Additional payment involved in correction of import declarations

 

Under Article 38, 38-2, and 38-3 of the CUSTOMS ACT (관세법) , importers can apply for the correction of an import declaration at any time – before or after paying duties.

 

CUSTOMS ACT   Article 38 (Payment of Customs Duties by Self-Assessment) (1) Each person, who intends to import goods (excluding any goods on which customs duties are assessed and collected by the head of a customs office in accordance with Article 39), shall file a declaration to pay customs duties (hereinafter referred to as "declaration for duty payment") with the head of a customs office when he or she submits an import declaration. (2) The head of a customs office in receipt of a declaration for duty payment shall review entries in an import declaration and other matters to be verified pursuant to this Act, but shall review the details of declaration for duty payment such as amount of duty by self-assessment (hereinafter referred to as “amount of duty review”) after receiving an import declaration: Provided, That if it is difficult to secure a duty claim on the amount of duty by self-assessment, or if it is deemed inappropriate to review the amount of duty after receiving an import declaration on the goods prescribed by Ordinance of the Ministry of Economy and Finance, the amount of duty shall be reviewed before the acceptance of an import declaration. <Amended on Dec. 31, 2023> (3) Where a person satisfying the requirements prescribed by the Commissioner of the Korea Customs Service in consideration of the duty payment records, the scale of imports, etc. requests for a review, the head of a customs office may permit him or her to autonomously review the amount of duty payment declared (hereinafter referred to as "self-review"), notwithstanding the main clause of paragraph (2). In such cases, the relevant person liable to pay duties shall submit the result of the self-review to the head of a customs office. (4) Where a person liable to pay duties has found that the amount of duty payment declared is excessive or deficient before paying it, he or she may correct the amount of duty payment declared. In such cases, the due date for payment shall be the original due date for payment (referring to the due date for payment as referred to in Article 9). (5) Matters necessary for the methods, procedures, etc. for declarations for duty payment, self-reviews, and correction of the amount of duty referred to in paragraph (4) shall be prescribed by Presidential Decree. (6) Article 12 (1) 3 and Article 12 (2) and (3) of the National Tax Collection Act shall apply mutatis mutandis to the payment of customs duties. <Amended on Dec. 22, 2020>   Article 38-2 (Revision) (1) Where a person liable to pay duties has found that there exists some deficiency in the amount of payment of customs duties by self-assessment, or any errors in the customs values forming a basis for duty computation, the tariff classification, etc., he or she may apply for a revision of the relevant amount of duty to the head of a customs office, as prescribed by Presidential Decree, within six months from the date on which the amount of payment of customs duties by self-assessment has been paid (hereinafter referred to as "revision period"). <Amended on Dec. 31, 2011> (2) Where the head of a customs office has found that there exists some deficiency in the amount of payment of customs duties self-assessment, or any errors in the customs values forming a basis for duty computation, the tariff classification, etc., he or she may give notice to a person liable to pay duties to enable him or her to apply for a revision during the relevant revision period, as prescribed by Presidential Decree. In such cases, the person liable to pay duties who intends to apply for a revision of the amount of duties shall file an application with the head of a customs office, as prescribed by Presidential Decree. <Amended on Dec. 31, 2011> (3) Deleted. <Dec. 31, 2011> (4) Where a person liable to pay duties has filed an application for a revision of the deficient amount of duty pursuant to paragraph (1) and the latter part of paragraph (2), he or she shall pay the relevant duty by not later than the date following the date on which the relevant application for the revision has been filed. (5) Where there still exists a deficiency in the amount of duty after revising the amount of duty in accordance with an