Get tax breaks when you pay in cash
“Do you want your cash receipt issued?”
What is a “cash receipt”? In this week’s Living in Korea column, we will take a look at the cash receipt system operating in Korea and discuss how expats can take advantage of the program.
Q.What is the cash receipt system for?
A.The system is a program through which cash purchases are tracked by a customer presenting a membership card for the system or a cell phone number, as opposed to getting a regular receipt, which is a record of sale for use by the buyer and the seller. When this cash receipt information is entered after a cash purchase, the information is sent straight to the National Tax Service.
Many cash transactions in Korea are still conducted in a rather gray area: legal transactions that should be reported to the government for reasons of taxation, but this is not always the case.
Thus, the government began the cash receipt system, through which cash incentives are offered to consumers to help track taxable transactions. The threshold for registering transactions stood at 5,000 won ($3.75) until June 2008, when it changed to 1 won beginning in July of that same year.
So if I get a “cash receipt” issued, what is the benefit to me?
If you are an individual taxpayer or a dependent of a taxpayer, the main taxpayer is able to receive a 20-percent deduction on his/her year-end tax settlement on the amount of total cash spending that exceeds 20 percent of one’s reported yearly income, up to a total of 5 million won. For businesses, a 1 percent rate of applicability is in place.
Can foreigners take advantage of these savings as well? If so, how?
On the Web site of the National Tax Service (www.taxsave.go.kr), foreigners can register by entering their alien registration number and performing a real-name check. If you are already registered as a tax payer then your name and alien registration number, as printed on your alien registration card, should already be accurately entered into the system.
In the event that the online real-name check does not work, you will need to go to your local tax office to register as a foreigner tax payer. After four to five days, it should then be possible to perform the real-name check on the National Tax Service’s Web site.
Registering for the cash receipt system is surprisingly easy, and the whole process can be done online in as little as 10 minutes. However, the hardest part of the process is that the Web site is only in Korean.
If you experience further difficulties trying to register for the system, you can also call the Global Center at 1688-0120 or the National Tax Service help line at 1544-2020 (press 2 for English).
Where can I take advantage of the cash receipt system? How are these locations different from those that do not participate in the program?
In theory, every registered business is legally obligated to provide a cash receipt on demand. As this is not always the case, you can know for sure that you can be provided with a cash receipt when you shop anywhere where there is an orange-colored cash receipt system sticker posted on the doorway.
If you’d like to receive the benefits, present either your membership card for the cash receipt system or cell phone number, depending on the information you input at the time of registration.