If you continue to sell goods or services repeatedly, you must register as a business owner. However, it cannot be said that you must register as a business owner if you repeat sales. If it is considered to have commerciality in social norms, you should register as a business owner.
If the National Tax Service determines that you need to register as a business owner, many problems can arise if you don't register yourself. On the contrary, if you have registered as a business owner, no matter what the National Tax Service's judgment is, there will be no problem.
However, registering as a business owner can be very cumbersome, so the most reliable way to check is to inquire at a nearby tax office. Many people think that it is difficult to inquire at a tax office, but you don't need to think that way. You can get accurate answers by calling the National Tax Service Counseling Center (phone number: 126).
Let's take a look at the problems that can arise if you don't register as a business owner.
- Unregistered surtax: You can be charged a surtax of 1% of all sales generated by your business.
- Unreported surtax: If you don't register as a business owner, it means you didn't report value-added tax or comprehensive income tax. Each of these taxes was originally a tax that should have been paid. Therefore, each of these taxes is charged, and a 20% surcharge is added to the originally owed tax.
- Late payment surtax: 0.025% of the amount of tax due and payable is added every day.
- Expenses incurred before registering as a business owner cannot be recognized.
There is a period of tax assessment exclusion called "제척기간" in Korean. This period refers to the time frame during which a claimant can exercise their right for a certain fact. For example, if a business continues to operate without registering, they will not report or pay taxes immediately. If the National Tax Service (NTS) becomes aware of this fact, they have the right to impose taxes, but the question is whether they can go back several years to impose taxes.
If a business does not register, they will not pay value-added tax (VAT) and comprehensive income tax. For these two items, there are exclusion periods of 5, 7, and 15 years depending on the reason. Below are the exclusion periods by reason:
- 5 years: omission of reporting content
- 7 years: non-reporting within the deadline
- 15 years: tax evasion by illegal means
If a business continues to engage in profit activities without registering, it might be considered as illegal tax evasion. This means that if a business continues to operate without registering, they can impose taxes even up to 15 years ago. However, in the age of big data, it is becoming increasingly difficult to engage in business activities without registering for years. It is more likely that they will be contacted by the tax office before years pass. If they are audited by the tax office, they may be required to pay more than half of the sales amount they have earned so far.
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