SOUTH KOREA Law and Practice Contributed by: Je-Heum Baik, Chang Hee Lee, Maria Chang and Min Kim, Shin & Kim
7. Administrative Co-Operation 7.1 Legal Framework for Administrative Co- Operation In Korea, administrative co-operation in tax matters – encompassing the exchange of information and mutual assistance in collection – is structured through domestic legislation and international treaties. The primary cornerstone of this framework is the LCITA, which establishes the fundamental rules for co-ordi - nation between the NTS and foreign states. Under Article 4 of the LCITA, this Act and applicable tax trea - ties explicitly take precedence over general domestic tax laws, such as the CITA, in matters of international transaction. A key provision of the LCITA is the legal basis for MAPs, which empowers the NTS to consult with foreign competent authorities to resolve interpre - tation disputes or instances of double taxation. Supporting this domestic foundation is a robust net - work of multilateral and bilateral treaties that facilitate the actual flow of taxpayer data. Korea is a signatory to the Multilateral Convention on Mutual Administra - tive Assistance in Tax Matters, an OECD/Council of Europe initiative that provides the legal “pipeline” for the Exchange of Information on Request (EOIR) and the Automatic Exchange of Information (AEOI) under the CRS. This is complemented by over 95 bilateral tax treaties, which typically include specific exchange articles modelled after the OECD standards. For juris - dictions where a tax treaty is absent, Korea utilises Tax Information Exchange Agreements (TIEAs) to ensure transparency. Finally, the technical mechanics of this co-operation are defined by Presidential Decrees and Enforcement Rules associated with the LCITA. These decrees man - date that Korean financial institutions report data on non-resident accounts to the NTS for global sharing. A significant update as of 1 January 2026 involves the expansion of these laws to include the automatic reciprocal exchange of information regarding crypto- asset transactions with contracting states, reflecting Korea’s commitment to capturing digital economy shifts within its administrative reach.
life imprisonment. Crucially, because Korean law gen - erally restricts probation or suspended sentences to prison terms of three years or less, those convicted of evading over KRW1 billion may face mandatory jail time. Furthermore, the authorities have placed a heavy focus on the use of fictitious tax invoices. While stand - ard penalties include up to three years of imprison - ment, transactions exceeding KRW3 billion may lead to much longer prison terms. These criminal risks are particularly pertinent to cross- border transactions and the management of repre - sentative offices. For fraudulent offshore or cross-bor - der transactions, the NTS operates within an extended assessment window of 15 years, significantly longer than the ten-year period for domestic fraud. Addition - ally, the criminal statute of limitations for tax evasion typically ranges from seven to 20 years, depending on the severity of the specific offence, ensuring a long period of potential legal exposure for non-compliant entities. 6.3 Interaction Between Tax and Criminal Procedures The transition of a tax case from an administrative audit to a criminal prosecution is governed by a for - mal and structured process primarily defined by the PTOA. Central to this framework is the Disposition of Tax Offenses, a two-tier referral mechanism where the NTS first allows for an “administrative settlement” phase. Under this phase, if the taxpayer pays the evaded tax along with a specific penalty known as the “fine equivalent amount”, the case is settled and cannot be prosecuted. However, a mandatory criminal referral to the Public Prosecutor’s Office is triggered if the taxpayer fails to pay by the deadline or if the NTS determines the offence is too severe – due to the scale of evasion or habitual fraud – to permit an administra - tive settlement. To ensure objectivity before a case reaches the judi - cial system, large-scale evasion cases are vetted by Tax Offense Investigation Committees located within Regional Tax Offices. Composed of both internal NTS officials and external experts such as lawyers and professors, these committees act as a quality control mechanism to ensure evidence meets the rigorous burden of proof required in criminal court.
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