Tax probes to be made on unaccounted annual remittances of over US$50,000

Starting next year, when foreign exchange transactions will be liberalized, the National Tax Service (NTS) will conduct tax probes on unaccounted remittances of over US$50,000 annually. The criteria for reporting remittances to the NTS were also bolstered to US$10,000 from US$20,000. Hence, parents with children studying abroad will be investigated by the NTS on the source of the funds being sent overseas.

The NTS held a national district chief conference Friday at which time he revealed the confirmed foreign exchange liberalization plan. The meeting was held amid concerns that there is a high possibility of untaxed funds leaving the country through emigration, early studies abroad and extravagant spending by the wealthy once the partial assurance of deposits, comprehensive financial income tax and foreign exchange liberalization are implemented.

Firstly, the NTS will set up a system to comprehensively analyze overseas remittances of US$10,000 or above, as well as foreign deposits and balance of overseas trust accounts. Thereafter, stringent steps aimed at preventing tax evasion through foreign exchange transactions will be made. In addition, for unaccounted overseas remittances, services payments and other foreign exchange reports related to directly to tax reports, direct and indirect investigations for possible tax evasion will be conducted on transactions exceeding a certain standard. Controls on fund transfers to tax havens, which are on the increase, will be bolstered to guard against tax evasion and foreign exchange outflow.

The NTS has collected more than 6.5 million foreign exchange transaction reports since April 1999 and more than 20,000 reports from foreign governments on interest and income generated outside of Korea. In 1999, the NTS levied 872 billion won in penalty taxes in 312 cases and 544 billion won in 153 cases as of September this year.