National Tax Service to Operate Dedicated Team for Pre-Review of R&D Tax Credit

[Asia Economy Reporter Kim Hyunjung] The National Tax Service (NTS) will establish a dedicated team to conduct prior reviews on the appropriateness of tax credit claims for research and development (R&D) expenses related to already developed technologies, in order to prevent cases of applying for tax credits improperly.

The NTS announced on the 18th that starting this year, it will set up and operate dedicated teams for prior review of R&D tax credits within the corporate tax divisions of each regional tax office. The goal is to support accurate and prompt reviews for as many small and medium-sized enterprises as possible, assist them in filing their taxes faithfully, and provide advisory services such as tax consultations related to R&D, enabling companies to focus on research, development, and investment activities.

According to the NTS, over 1,500 companies applied for prior review of R&D tax credits last year. The prior review process involves the NTS pre-confirming whether a company is eligible to receive the tax credit, which also helps avoid additional penalties due to incorrect filings. The NTS expects the demand for prior review applications, aimed at tax savings, to increase further this year.

For businesses that apply for prior review and subsequently file their corporate tax (or income tax) returns reflecting the approved tax credit amount, the contents of the prior review application are exempt from verification and post-exemption management. Furthermore, even if a tax assessment differs from the review results due to investigations after the review, underreporting penalties will be waived.

Applications for prior review can be submitted via Hometax, mail, or in person. The application deadline is before the corporate tax (or income tax) taxable income declaration. For missed applications, requests for correction, amended filings, or late filings are allowed until before the deadline. Applications can be made not only for expenses already incurred for R&D but also for planned expenses or partial items within the total expenses, with no limit on the amount.

The review is primarily conducted through non-face-to-face document examination; however, if the facts cannot be accurately confirmed from the submitted documents, supplementary requests or on-site inspections may be conducted. If the applicant disagrees with the review results, they can also request a re-examination.

The NTS plans to provide convenience services such as posting prior review cases on its website’s guidance section, creating a simplified calculator for R&D expense tax credits on the Hometax bulletin board, and providing progress updates at each review stage. They also intend to conduct surveys targeting applicants to incorporate improvements, aiming to develop a business-friendly system.

This content was produced with the assistance of AI translation services.