From May, 'Tax Evasion Rewards' Increase... Penalty Surcharges Also Included in Evasion Amount

Decrease in Tax Evasion Reports
Including Penalties for Non- or Underreporting and Late Payment in Reward Calculations

Starting from May this year, the scale of rewards for tax evasion reporting will increase. Until now, rewards were calculated and paid based on the amount of tax evasion, but going forward, the rewards will include the amount of additional tax penalties collected.

The National Tax Service (NTS) announced on the 9th that this year, the criteria for reward payments will include additional tax penalties related to reporting and payment.

The NTS operates a "Tax Evasion Reporting Reward" system that pays 5-20% of the evaded tax amount collected based on the information provided by citizens who supply decisive evidence of suspected tax evasion. The NTS imposes additional tax penalties of 10-40% on unpaid taxes or underreported amounts. Interest must also be paid for delayed payments. However, additional tax penalties were not previously included in the calculation of rewards.

For evaded amounts between 50 million and 500 million KRW, 20% of the evaded amount is paid as a reward, and for amounts exceeding 500 million KRW up to 2 billion KRW, a reward of 100 million KRW plus 15% of the amount exceeding 500 million KRW is paid.

For example, if the evaded tax amount is 500 million KRW, previously a reward of 20%, or 100 million KRW, was paid. Going forward, if an additional tax penalty for underreporting is imposed, the recognized evaded amount increases to 600 million KRW. In this case, the reward will be 100 million KRW for the first 500 million KRW plus 15% of the 100 million KRW exceeding 500 million KRW, which is 15 million KRW, totaling 115 million KRW as the reward.

An NTS official explained, "Due to the contraction of real economic activities during the COVID-19 pandemic, public interest in reporting tax evasion has also declined. Following last year's efforts to improve the convenience of submitting tax evasion reports, this year we plan to include additional tax penalties in the payment criteria to provide greater rewards to informants who provide important evidence for detecting tax evasion."

According to the National Tax Statistics Portal, the number of tax evasion reward payments decreased from 448 cases in 2020 to 392 cases in 2021, and 372 cases in 2022.

The NTS plans to revise the "Tax Evasion Reporting Reward Payment Regulations" in May to include additional tax penalties related to reporting and payment when calculating the evaded tax amount for reports received thereafter. Accordingly, the NTS estimates that the number of reward recipients and the scale of rewards will increase by about 26% compared to last year.

Tax evasion reports can be submitted with specific evidence of tax evasion to the nearest tax office (in person, fax, etc.), as well as through Hometax, Sontax, and ARS. An NTS official stated, "The NTS will continue to faithfully operate the tax evasion reporting reward system based on proactive administration to contribute to increasing national fiscal revenue while supporting the establishment and development of a voluntary and sincere tax payment culture created by the public."

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