NTS Imposes 45 Billion Won on the Staffs of Foreign Subsidies for Tax Evasion

National Tax Service (NTS) imposed 45 billion won on more than 1,000 executives and staffs who are working for the Korea subsidies of foreign companies and have received stock option form the headquarters.

On 21st, Lee Jin-hak, a supervisor of International Tax of NTS spoke, “NTS is performing in-dept investigation on 2,100 cases of stock option and on the persons related.” And added “ by this investigation, NTS estimates to impose more than 100 billion won in this year.”

NTS received information through e-mail from US and other foreign tax authorities on the executives and staffs who are working for the subsidies of foreign companies and exercised stock option this year for the first time. NTS imposes penalty and tax on the persons who haven’t reported tax or have reduced the amount.

Lee, Supervisor, spoke “ in many case, the stock option agreement is contracted with the foreign headquarters directly, so the subsidies in Korea don’t know about it. However, as foreign tax authorities accepting NTS’s request, the amount of their incomes becomes known accurately.

NTS expects that it will receive tax information continuously from foreign tax authorities by cooperation and supervise their stock option.

On the other side, 182 executives and staffs of the subsidies of foreign companies sue to Seoul Administrative Court collectively with an objection that it is unjust to impose earned income tax rather than other tax on the income earned by practicing stock option that was bestowed from a foreign company not having direct employment relationship.

However, National Judgment analyzed on the similar case in last February with the pronouncement “mother and subsidiary has a subordinate relationship, so the stock option bestowed from the mother company to the staffs of the subsidiary must be understood as employment relationship between the staffs and the mother company.”

Jeong-Hun Park sunshade@donga.com