application filed pursuant to paragraph (1) and the latter part of paragraph (2), the head of a customs office shall, notwithstanding Article 42, collect the deficient amount of duty by adding the amount computed based on the interest rate prescribed by Presidential Decree in consideration of the period from the date following the due date for payment (referring to due date for payment pursuant to Article 9) to the date on which the application for the revision has been filed, and the interest rate applied to time deposits of financial institutions: Provided, That the foregoing shall not apply in any of the following subparagraphs: <Amended on Dec. 31, 2011; Dec. 31, 2019; Dec. 21, 2021> 1. Where the goods prescribed by Presidential Decree are imported directly by the State or local governments; 2. Where a person liable to pay duties who has underpaid the amount of customs duties paid by self-assessment, has a good cause. (6) Notwithstanding paragraph (5), where a duty payer files an application under paragraph (1) and the latter part of paragraph (2) after underreporting customs duties by improper acts pursuant to Article 42 (2), the head of a customs office shall collect additional duties under Article 42 (2). <Newly Inserted on Dec. 21, 2021; Dec. 31, 2022>   Article 38-3 (Amendment and Rectification) (1) Where there exists any deficiency in the amount of payment of customs duties by self-assessment, a person liable to pay duties may file an amended declaration (limited to the day a period referred to in Article 21 (1) expires from the day the relevant revision period expires), as prescribed by Presidential Decree. In such cases, a person liable to pay duties shall pay the relevant customs duties by not later than the date following the date on which the amended declaration has been filed. <Amended on Jan. 1, 2013> (2) Where a person liable to pay duties becomes aware that he or she has overpaid the amount of payment of customs duties by self-assessment, the amount of payment of customs duties which is applied for revision under Article 38-2 (1) and the amount of payment of customs duties which is applied for an amended declaration under paragraph (1) of this Article, he or she may file an application for rectification of the amount of payment of customs duties by self-assessment with the head of a customs office, within five years from the date on which the first declaration for duty payment has been filed, as prescribed by Presidential Decree. <Amended on Dec. 31, 2011; Aug. 13, 2013; Dec. 23, 2014; Dec. 20, 2016; Dec. 31, 2022> (3) Where a person liable to pay duties becomes aware that he or she has overpaid the amount of duty for any reason prescribed by Presidential Decree, such as where any transaction or act, etc., which is the basis of calculating the duty base and the amount of duty in the first declaration or rectification becomes final and conclusive as different by a ruling (including a settlement or other acts as effective as the ruling) of the relevant lawsuit, he or she may file an application for rectification of the amount of duty with the head of a customs office, within two months from the date on which he or she has become aware of the occurrence of such reason, as prescribed by Presidential Decree, notwithstanding the period prescribed in paragraph (2). <Newly Inserted on Dec. 31, 2011; Dec. 20, 2016> (4) Within two months from the receipt of an application for rectification under paragraph (2) or (3), the head of a customs office shall rectify the amount of duty or inform the applicant of the purport that there is no reason to rectify it. <Newly Inserted on Dec. 20, 2016> (5) Where a person who has filed an application for rectification under paragraph (2) or (3) fails to receive any notification within two months as prescribed in paragraph (4), he or she may file an application for objection, examination, or adjudication under Chapter V or a request for examination under the Board of Audit and Inspection Act. <Newly Inserted on Dec. 20, 2016> (6) Where the head of a customs office finds in the course of review that the amount of payment of customs duties by self-assessment, the amount of duty payment declared, or the amount of duty subject to an application for rectification under paragraphs (2) and (3), is excessive or insufficient, he or she shall rectify the said amount of duty, as prescribed by Presidential Decree. <Amended on Dec. 31, 2011; Dec. 20, 2016>

