SOUTH KOREA Law and Practice Contributed by: Steve M Kim, Philje Cho, Gijin Hong and Kyu Bin Kang, Lee & Ko
in order to obtain a pre-alignment between the arm’s-length price and the dutiable value. Upon receipt of the application, the NTS and the KCS will co-operate on the method of calculating the arm’s length price and dutiable value, and the range of the pre-adjusted price. 13. Controversy Process 13.1 Options and Requirements in Transfer Pricing Controversies TP Review Committee The NTS is legally required to establish a TP Review Committee (TPRC) within each regional tax office to review proposed TP adjustments prior to the completion of a tax audit. The TPRC is designed to ensure that taxpayers are treated fairly and consistently with regard to TP assess - ments. The TPRC is responsible for reviewing Review of Accuracy of Tax Imposition (RATI) Once a tax audit has been completed, the tax auditor will provide a notice to the taxpayer of its findings and the proposed amount of additional tax that will be assessed. This notice is known as a Pre-Tax Assessment Notice (PTAN). Time limits are important, since the taxpayer has 30 days to appeal to an administrative body within the NTS to review the legal basis of the proposed tax assessment. This process is referred to as a request for a RATI. Once filed, the tax auditor’s right to issue a for - mal Tax Assessment Notice (TAN), which crys - talises the taxpayer’s obligation, is suspended until the RATI procedure is completed. The RATI is reviewed by a panel of reviewers comprised proposed adjustments that are: • in excess of KRW30 billion; or • disputed by a taxpayer.
both of NTS officials and of outside experts such as professors, accountants, licensed tax repre - sentatives and attorneys who have good stand - ing with the NTS. However, a senior official of the NTS has the final say in all decisions and sometimes conducts several hearings, particu - larly 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 assessment, 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 taxpayer receives an unfavourable decision in the RATI, the tax auditor will issue a formal TAN. The issuance of a TAN formalises the taxpayer’s obligation to pay the amount shown on the TAN (ie, the deficiency plus interest and penalty). Such an obligation must be settled (by payment or other arrangement, such as posting a bond or obtaining a guarantee) within 30 days of receipt. If the taxpayer’s obligation is not settled, addi - tional 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.
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