SOUTH KOREA: NTS Launches Investigation into Offshore Tax Evasion Allegations.

As published on businesskorea.co.kr, Thursday 1 June, 2023.

The National Tax Service (NTS) has launched an intense tax investigation into 52 potential offshore tax evaders for leaking national wealth.

The National Tax Service said on May 31 that it has launched a tax investigation into alleged offshore tax evaders who might have have evaded taxes by taking property out of the country through unfair international transactions or passing it on to their children by employing expedients.

There are three main types of offshore tax evasion allegations disclosed this time. First, exporters (19 individuals) who allegedly manipulated export transactions using local entities, private equity funds (12 individuals) that may have improperly diverted investment income overseas, wealthy individuals (12 individuals) who could have improperly transferred wealth to their children, and multinational corporations (21 firms) that might have made money by disguising their business structures in Korea and sending the money abroad.

The NTS also found that foreign multinational corporations disguised their business structures in Korea. NTS investigators believe that these companies either hid their operations or disguised their transactions to evade taxes in Korea and sent funds out of the country.

Global digital business companies have previously been caught using telecommunications networks in Korea to generate revenue from consumers, but hiding their business locations and siphoning income out of the country. Prior to this, the NTS conducted a tax probe against Netflix, a leading U.S. OTT service provider, in 2021 and collected 80 billion won (US$61 million) in taxes for alleged tax evasion. Netflix appealed to the Tax Tribunal of Korea and the case is currently underway.

Meanwhile, the NTS said it collected a total of 4.0149 trillion won (US$3.0454 billion) in taxes by looking into offshore tax evasion over the past three years. The average amount of tax collected per year also exceeded 1.3 trillion won (US$986 million). In particular, the amount of tax levied per offshore tax evasion investigation was 6.81 billion won (US$5.17 million) per case in 2021. This is seven times more than the average fine of 980 million won (US$743,043) per general tax investigation.

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