 

When an import declaration is corrected after duty payment, resulting in more duties owed to the authority, different amounts are also collected, depending on the timing of the correction.

When an import declaration is corrected during the revision period which is within 6 months after the duty payment, revision interest is also collected for the deficient taxes.

The revision interest rate is prescribed in Article 9-3 of the ENFORCEMENT RULE OF THE CUSTOMS ACT (관세법시행규칙), determined by taking into account the average interest rate on one year term deposits in any bank authorized to engage in banking business under the BANKING ACT,  with its principal office located in Seoul. The current revision interest rate is 2.9% per year, effective from March 20, 2023.

 

When an import declaration is corrected after the revision period, additional duties, as prescribed in Article 42 of the CUSTOMS ACT, and additional taxes, as prescribed in Article 47-2 through 47-4 of the FRAMEWORK ACT ON NATIONAL TAXES (국세기본법), apply.

 

CUSTOMS ACT   Article 42 (Additional Duties) (1) When the head of a customs office collects customs duties not paid by a person liable to pay duties (hereafter referred to as "amount of unpaid duties" in this Article) within a due date for payment (hereafter referred to as “statutory due date for payment" in this Article) referred to in Article 9 or collects any deficiency in the amount of duties (hereafter referred to as “deficiency in the amount of duties”) pursuant to Article 38-3 (1) or (6), he or she shall collect the aggregate of the following amounts as additional duties: <Amended on Dec. 31, 2011; Dec. 23, 2014; Dec. 20, 2016; Dec. 31, 2019; Dec. 22, 2020> 1. 10/100 of the relevant deficiency in the amount of duties; 2. The aggregate of the following amounts: (a) The amount of unpaid duties or deficiency in the amount of duties × the period from the date following the statutory due date for payment to the date of payment of payment notice (excluding the period from the date of payment notice to the date of payment referred to in the due date for payment) × interest rate prescribed by Presidential Decree in consideration of the interest rate applied to overdue loans by the financial company, etc.; (b) The amount of custom duty unpaid by the due date for payment specified in the payment notice among the amount of customs duties to be paid by the statutory due date for payment × 3/100 (limited to where the customs duties are not paid in full by the due date for payment). (2) Notwithstanding paragraph (1), where a duty payer has under-reported customs duties by an improper act (referring to an act prescribed by Presidential Decree that a duty payer violates his or her duty to file a self-assessment on the duty base for customs duties or the amount of customs duties by fully or partially concealing or disguising the fact forming the basis of the duty base or calculation of the amount of duty), the head of a customs office shall collect the aggregate of the amount equivalent to 40/100 of the deficiency in the customs duties and the amount referred to in paragraph (1) 2 as additional duties. <Amended on Dec. 31, 2019; Dec. 31, 2022> (3) In assessing and collecting customs duties on goods specified in subparagraph 11 of Article 16, the head of a customs office shall collect the aggregate of the following amounts as additional duties: Provided, That this shall not apply where an additional duty is collected under Article 241 (5) or where the head of a customs office deems that such goods are imported without an import declaration on a good cause, such as a natural disaster: <Newly Inserted on Dec. 15, 2015; Dec. 31, 2019; Dec. 22, 2020> 1. 20/100 of the relevant amount of customs duties (40/100, if the duty payer has been punished for committing an offense provided for in Article 269 or received a notification disposition); 2. The aggregate of the following amounts: (a) The relevant amount of customs duties x the period from the date of import to the date of payment (excluding the period from the date of payment notice to the due date for payment specified in the payment notice) x the interest rate prescribed by Presidential Decree in consideration of the interest rates, etc. applied to overdue loans by financial companies, etc.; (b) 3/100 x the relevant amount of customs duties unpaid by a due date for payment specified in the payment notice (limited to where a person fails to pay customs duties in full by the due date for payment specified in the payment notice). (4) In applying paragraphs (1) through (3), where the period from the day following the due date for payment specified in the payment notice of to the payment date exceeds five years, such period shall be five years. <Newly Inserted on Dec. 31, 2019; Dec. 22, 2020> (5) Where the amount of customs duties in arrears (including an internal tax collected by the head of a customs office, if any) is less than 1.5 million won, the additional duties prescribed in paragraph (1) 2 (a) or paragraph (3) 2 (a) shall not apply. <Newly Inserted on Dec. 31, 2019; Dec. 21, 2021> (6) Where additional duties for payment delayed after the due date for payment specified in its payment notice is collected out of the additional duties prescribed by paragraph (1) 2 or (3) 2 (hereinafter referred to as the "additional duties for delayed payment"), a payment notice need not be issued. <Newly Inserted on Dec. 31, 2019; Dec. 22, 2020> (7) Articles 21 (2) 11 (b) and (c), and 22 (4) 5 of the Framework Act on National Taxes shall apply mutatis mutandis to the creation and determination of tax liability for additional duties for delayed payment (limited to additional duties for payment delayed after the due date for payment specified in its payment notice). In such cases, "additional duty for delayed payment” under 47-4 (1) 1 and 2 and "statutory due date for payment" under Article 21 (2) 11 (b) of the Framework Act on National Taxes shall be respectively deemed “additional duty” and "statutory due date for payment specified in its payment notice under paragraph (1) 2 (a) and (3) 2 (a). Additional duties for delayed payment under paragraph (3) 2 (c) Article 47-4 (1) 3 shall be deemed“ prescribed by Article 47-4 (1) 1 and 2 in and 2 and due date for payment", and in Article 47-4 (1) 3) The additional tax for payment delay under Article 4 (1) shall be deemed additional duties under paragraph (1) 2 (b) and paragraph (3) 2 (b).” <Newly Inserted on Dec. 31, 2019; Dec. 22, 2020>

 

