Plagiarizing Papers and Falsely Registering Researchers... National Tax Service Recovers 27 Billion KRW from Companies Illegally Claiming R&D Tax Credits

NTS Recovers 10 Times More Improper R&D Tax Credits in 2023 Compared to 2021
Crackdown Intensifies on Plagiarized Papers and Fake Researchers

It has been revealed that the amount of taxes reclaimed after being caught by the National Tax Service (NTS) for improperly receiving research and development (R&D) tax credits by submitting plagiarized papers or falsely registering researchers has increased tenfold over the past three years.

The NTS announced on the 20th that, after thoroughly analyzing and verifying allegations of improper deductions related to research and personnel development expenses by compiling various R&D-related reports and field information collected from the internet, it identified 864 companies last year and reclaimed 27 billion KRW. This is about a tenfold increase compared to 2.7 billion KRW in 2021.

The NTS conducts annual post-management to prevent improper deductions of research and personnel development tax credits. However, tax evasion practices abusing the system, such as establishing fake research institutes without conducting actual R&D activities and improperly receiving tax credits, have not been eradicated.

Accordingly, since 2023, the NTS has assigned specialized examiners at its headquarters and dedicated teams at regional offices to focus on verifying R&D activities that had previously been in a tax blind spot. Last year, they reclaimed 11.6 billion KRW from 364 companies. According to the NTS, Company A plagiarized and cited others’ papers, simply altered or imitated figures and photos, and pretended to have conducted actual R&D. The NTS also detected illegal consulting practices where consulting firms prepared research evidence documents such as research notes and explanatory materials on behalf of companies that did not conduct R&D activities, and refunded consulting fees when improper deductions were discovered.

In addition, after thoroughly analyzing and verifying corporations eligible for high-rate tax credits under new growth, source technology, and national strategic technology tax credit programs, the NTS reclaimed 6.2 billion KRW in excessive tax credits from 69 companies that applied higher deduction rates instead of the general R&D credit rate. Beyond verifying R&D activities, the NTS also collected and analyzed data from related ministries such as the Ministry of Science and ICT on companies that were not recognized as research institutes or had their recognition revoked, and reclaimed 3 billion KRW from 178 companies after verification.

The NTS strictly responds to malicious improper deductions while supporting bona fide taxpayers to focus on research and personnel development activities without unnecessary tax burdens through the pre-assessment system for research and personnel development tax credits. An NTS official stated, "Since the pre-assessment system allows you to confirm eligibility in advance, we recommend applying for pre-assessment as early as possible before corporate tax filing (end of March) and income tax filing (end of May) to receive assistance." He added, "We will strongly respond to improper tax credits that illegally abuse the research and personnel development tax credit system, undermine the soundness of national finances, and obstruct the realization of fair taxation."

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