Interim Prepayment of Corporate Tax

Date: June 19, 2020

I. Introduction

Where each business year of a domestic corporation exceeds six months the domestic corporation shall determine the period of six months from the beginning of the relevant business year as an interim prepayment period and shall pay the amount computed by multiplying six by the amount computed by dividing the amount of tax determined as corporate tax for the business year immediately preceding the relevant business year, less the following amounts, by the number of months in the immediately preceding business year.

II. Businesses Subject to Interim Prepayment of CorporateTax

All the businesses excepting the following arethe subject to interim payment of corporate tax;

☞ Newly established corporationsin the pertinent year

   (New corporations created by merger or division excl.)

☞ Corporations without business income due to reasons such as business closure during the period of interim payment of corporate tax

☞ Liquidated corporations

☞ Corporations with business period less than 6 months

III. Computation of Interim Corporate Tax

If a domestic liable to pay interim tax has no calculated amount of tax finally assessed as corporate tax for the immediately preceding business year, if the amount of corporatet ax for the immediately preceding business year has not been finally assessed by the end of the relevant interim prepayment period, or if the relevant business year is the first business year after the relevant corporation is newly incorporated through a division or its counter-party corporation to adivision is merged through a division, such corporation shall compute interim tax and pay it.

① The amount of corporate tax reductions or exemptions granted in the business year immediately preceding the relevant business year

② The amount of withholding tax paid as corporate tax in the business year immediately preceding the relevant business year;

③ The amount of occasionally imposed corporate tax paid in the business year immediately preceding the relevant business year.

Where deemed necessary, the head of the tax office having jurisdiction over the place of tax payment may determine the interim tax for the relevant business year, not exceeding the amount of corporate tax for the immediately preceding business year of the relevant corporation.

Where the amount of tax payable by a domestic corporation exceeds one thousand won, it may be paid in installments.

IV. Related Laws and Regulations

Article 63(Interim Prepayment)

(1)  Where each business year of a domestic corporation (excluding an educational foundation that operates a private school defined by Article 3 of the Higher Education Act, an industry-academia cooperation group under the Industrial Education Enhancement andIndustry-Academia-Research Cooperation Promotion Act, the Seoul NationalUniversity established under the Act on Establishing and Administrating Seoul National University, and the Incheon National University established under theAct on Establishing and Administering Incheon National University) exceeds six months (excluding the first business year after the incorporation of a corporation, if newly incorporated without a merger or division), the domestic corporation shall determine the period of six months from the beginning of the relevant business year as an interim prepayment period and shall pay the amount computed by multiplying six by the amount computed by dividing the amount of tax (including penalty tax, but excluding corporate tax on capital gains on the transfer of land, etc. under Article 55-2, corporate tax on unappropriated earnings under Article 56, and corporate tax computed by applying special tax provisions for promoting investment and collaborative cooperation under Article100-32 of the Restriction of Special Taxation Act) determined as corporate tax for the business year immediately preceding the relevant business year, less the following amounts, by the number of months in the immediately preceding business year (hereinafter referred to as "interim tax") within two months after the expiration of the interim prepayment period to the tax office having jurisdiction over the place of tax payment, the Bank of Korea (including any of its agents), or a post office (hereinafter referred to as "taxoffice, etc., having jurisdiction over the place of tax payment"), as prescribed by Presidential Decree: Provided, That, if a domestic corporation (excluding corporations referred to in Article 51-2 (1)) liable to pay interimtax has no calculated amount of tax finally assessed as corporate tax for the immediately preceding business year, if the amount of corporate tax for the immediately preceding business year has not been finally assessed by the end ofthe relevant interim prepayment period, or if the relevant business year is the first business year after the relevant corporation is newly incorporated through a division or its counter-party corporation to a division is merged through a division, such corporation shall compute interim tax and pay it pursuant to paragraph (5)

1.  The amount of corporate tax reductions or exemptions granted in the business year immediately preceding the relevant business year (excluding the amount deducted from income);

2.  The amount of withholding tax paid ascorporate tax in the business year immediately preceding the relevant business year;

3.  The amount of occasionally imposed corporate tax paid in the business year immediately preceding the relevant business year.

(2)  Where a corporation incorporated after a merger pays interim tax computed under paragraph (1) for the first business year upon its incorporation, the business year immediately preceding the business year which includes the registration date of the merger of the merged corporation shall be construed as the immediately preceding business yearreferred to in paragraph (1).

(3)  Where a corporation surviving a merger pays interim tax computed under paragraph (1) for the first business year after the merger, both the immediately preceding business year of the surviving corporation and the business year immediately preceding the business year which includes the registration date of the merger of the merged corporation shall be construed as the immediately preceding business year referred to in paragraph(1).

(4)  Where a corporation which becomes ineligible for the consolidated tax return system under Articles 76-9, 76-10 and 76-12 pays interim tax computed under paragraph (1) in the first business year inwhich it becomes ineligible for the consolidated tax return system, the computed tax for the immediately preceding consolidated business year by consolidated corporation as prescribed in Article 76-15 (4) shall be construedas the computed amount of tax which has been determined as corporate tax for the immediately preceding business year referred to in paragraph (1).

(5)  A domestic corporation liable to pay interim tax under paragraph (1) may use the relevant interim prepayment period as one business year, and use the amount computed by deducting the following amounts from the amount of corporate tax calculated by applying the tax rates referredto in Article 55 to the tax base calculated under Articles 13 through 18, 18-2,18-3, 19, 19-2, 20 through 30, 33 through 38, 40 through 42, 42-2, 43, 44,44-2, 44-3, 45, 46, 46-2 through 46-5, 47, 47-2, 50, 51, 51-2, 52, 53, 53-2,53-3 and 54, as the interim tax and pay it at the tax office, etc., having jurisdiction over the place of tax payment, notwithstanding paragraph (1). Insuch cases, the same shall not apply where the deadline for interim prepaymentunder paragraph (1) has lapsed, except in cases falling under the proviso toparagraph (1):

1.  The amount of tax reductions or exemptions corresponding to the relevant interim prepayment period (excluding the amount deducted from income);

2.  The amount of withholding tax paid as corporate tax during the relevant interim prepayment period;

3.  The amount of occasionally imposed corporatetax during the relevant interim prepayment period.

(6)  Where deemed necessary, the head of the taxoffice having jurisdiction over the place of tax payment may determine theinterim tax for the relevant business year, not exceeding the amount ofcorporate tax for the immediately preceding business year of the relevantcorporation (in cases falling under paragraph (5), the amount of the relevantinterim tax divided by six and multiplied by the number of months in therelevant business year), as prescribed by Presidential Decree, notwithstandingparagraphs (1) through (5).

(7)  Where the amount of tax payable by a domesticcorporation pursuant to paragraphs (1) and (5) exceeds one thousand won, it maybe paid in installments by applying mutatis mutandis Article 64 (2).

 

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