Korean Tax Audits: Fine for Failure to Comply with Request for Documents in Tax Audits

Korea implemented a system to fine taxpayers for the failure to comply with a request for documents during an audit at the Korean National Tax Service. With the facial purpose of enhancing the efficiency of the Korean National Tax Service audit procedure, the amendment establishes a fine for failure to comply with requests for documents on or after September 15, 2025.

The Korean tax audit process typically begins with the Korean National Tax Service (“NTS”) selecting a business or individual for an audit based on, usually, discrepancies in financial reports, unusual transactions, policy priorities, or based on a random selection. Once a Korean audit commences, the NTS, normally, requests detailed financial records and documents to assess the accuracy of tax filings. This can include reviewing income statements, tax returns, contracts, logs, POS data, and other supporting documentation. During the audit procedure, in some cases, the taxpayer is asked to provide explanations of documents and transactions. If discrepancies are found, penalties, additional taxes, or interest charges may be imposed. In some cases, tax issues can even lead to jail sentences.

The following revision to Korean tax law gives more power to the NTS to mandate the production of documents.

Korean National Tax Service Fine for Non-Compliance with Document Requests

1. The National Tax Service of Korea must provide, at least, 30-days for the taxpayer to comply with the order to produce.
2. The fine amount for non-compliance with the document production request is KRW 5 million per day if the amount is “difficult” to calculate and if not difficult to calculate, 0.3% of the average daily income per day from the date of non-compliance with the order to produce documents.
3. A reduction of the fine by 50% is possible based on the efforts and reasons for non-compliance.
4. The fine is, only, applicable if the taxpayer does not provide a justifiable reason for non-compliance.

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