FRAMEWORK ACT ON NATIONAL TAXES   Article 47-2 (Additional Taxes for Non-Filing) (1) Where a taxpayer fails to file a return (including preliminary returns and interim returns, but excluding returns of persons who are not financial and insurance business entities from among returns prescribed in Article 9 of the Education Tax Act and excluding returns under the Act on Special Rural Development Tax and the Comprehensive Real Estate Holding Tax Act) on the tax base of national tax pursuant to the tax-related statutes within the statutory due date of return, amounts obtained by multiplying an amount he or she should pay upon filing the tax return by the following rates (where he or she should pay an additional tax under this Act and the tax-related statutes and an additional amount equivalent to the interest he or she should pay by adding thereto pursuant to the tax-related statutes, such amounts shall be excluded; hereinafter referred to as "tax amount to be paid due to non-filing") shall be additional taxes: <Amended on Dec. 20, 2016; Dec. 31, 2019> 1. Where the taxpayer fails to file a return on tax base under the tax-related statutes by the statutory due date of return due to an unlawful act: 40/100 (in cases of an unlawful act committed in cross-border trades, 60/100); 2. Cases except for those prescribed in subparagraph 1: 20/100. (2) Notwithstanding paragraph (1), in any of the following cases, an amount specified in the relevant subparagraph shall be an additional tax: <Amended on Dec. 20, 2016; Dec. 31, 2019> 1. Where a person failing to file a return under Articles 70 and 124 of the Income Tax Act or Articles 60, 76-17 and 97 of the Corporate Tax Act is a person subject to double-entry bookkeeping under Article 160 (3) of the Income Tax Act (hereinafter referred to as "person subject to double-entry bookkeeping) or a corporation: An amount specified in the relevant item as follows or an amount specified in the relevant subparagraph of paragraph (1), whichever is the greater amount: (a) In cases falling under paragraph (1) 1: An amount obtained by multiplying the amount of revenue classified as follows (hereafter in this Article, referred to as "amount of revenue") by 14/10,000: (i) Individual: The amount of the individual's gross revenue out of the business income calculated in accordance with Articles 24 through 26 and 122 of the Income Tax Act; (ii) Corporation: The amount of the corporation's revenue which shall be entered on the tax base return and corporate tax amount return in accordance with Articles 60, 76-17, and 97 of the Corporate Tax Act; (b) In cases of paragraph (1) 2: An amount obtained by multiplying the amount of revenue by 7/10,000; 2. Where a business entity prescribed in the Value-Added Tax Act failing to file a return under Articles 48 (1), 49 (1) and 67 of the same Act has a tax base to which a zero rate applies under the same Act or the Restriction of Special Taxation Act (hereinafter referred to as "zero-rate tax base"): An amount obtained by adding an amount equivalent to 5/1,000 of the zero-rate tax base to an amount specified in the relevant subparagraph of paragraph (1). (3) Notwithstanding paragraphs (1) and (2), in any of the following cases, paragraphs (1) and (2) shall not apply: <Amended on Jun. 7, 2013; Dec. 23, 2014> 1. Deleted; <Dec. 22, 2020> 2. Where a taxpayer is exempted from the obligation to pay taxes pursuant to Article 69 of the Value-Added Tax Act. (4) In applying paragraph (1) or (2), additional tax under paragraph (1) or (2) shall not apply to the portion equivalent to the bad-debt tax amount under the proviso of Article 45 (3) of the Value-Added Tax Act. <Amended on Jun. 7, 2013> (5) When applying paragraph (1) or (2), an additional tax under paragraph (1) or (2) in relation to a final return shall not apply to a portion on which an additional tax is imposed pursuant to this Article or Article 47-3 in relation to a preliminary return and interim return. <Amended on Dec. 23, 2014> (6) When applying paragraph (1) or (2), Article 81-5 or 115 of the Income Tax Act or Article 75-3 of the Corporate Tax Act applies simultaneously, only an additional tax the amount of which is the largest among them shall apply, and where the amount of additional tax is equal to one another, only an additional tax under paragraph (1) or (2) shall apply. <Amended on Dec. 23, 2014; Dec. 19, 2017; Dec. 31, 2018; Dec. 31, 2019> (7) Except as provided in paragraphs (1) through (6), matters necessary to impose additional taxes shall be prescribed by Presidential Decree. <Amended on Dec. 23, 2014; Dec. 31, 2019>   Article 47-3 (Penalty Taxes for Underreporting or Excess Tax Refund Claims) (1) Where a taxpayer has filed a return (including preliminary returns and interim returns, but excluding returns of persons who are not financial or insurance business entities from among returns prescribed in Article 9 of the Education Tax Act and excluding returns under the Act on Special Rural Development Tax) on the tax base of national tax pursuant to the tax-related statutes within the statutory due date of return, but he or she has reported the tax amount he or she should pay less than the amount he or she should report (hereinafter in this Article and Article 48, referred to as "underreporting") or has reported the tax amount to be refunded more than the amount he or she should report (hereinafter in this Article and Article 48, referred to as "overreporting"), amounts obtained by applying the following calculation methods to the aggregate amount of the underreported tax amount to be paid and the overreported tax amount to be refunded (where he or she should pay an additional tax under this Act and the tax-related statutes and an additional amount equivalent to the interest he/should pay by adding thereto pursuant to the tax-related statutes, such amounts shall be excluded; hereinafter referred to as "underreported tax amount to be paid, etc.") shall be additional taxes: <Amended on Dec. 20, 2016; Dec. 19, 2017; Dec. 31, 2019> 1. In cases of underreporting or overreporting due to an unlawful act: The aggregate of the following amounts: (a) An amount equivalent to 40/100 (in cases of underreporting caused by an unlawful act in cross-border trades, 60/100) of the underreported tax amount to be paid, etc., caused by an unlawful act; (b) An amount equivalent to 10/100 of the amount obtained by subtracting the underreported tax amount to be paid, etc., caused by an unlawful act, from the underreported tax amount to be paid, etc.; 2. Cases other than subparagraph 1: An amount equivalent to 10/100 of the underreported tax amount to be paid, etc. (2) Notwithstanding paragraph (1), in any of the following cases, an amount specified in the relevant subparagraph shall be an additional tax: <Amended on Jan. 1, 2013; Jun. 7, 2013; Dec. 23, 2014; Dec. 20, 2016> 1. Where a person who has underreported by an unlawful act for the reports prescribed in Articles 70 and 124 of the Income Tax Act or in Articles 60, 76-17 and 97 of the Corporate Tax Act is a person subject to double-entry bookkeeping or a corporation: An amount obtained by adding an amount prescribed in paragraph (1) 1 (b) to the greater of the two following amounts: (a) An amount prescribed in paragraph (1) 1 (a); (b) An amount calculated by multiplying the amount of revenue related to the tax base underreported by an unlawful act, by 14/10,000; 2. Where a business entity prescribed in the Value-Added Tax Act has filed a return under Articles 48 (1) and (4), 49 (1), 66 and 67 of the same Act, but has underreported the zero-rate tax base or has failed to file a return on such tax base: The aggregate amount of an amount specified in the relevant subparagraph of paragraph (1) and an amount equivalent to 5/1,000 of the zero-rate tax base underreported or non-reported. (3) Paragraphs (1) and (2) shall also apply to the case where a person other than an enterprise under the Value-Added Tax files a return on refunded tax amount. (4) When applying paragraph (1) or (2), in cases falling under any of the following, an additional tax under paragraph (1) or (2) shall not apply to the underreported or overreported portion in relation thereto: <Amended on Jun. 7, 2013; Dec. 23, 2014; Dec. 15, 2015; Dec. 19, 2017> 1. In cases of underreporting the tax base of inheritance tax or gift tax due to the any of the following causes: (a) Where inherited tax or gifted tax is not confirmed due to the reasons such a lawsuit for its ownership at the time of filing a return; (b) Where there is an error in the application of deduction under Articles 18 through 23, 23-2, 24, 53 and 54 of the Inheritance Tax and Gift Tax Act; (c) Where a tax base is determined with the value appraised under Articles 60 (2) and (3) and 66 of the Inheritance Tax and Gift Tax Act; (d) Where a profit deemed donation under the provisions of Articles 45-3 through 45-5 of the Inheritance Act and Gift Tax Act varies due to the determination or correction of the corporate tax base and tax amount pursuant to Article 66 of the Corporate Tax Act (excluding cases that the corporate tax base and tax amount are determined or corrected due to an unlawful act); 2. Where the proviso of Article 45 (3) of the Value-Added Tax Act applies; 3. Where acquisition values of stocks, etc. defined in subparagraph 2 of Article 88 of the Income Tax Act are reduced due to a ground falling under subparagraph 1 (d). (5) Deleted. <Dec. 23, 2014> (6) Article 47-2 (5) and (6) shall apply mutatis mutandis to the imposition of additional taxes under this Article. <Amended on Dec. 23, 2014; Dec. 22, 2020> (7) Matters necessary for the calculation of the underreported tax amount to be paid, etc. due to an unlawful act and the imposition of additional taxes, shall be prescribed by Presidential Decree. <Amended on Dec. 23, 2014>   Article 47-4 (Additional Tax for Delayed Payment) (1) Where a person liable to pay taxes (including persons jointly and severally liable for tax payment, persons secondarily liable additional tax to pay taxes or guarantors if they become liable for tax payment on behalf of a taxpayer) fails to pay national tax (excluding the stamp tax under Article 8 (1) of the Stamp Tax Act) by the statutory due date of payment (including interim pre-payment, payment by preliminary return, and interim return) or has paid less than the tax amount payable (hereinafter referred to as "underpayment"), or is refunded more than the amount of tax to be refunded (hereinafter referred to as "excess refund"), the aggregate of the following amounts shall be the : <Amended on Dec. 31, 2018; Dec. 31, 2019; Dec. 29, 2020> 1. The amount of unpaid tax or the underpayment (where there is any penalty amount corresponding to the interest to be paid by being added under the tax-related statutes, such amount shall be added) × The period beginning with the day immediately after the statutory due date of payment and ending with payment date (excluding the period from the date of notice of payment to the due date of payment under a notice of payment) × The interest rate prescribed by Presidential Decree in consideration of the interest rates, etc. that the financial institutions apply to overdue loans; 2. The excessively refunded amount of