Advance Ruling System with National Tax Service (“NTS”)

“Advance Rulings will be administrated and issued in Korean only”. However We, Selim, provide this service on behalf of clients with our professional group and past experiences. The major principle, NTS's purpose and process are as followings;

1.    Purpose and background of Advance Ruling with NTS “

NTS introduced the “Advance Ruling Service” to provide a clear and expedited ruling with regard to a “ specific transaction” of a taxpayer's business, provided that a ruling is requested by the legal due date for tax filing with the disclosure of taxpayer's identity and the specific facts and circumstance of transaction in question.

l  With the availability of the NTS's “Advance Ruling Service”, foreign business enterprises unfamiliar with the Korean Tax Law as well as domestic business enterprises can obtain a clear and expedited tax ruling from NTS to resolve related tax issues in advance.

l  It is expected that the NTS's “Advance Ruling System” will help eliminate tax uncertainties faced by business enterprises, heighten predictability of tax matters and encourage active business investments, and thereby, contribute enormously to fostering a business friendly taxation environment for enterprises conducting business in Korea.

2.    Information on the application Process and procedures

Application Requirements

l  Only business taxpayers (including those who may assume a tax responsibility from future business transaction) as defined in Korea's VAT Law, Income Tax Law and Corporation Tax Law are eligible to apply for an Advance Ruling.

*As an exception, non-residents or foreign corporations with a Permanent Establishment in Korea are also eligible for application.

l  Advance Ruling will be provided only to taxpayers who request a ruling matters on Tax matters with regard to a specific transaction of their business, where such transaction could be objectively verified with relevant documents that it has actually occurred or will occur in the near future.

Applications in relations to any of following matter, however, are excluded from consideration for an Advance Ruling. (Not eligible for application)

ü  Ruling request which involve application of the Tax Law that is not relevant to the Taxpayer.

ü  Ruling requests which require judgment of facts and circumstances involved.

ü  Ruling requests regarding assumed facts.

ü  Ruling requests which involve transactions that have violated laws or have concerns for violation.

ü  Ruling requests which have been submitted after the application deadline.

ü  Ruling requests which appear to have been applied for means of tax evasion or tax avoidance.  

Application Submission

l  An Advance Ruling request must be filed by the taxpayer in the required “Advance Ruling application Form” to the Commissioner of the NTS. Alternatively, the taxpayer may authorize a tax representative (i.e. CTA, CPA, lawyer, etc.) to file an Advance Ruling on the taxpayer's behalf.

l  At the time of an Advance Ruling request submission, the taxpayer must submit relevant materials necessary to verify facts and circumstances involved and examine appropriateness of such request. In case when the Commissioner of the NTS determines that additional materials are necessary, and subsequently requests for such materials, the taxpayer must promptly submit the requested materials.

      Application time limit

               An Advance Ruling request application must be submitted by the relevant legal filing due date as specified in the relevant Tax Law.

3.    Benefits of the Advance Ruling Service

l  Provided that the taxpayer's treatment of the actual transaction is consistent with the results of the ruling obtained, and such transaction is in accordance with the facts and circumstances represented in the ruling request, the tax authority will protect the taxpayer's interest in accordance with the bona fide principle.

l  Prior to the introduction of the NTS's Advance Ruling Service, the NTS faced certain limitation in providing a clear and accurate response in the form of a general tax ruling, due to ruling requests being made on an anonymous basis or with omission or taxpayers in request of a ruling.

Moreover, general rulings that have been issued could not assure taxpayers from exposure to tax liabilities in accordance with the bona fide principle due to discrepancies identified between facts or circumstances represented in ruling requests with those of the actual transactions.

l  However. With the introduction of the Advance Ruling Service, taxpayers who obtain an Advance Ruling will be protected from the potential tax issues with the NTS and mitigated tax uncertainties with regard to the specific transaction covered in their ruling requests, provided that taxpayers comply with their ruling results.

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