid over to the company within 30 days of the return deadline.
Annual Audit (exemptions applicable)
A limited company (Yuhan Hoesa) is subjected to an external audit if the company meets 2 out of 3 conditions as follows:
- total assets more than KRW12 billion (US$8million)
- total liabilities more than KRW7 billion (US$5million)
- revenues are more than KRW10 billion (US$7million)
To comply with the external audit, the company must appoint an external auditor from any certified Korean Public Accounting Firm.
You can search for certified Korean Public Accounting Firms at The Korean Institute of Certified Public Accountants (KICPA) official website.
The report from the external audit done by the appointed auditor must be submitted to the Financial Supervisory Service.
Failure to report to the authority will lead to penalties for the company.
Payroll and Employment Tax (Mandatory for a company with Employees)
Every company that hires employees must withhold and pay monthly income taxes to the district tax office.
To determine the employee’s overall tax liability in South Korea, the employer should also file a year-end tax settlement by the end of January of the following year or the month the employee retires.
An employer must also contribute to the Social Security Contributions mandated by the government.
The Social Security Contributions are mainly:
- National Pension (NP)
- National Health Insurance (NHI),
- Worker’s Compensation Insurance (WCI)
- Employment Insurance (EI)
Each type of social security contribution has different rates and requirements depending on the employee’s nationality.
ACCOUNTING SERVICES IN SOUTH KOREA
Accounting and bookkeeping are essential functions in any business and are particularly important in South Korea, where strict financial reporting standards and tax laws apply. These functions involve systematically recording, classifying, and analyzing financial transactions to provide accurate and up-to-date information on a company’s financial position, performance, and cash flow.
In South Korea, accounting and bookkeeping are typically performed by trained professionals, such as certified public accountants (CPAs) or accounting firms. These professionals are responsible for maintaining accurate and complete financial records, preparing financial statements, and ensuring compliance with local regulations.
One of the key responsibilities of accounting and bookkeeping professionals in South Korea is to maintain accurate and complete financial records. This involves tracking all financial transactions, including income, expenses, assets, and liabilities, and properly recording them in the company’s books.
In South Korea, financial records must be kept by generally accepted accounting principles (GAAP), which provide guidelines for the proper recognition and measurement of financial transactions. Another important aspect of accounting and bookkeeping in South Korea is the preparation of financial statements.
Financial statements are formal reports that provide information on a company’s financial position, performance, and cash flow. In South Korea, financial statements must be prepared by GAAP and must be audited by a CPA unless exempted. The three primary financial statements that are required in South Korea are the balance sheet, income statement, and cash flow statement.
In addition to maintaining financial records and preparing financial statements, accounting and bookkeeping professionals in South Korea also have a role in tax compliance. This includes calculating and paying corporate taxes and preparing and filing tax returns.
Overall, accounting and bookkeeping are critical in South Korea, as they provide accurate and up-to-date information on a company’s financial position and performance and help ensure compliance with local regulations. By relying on the expertise of trained professionals, businesses in South Korea can ensure that their financial records are accurate and complete and can make informed decisions about their operations.
Relin Consultants is a provider of accounting services and book-keeping services in Asia Pacific.
What is a Yuhan Hoesa?
A Yuhan Hoesa is also referred to as a limited company. The structure was introduced in 2012 with the amendments made to the Korean Commercial Code(“Amended KCC”). The objective was mainly to attract foreign investors by offering more flexibility in operation, management, and governance structures. Yuhan Hoesa does not have a minimum capital requirement and there is no restriction on the total number of shareholders.
Do South Korean companies have annual reports?
Yes, all South Korean companies must prepare annual reports. Certain companies are exempted from preparing audited annual reports. Irrespective, all companies must prepare annual reports.
What is the tax year in South Korea?
The tax year in South Korea is the calendar year. 1st January to 31st December.
Are annual reports mandatory in South Korea?
Yes, it is mandatory to either prepare an audited or unaudited annual report in South Korea.
What happens if you don't file an annual report in South Korea?
In South Korea, failure to file an annual report can result in various consequences, including fines, penalties, and potential legal action. The consequences will depend on the specific requirements and circumstances of the company.
One potential consequence of failing to file an annual report in South Korea is the imposition of fines or penalties. In South Korea, companies that fail to file required reports or pay required fees may be subject to fines or other penalties, which can be substantial. The relevant government agency or regulatory body typically imposes these fines and penalties.
Another potential consequence of failing to file an annual report in South Korea is the suspension or revocation of the company’s legal status. In some cases, if a company fails to meet its annual reporting requirements, the government may suspend or revoke the company’s legal status, which can have serious consequences for the company’s operations.
Finally, failing to file an annual report in South Korea can also result in legal action, including the possibility of criminal charges being filed against the company or its directors. In cases where the failure to file an annual report is deemed to be intentional or fraudulent, the company and its directors may be held liable under the law.
Overall, it is important for companies in South Korea to be aware of their annual reporting requirements and to ensure that they comply with them. Failure to do so can result in serious consequences for the company and its directors.