taxes (where there is any penalty amount corresponding to the interest to be paid by being added under the tax-related statutes, such amount shall be added) × The period beginning with the day immediately after the refund date (excluding the period from the date of notice of payment to the due date of payment under a notice of payment) × The interest rate prescribed by the Presidential Decree in consideration of the interest rates, etc. that the financial institutions apply to overdue loans; 3. Out of the amount of tax payable by the statutory due date of payment (where there is any penalty amount corresponding to the interest to be paid by being added under tax-related statutes, such amount shall be added), an amount of tax yet to be paid by the due date of payment under a notice of payment or an amount of underpayment × 3/100 (limited to where the amount of national tax is not paid in full by the due date of payment under the notice of payment). (2) Paragraph (1) shall also apply to the case where a person other than an enterprise under the Value-Added Tax is refunded the value-added tax. (3) In any of the following cases, the additional tax under paragraph (1) 1 and 2 shall not apply (limited to the period beginning with the day immediately after the statutory due date of payment and ending with the date of notice of payment): <Amended on Jun. 7, 2013; Dec. 23, 2014; Dec. 15, 2015; Dec. 19, 2017; Dec. 31, 2018; Dec. 22, 2020; Dec. 29, 2020> 1. Where a business operator under the Value-Added Tax Act files a return and pays value-added tax by adding a value-added tax on a place of business to a value-added tax on another place of business by the due date of payment under the aforesaid Act; 2. A portion equivalent to the bad debt tax amount under the proviso of Article 45 (3) of the Value-Added Tax Act; 3. Deleted; <Dec. 22, 2020> 4. Where a profit deemed donation under the provisions of Articles 45-3 through 45-5 of the Inheritance Tax and Gift Tax Act alters due to the determination or correction of the corporate tax base and tax amount pursuant to Article 66 of the Corporate Tax Act (excluding cases that the corporate tax base and tax amount are determined or corrected due to an unlawful act); 5. Where acquisition values of stocks, etc. provided for in subparagraph 2 of Article 88 of the Income Tax Act are reduced due to a ground falling under subparagraph 4; 6. Where a person who has filed a return of inheritance tax or gift tax pursuant to Article 67 or 68 of the Inheritance Tax and Gift Tax Act pays inheritance tax or gift tax by the statutory due date of return pursuant to Article 70 of the same Act and determines and corrects the tax base and tax amount by assessing the inherited property or gift property according to the methods prescribed by Presidential Decree after the statutory due date of return. (4) Penalty tax under paragraph (1) in relation to the payment of national tax shall not apply to the portion on which the additional tax is levied under Article 47-5. <Amended on Dec. 31, 2018> (5) In applying paragraph (1), the additional tax under paragraph (1) in relation to the final return and payment shall not apply to the portion when the additional tax under paragraph (1) is levied in relation to the interim pre-payment, payment by preliminary return and payment by interim return. <Amended on Dec. 31, 2018> (6) Where a taxpayer files a return and pays national tax (limited to income tax, corporate tax and value-added tax) by erroneously applying the taxable period, it shall be deemed that the taxpayer has voluntarily paid national tax with respect to the taxable period for which he or she should have filed a return and paid the national tax within the scope of the amount actually declared and paid on the date when he or she actually filed such return and paid the national tax: Provided, That the same shall not apply to failure to file a return by an unlawful act from among returns prescribed in Article 47-2, or underreporting or overreporting by an unlawful act from among returns prescribed in Article 47-3. <Amended on Dec. 20, 2016> (7) In applying paragraph (1), if the period beginning with the day immediately after the due date of payment and ending with the date of payment (if the periods specified in the designated due date of payment under Article 13 of the National Tax Collection Act and in the demand notice are extended, the extended period shall be excluded) exceeds five years, such period shall be five years. <Newly Inserted on Dec. 31, 2018; Dec. 29, 2020> (8) Where the amount of delinquent national taxes by notice of payment and by tax item is less than 1.5 million won, the additional tax under paragraph (1) 1 and 2 shall not apply. <Newly Inserted on Dec. 31, 2018; Dec. 31, 2019; Dec. 29, 2020; Dec. 21, 2021> (9) Where a person fails to pay or makes underpayment of stamp tax under Article 8 (1) of the Stamp Tax Act, he or she shall be liable to pay an additional tax in an amount equivalent to 300/100 of the amount of tax not paid or underpaid: Provided, That in any of the following cases (excluding where a person pays taxes with prior knowledge that the tax base and the amount of tax will be corrected), the amount of an additional tax shall be as follows: <Newly Inserted on Dec. 31, 2018; Dec. 22, 2020> 1. Where tax is paid within three months after the statutory due date of payment under the Stamp Tax Act: 100/100 of the amount of tax not paid or underpaid; 2. Where tax is paid between three and six months after the statutory due date of payment under the Stamp Tax Act: 200/100 of the amount of tax not paid or underpaid.

