'Entertainment Expenses Squandered on Corporate Credit Card and Donation Underreporting'... National Tax Service Strengthens Verification of Noncompliant Public Interest Corporations

Tax Evasion Suspected in Major Cases, Tax Audits Conducted
"Strict Action Will Be Taken Against Tax Law Violations"

Verification of public interest corporations that use corporate cards for private purposes such as entertainment expenses instead of public interest projects or underreport donation income will be strengthened.

On the 16th, the National Tax Service (NTS) announced that it will strengthen post-management of acts of private benefit, such as using donations received from many citizens for private purposes instead of public interest purposes or engaging in accounting fraud.

Considering the social role and importance of public interest corporations, the NTS provides tax exemption benefits such as gift tax on the assets received and continuously expands tax support to revitalize public interest projects. It also conducts annual post-management on whether public interest corporations violate tax laws to establish a transparent donation culture.

An NTS official said, "Misuse of donations seriously undermines the credibility of public interest corporations as a whole and reduces the willingness to donate, posing a significant obstacle to the activation of the donation culture. It results in shrinking the social contribution activities of the majority of public interest corporations working for the general public interest, so more meticulous management is necessary."

Accordingly, to enhance the transparency of public interest corporations, the NTS analyzes violations of tax laws such as controlling affiliated companies through public interest corporations and using contributed assets for non-public interest purposes every year based on big data, and verifies them through the local office's 'Public Interest Corporation Dedicated Team.'

The NTS identified the main verification types for insincere public interest corporations involving accounting fraud and private use as ▲ irregular accounting ▲ failure to obtain supporting documents ▲ false expense claims ▲ private use of corporate cards ▲ improper receipt of donations ▲ unfair internal transactions.

According to the NTS, Public Interest Corporation C is suspected of underreporting donation income by reporting less to the Ministry of Health and Welfare than the actual amount received, thereby omitting donation income and improperly diverting funds. It also excessively recorded expenses in the settlement disclosure data compared to the amount reported as donation expenditures to the Ministry of Health and Welfare, indicating false expense claims and misuse of public funds. The NTS plans to impose gift tax if the difference between the amounts reported to the Ministry of Health and Welfare regarding donation income and expenditures and the settlement disclosure data is confirmed to have been improperly diverted without being used for public interest projects.

There were also cases where corporate cards were used for private purposes such as entertainment expenses instead of public interest projects. Public Interest Corporation D is suspected of misappropriating public funds for personal use unrelated to public interest projects at places such as skin care clinics, pet cafes, and golf courses using corporate cards. The NTS plans to impose gift tax on public interest corporations if the purpose of expenses related to corporate card usage is confirmed to be private rather than for public interest purposes.

Going forward, the NTS will strictly respond to tax law violations such as using public interest corporations to strengthen control over affiliated companies or illegally leaking public funds outside. Public interest corporations confirmed to have accounting fraud or private use will be subject to post-management for three years and managed more meticulously. Especially, if there is a significant suspicion of tax evasion during the verification process, the local office's public interest corporation investigation team will conduct tax audits to block illegal activities.

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