Tax service targets affiliate business

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Tax service targets affiliate business

For the first time, owners of large businesses and their families will be taxed on profits from transactions with their affiliates.

The move is part of the Park Geun-hye administration’s efforts to limit internal transactions under the economic democratization initiative aimed at rooting out unfair business practices.

According to the National Tax Service yesterday, about 10,000 business owners and family members have been notified that they must report and pay taxes of 10 percent on profits from 2012 transactions involving a total of 6,200 affiliates. Payments are due by the end of July.

Among the notified companies are Samsung Electronics, Hyundai-Kia Motor Group, SK Group and other conglomerates.

The tax was levied on owners or family members who have a 3 percent stake or more in affiliates where at least 30 percent of earnings are from business with parent companies.

Those who file accurately and on time will receive a 10 percent break on the tax owed.

The tax agency said those who owe more than 10 million won will be allowed to pay over two months.

When the tax exceeds 20 million won, the period of payment could be extended to a maximum of five years at 3.4 interest by putting up collateral.

However, the payments that they would have to pay will go up if they falsify the amount that they are planning to pay or fail to pay at all.

“It would be most beneficial to pay the accurate amount within the deadline because if they do not,” said a tax official, “[since this is the first] there will be special agents that would counsel on the tax report at our tax offices for convenience.”

Reporting incorrect tax amounts will bring a penalty of 40 percent of the tax owed, while those who report late will be assessed 0.3 percent of the tax multiplied by the number of days past due.

Earlier this week, lawmakers from both the leading Saenuri Party and the main opposition Democratic Party agreed to pass legislation imposing stronger penalties on conglomerates and founding families that reap unfair profits through internal transactions affiliates and subsidiaries.

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