 

Additional duties and taxes are composed of two components – the penalty component and the interest component.

Penalty component for general cases: 10% of the deficient duties or national taxes, such as VAT.

Interest component: Deficient duties or national taxes, such as VAT, multiplied by the period and the interest rate.

-        Period: From the date following the statutory due date for payment to the date of payment of payment notice (excluding the period from the date of payment notice to the date of payment referred to in the due date for payment).

-        Interest rate: As prescribed in Article 39 (1) of the ENFORCEMENT DECREE OF THE CUSTOMS ACT (관세법시행령)

·      22/100,000 from February 15, 2022

·      25/100,000 from February 12, 2019, to February 14, 2022

·      3/10,000 from February 6, 2015, to February 11, 2019

 

Under Article 42-2 of the CUSTOMS ACT and Article 48 of the FRAMEWORK ACT ON NATIONAL TAXES, the amount of penalty component may be reduced to 7%, 8%, and 9% depending on the timing of filing the amended declaration.

 

CUSTOMS ACT   Article 42-2 (Reduction or Exemption of Additional Duties) (1) In any of the following cases, the head of a customs office shall reduce or exempt the relevant amount from the amount of the additional duties provided for in Article 42 (1): <Amended on Dec. 21, 2021; Dec. 31, 2022; Dec. 31, 2023> 1. Where a deficiency is found to exist in the amount of customs duties paid before an import declaration is accepted pursuant to Article 9 (2) and a person liable to pay duties files an amended declaration for the payment of the amount of the relevant customs duties or the head of the relevant customs office rectifies it before an import declaration is accepted: The sum of the amounts set forth in Article 42 (1) 1 and 2; 2. Where a person liable to pay duties files a declaration for duty payment based on a provisional value declaration under Article 28 (1) and pays the amount of the relevant customs duties (excluding cases where data submitted by a person liable to pay duties is found to be different from the fact and thus the ground for additional collection of customs duties arises): The sum of the amounts in Article 42 (1) 1 and 2; 3. Where the results of an advance ruling on a matter provided for in Article 37 (1) 3 have been notified and an amended declaration is filed on the amount of customs duties paid by self-assessment before the date the results of the advance ruling is notified in accordance with the method of determining the customs value notified within two months from the date of notification: The amount in Article 42 (1) 1; 4. Where a deficiency is caused by an erroneous application of goods subject to reduction or exemption or an erroneous application of reduction or exemption rate among goods prescribed by Ordinance of the Ministry of Economy and Finance under the proviso of Article 38 (2): The amount in Article 42 (1) 1; 5. Where an amended declaration is filed under Article 38-3 (1) (limited to an amended declaration filed before one year and six months pass from the date when the revision period expires under Article 38-2 (1)): The relevant amounts categorized as follows: Provided, That cases prescribed by Ordinance of the Ministry of Economy and Finance, such as where an amended declaration is filed knowingly in advance that the custom duty base and the amount of the relevant customs duties will be revised, shall be excluded herefrom: (a) Where an amended declaration is filed before six months pass from the date on which the revision period prescribed in Article 38-2 (1) of the Act expires: 30/100 of an amount set forth in Article 42 (1) 1; (b) Where an amended declaration is filed during a period exceeding six months but not exceeding one year counting from the date on which the revision period referred to in Article 38-2 (1) of the Act expires: 20/100 of an amount set forth in Article 42 (1) 1; (c) Where an amended declaration is filed during a period exceeding one year but not exceeding one year and six months counting from the date on which the revision period referred to in Article 38-2 (1) of the Act expires: 10/100 of an amount set forth in Article 42 (1) 1; 6. In cases of goods prescribed by Presidential Decree, including goods directly imported by the State or a local government: The sum of the amounts prescribed in Article 42 (1) 1 and 2; 7. Where the Tariff Examination Committee referred to in the former part of Article 118-4 (9) fails to make a decision and give notice on the pre-assessment review within the period referred to in the main clause of Article 118 (3) (hereafter referred to as "decision and notice" in this subparagraph): 50/100 of the amount of an additional duty imposed for the period for which the decision and notice is delayed (the amount calculated by applying the delayed period of decision and notice in the formula set forth in Article 42 (1) 2 (a)); 8. Where a person liable to pay duties has a good cause prescribed by Presidential Decree for deficiency in the paid or reported amount of duty: The sum of the amounts in Article 42 (1) 1 and 2. (2) Any person who intends to have an additional duty reduced or exempted under paragraph (1) may file an application therefor, as prescribed by Presidential Decree.

