selim

Stay ahead of changes impacting
the financial accounting
and reporting of income taxes.

Corporate Tax

home Local Compliance InformationCorporate Tax
Subject
Sales Incentives
 Print
Writer
Manager
Date
2014-12-31
Hits
1,191
File

How to judge “Sales Incentives” both S & A expenses or
Entertainment expenses under the Korean Tax Code

1. Disputing points

If company is paid the sales incentives or other types of considerations to customer, is it possible to classify the sales related expenses or not ?

2. Conclusion

(1) In case of paying to all of the sales customers with the prior agreement.

If company paid the sales incentives to all of the customers, it can be classified

the sales related expenses and treated as the sales & administration expenses.

(2) In case of paying to the specific clients.

If paid to the specific client, the expenses will be classified the entertainment expenses and must be calculated the limitation of the expenses.

3. Case Study

Seoi 46012-11293 ( 2002.07.03. )Title : If paid the sales incentive, whether the expenses can be classified the sales related expenses or not?

Summary of the case

When the company sell their products, the consideration which is provided with their clients will be in excess of the generally accepted scope of the normal business course or provided the only specific clients, it'll be applicable of the entertainment expenses under thew Korean Corporate Tax Act.

[ Question from Taxpayers ]

If the company will pay the sales incentive with the differential rates, in this case it's possible to apply the sales related expenses under the Corporate Income Tax.

(Case1) Of 50 clients, only 4 clients will be paid the sales incentives regardless of

turnover and Quantity of sales

(Case 2) Of 50 clients, sales incentive will apply only 2 clients and 10 products of

total 30 products.

(Case 3) Of 50 clients, only 4 clients will apply the sales incentive and each

different incentive scheme.

[ Answer ] 

Bubin4602-3435.1999.9.4

When company is sold the products and etc, if company will provide the considerations ( Money, gift card, presents and etc ) and it'll be in excess of a sound social norm and business practices compared to the normal business trade or provide only specific customers, the expenses will be applied to the entertainment expenses according to the Corporate Income Tax Act Article 25-4.

Prev The Additional Tax for the inadequate invoice by tax law
Next The Concept of Entertainment Expenses in Korea
TOP