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.

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.