 

FRAMEWORK ACT ON NATIONAL TAXES   Article 48 (Reduction of Exemption from Additional Taxes) (1) Where the Government intends to impose an additional tax under this Act or any other tax-related statutes, if any cause for such imposition falls under any of the following, the Government shall not impose such additional tax: <Amended on Dec. 31, 2018; Dec. 22, 2020> 1. Where such cause constitutes grounds for extension of the due date under Article 6; 2. Where a taxpayer fails to fulfill his or her obligations for good cause; 3. Other cases prescribed by Presidential Decree, which are similar to those provided in subparagraphs 1 and 2. (2) In any of the following cases, the Government shall reduce or exempt an amount set forth in each of the following subparagraphs, from the relevant additional tax imposed under this Act or any other tax-related Act: <Amended on Dec. 27, 2010; Dec. 31, 2011; Dec. 23, 2014; Dec. 19, 2017; Dec. 31, 2019> 1. Where a person who filed a tax base return files until the statutory due date of return files a revised return pursuant to Article 45 after expiration of the statutory due date of return (limited to additional taxes referred to in Article 47-3, excluding cases where the revised tax base return is filed with a prior knowledge that the initial tax base and the amount of tax would be corrected), the amount shall be the following: (a) Where a revised return is filed within one month after expiration of the statutory due date of return, the amount shall be equivalent to 90/100 of the amount of the relevant additional tax; (b) Where a revised return is filed between one and three months after expiration of the statutory due date of return, the amount shall be equivalent to 75/100 of the amount of the relevant additional tax; (c) Where a revised return is filed between three to six months after the statutory due date of return elapses, the amount shall be equivalent to 50/100 of the amount of the relevant additional tax; (d) Where a revised return is filed between six months and one year after expiration of the statutory due date of return, the amount shall be equivalent to 30/100 of the amount of the relevant additional tax; (e) Where a revised return is filed between one year and one and a half years after expiration of the statutory due date of return, the amount shall be equivalent to 20/100 of the amount of the relevant additional tax; (f) Where a revised return is filed between one and a half years and two years after expiration of the statutory due date of return, the amount shall be equivalent to 10/100 of the amount of the relevant additional tax; 2. Where a person who fails to file a tax base return until the statutory due date of return files a return after the due date pursuant to Article 45-3 after expiration of the statutory due date of return (limited to additional taxes referred to in Articles 47-2, excluding cases where the tax base return after the due date is filed with a prior knowledge that the initial tax base and the amount of tax would be determined), the amount shall be the following: (a) Where a return is filed within one month after the statutory due date of return elapses, the amount shall be equivalent to 50/100 of the amount of the relevant additional tax; (b) Where a revised return is filed between one and three months after expiration of the statutory due date of return: The equivalent to 30/100 of the relevant amount of an additional tax; (c) Where a revised return is filed between three and six months after expiration of the statutory due date of return: The equivalent to 20/100 of the relevant amount of an additional tax; 3. Where it falls under any of the following categories, the amount shall be equivalent to 50/100 of the relevant amount of the additional tax: (a) Where a result of the pre-assessment review is not notified under Article 81-15 within the period of determination and notification thereof (limited to additional taxes imposed under Article 47-4 during the relevant period for which such determination and notification are delayed); (b) Where the obligation of the submission, filing, joining, registration or establishment pursuant to tax-related statutes (hereinafter in this subparagraph, referred to as "submission, etc.") is fulfilled in compliance with the tax-related statutes within one month after the deadline for submission, etc. elapses (limited to additional taxes to be imposed pursuant to tax-related statutes for violation of the duty of such submission, etc.); (c) Notwithstanding subparagraph 1 (d) through (f), where the preliminary return and interim return are filed to be underreported or overreported by the due date of preliminary returns and due date of interim returns prescribed in tax-related statutes and then the revised return of the tax base is filed by the due date of final returns (limited to additional taxes provided for in Article 47-3 imposed during the relevant period, and excluding cases of reporting tax bases, knowing in advance that the tax bases and tax amounts are to be corrected); (d) Notwithstanding subparagraph 2, where the preliminary return and interim return fail to be filed by the due date of preliminary returns and due date of interim returns prescribed in tax-related statutes, but the tax base is returned by the due date of final returns (limited to additional taxes provided for in Article 47-2 imposed during the relevant period, and excluding cases of reporting tax bases, knowing in advance that the tax bases and tax amounts are to be corrected). (3) Any person who intends to have an additional tax reduced or exempted under paragraph (1) or (2) may file an application therefor, as prescribed by Presidential Decree.

 

Therefore, it is recommended to implement a periodic import data review process to rectify errors in import declarations affecting the tax amount within the revision period or, at the very least, a short period of time after the revision period, while a reduction applies to the penalty component.