New

▣ [Exclusion] This deduction rule will not apply to company car directly used in the business to generate profits in the industries including transportation, car sales, renting of cars(rent company), leasing of car and facilities (lease company) and driving schools.

▣ [Types of Expenses] The types of car related expenses are expenses incurred for the acquisition and maintenance of company cars including depreciation expenses, rental or lease fees, fuel expenses, repair expenses, car insurance, property tax, interest expenses on financial leases.

▣ [Calculation] The calculation method of car expenses for business purpose is as follows.

o A company must purchase (or renew) an exclusive auto insurance* : If not, the entire expenses relating to the company car will not be allowed

* The exclusive auto insurance should limit the scope of coverage drivers to executives and employees of the company (or executives and employees of a subcontractor if they drive cars for the business of the client company) and also should cover the entire period of the fiscal year**.

** For the fiscal year 2016, it will be applied for the ‘exclusive auto insurance policy for executives and employees' purchased (or renewed) effective April 1, 2016 and after.

o When the ‘exclusive auto insurance for executives and employees' is enrolled and the ‘car operation record'* is prepared, the deductible expense is as follows.

Total car expenses of company car x business use ratio **

* The details for car operation record form, etc. will be specified by the tax authority (head of National Tax Service).

** Business use ratio per operation record for each car:  

Mileage for business ÷ Total mileage  

o When the ‘exclusive auto insurance for executives and employees' is enrolled but  the ‘car operation record'* is not prepared, the deductible expenses is as follows.

MIN [ Expense of company car for Business, KRW 10 million ]

* For individual, the ‘exclusive auto insurance for executives and employees' is not necessarily required

▣ [Car Operation Record] The car operation record should be maintained for each car and readily provided to the tax authorities upon the request without any delay.

▣ [Depreciation] The calculation method of depreciation on company car (or equivalent depreciation on leased company cars) with ceiling amount of KRW 8 million a year is as below.

Depreciation amount (the equivalent*) x business use ratio **

* The equivalent depreciation in the car rental expense:  the amount of rental excluding expenses for car insurance, car tax, etc.  And the further equivalent depreciation is to be specified by the Presidential Rules 

** Unless the car operation record is maintained, the business use ratio will be as follows.    

  - 100% if the company car related expenses is KRW 10 million or less

- KRW 10 million divided by the company car related expense if the company car related expense exceeds KRW 10 million.

▣ [Expenses of the Carried Forward] The method of the carried forward for the excess amount of KRW 8 million on the depreciation (the equivalent) and disposal loss is as follows.

o The depreciation expense over the limit can be carried forward to subsequent years and deducted when the depreciation expense multiplied by a business use ratio is less than KRW 8 million.

o When a loss is incurred in a year from the disposal of company cars or the expiration of a lease period, the amount in excess of the limit can be carried forward to subsequent years and deducted up to KRW 8 million

- any remaining amount will be entirely deducted in the year that includes the 10^th anniversary of the disposal date or expiration date of car lease contract.

Current

New

▣ The amount of outflow from determining or correcting the tax base of corporate tax according to the tax law, the disposal of income will be reverted to the person who is beneficiary of the income (when the beneficiary is unknown, it will be reverted to bonus to a Representative of the company)

o Shareholder: Dividend

o ExecutiveㆍEmployee: Bonus, etc.

▣ The disposal of income includes the non-deductible expense amount of private use of business purpose company car

Current

New

▣ Company has option to select on the Depreciation method and Period of duration

▣ Depreciation criteria of company car is revised to mandatory conditions

o Depreciation Method:  Straight line method or Fixed rate method

o Depreciation Method:  Straight line method

o Period of duration: 4~ 6 years (25 years±25%)