SOUTH KOREA Law and Practice Contributed by: Steve M Kim, Philje Cho, Gijin Hong and Kyu Bin Kang, Lee & Ko
taxpayer’s obligation, is suspended until the RATI procedure is completed. The RATI is reviewed by a panel of reviewers comprised both of NTS officials and of outside experts such as professors, account - ants, licensed tax representatives and attorneys who have good standing with the NTS. However, a senior official of the NTS has the final say in all decisions and sometimes conducts several hearings, particularly where the senior official disagrees with the decisions reached by the panel. The RATI procedure is informal, and taxpayers are often provided with an opportunity to appear before the panel or submit additional documents in support of their position that some or all of the proposed tax assessment is unjustified. The RATI process typically takes several months to complete. If the taxpayer prevails, the RATI panel will issue a written decision cancelling the proposed tax assess - ment, thereby concluding the tax audit. Alternatively, the panel may order a re-audit, requiring further review of the initial tax audit. Timing of the Disputed Tax Payment If a taxpayer decides not to file a request for a RATI within 30 days of the issuance of a PTAN, or if the tax - payer receives an unfavourable decision in the RATI, the tax auditor will issue a formal TAN. The issuance of a TAN formalises the taxpayer’s obli - gation to pay the amount shown on the TAN (ie, the deficiency plus interest and penalty). Such an obliga - tion must be settled (by payment or other arrange - ment, such as posting a bond or obtaining a guaran - tee) within 30 days of receipt. If the taxpayer’s obligation is not settled, additional interest can accrue, and, depending on the facts and circumstances, the tax authority can seek to attach or freeze the taxpayer’s assets and bank accounts. Taxpayers may pursue several procedural avenues to seek deferral of TAN issuance and suspension of tax payment in connection with a MAP application. In practice, however, securing approval for either form of relief is often difficult and challenging, albeit not impossible, given the stringent statutory timelines and
the demanding guarantee requirements imposed by the authorities. Appeal to Administrative Bodies of the Government Time limits are also important for the TAN, because the taxpayer has 90 days after receipt to appeal to one of three administrative bodies of the govern - ment, namely the Tax Tribunal, the Board of Audit and Inspection (BOAI) or the NTS’s office of appeals. In the vast majority of cases, taxpayers appeal to the Tax Tribunal as it is considered more independent than the BOAI or the NTS. Another important reason to file an administrative appeal is that, under the Korean tax dispute system, the taxpayer must file the appeal and wait at least 90 days before it can file a petition to the court. The Tax Tribunal is established under the office of the prime minister and is administered by officials gen - erally seconded from the MOEF and the NTS. Like the RATI panel, the adjudicators of the Tax Tribunal are comprised of NTS officials and outside experts, and a senior official at the NTS has the final say in all decisions. Tax Tribunal proceedings are less formal than court proceedings but more formal than RATI proceedings. As in court proceedings, the taxpayer and the tax authority are expected to submit briefs with techni - cal arguments and applicable evidence. The taxpayer will also be given a formal opportunity to speak and plead before the adjudicators, although recently some of these hearings have been held by videoconference. A typical Tax Tribunal proceeding involving a foreign entity or a Korean entity with foreign investment, or involving an international tax issue, may last six months, although a large or complex TP case can last a year or more. During the proceedings, it is also possible that the adjudicators may order a re-inves - tigation, which is effectively a re-audit of the taxpay - er. However, such a re-investigation is essentially a desk tax audit, which involves the reviewing of files prepared by the tax auditor, rather than undertaking another field examination at the taxpayer’s premises.
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