National Tax Service to Deduct Corporate Tax Equivalent to Disaster Losses for Companies Affected by Wildfires

Disaster Loss Tax Credit Application Must Be Submitted Within Three Months from the Date of Disaster

The National Tax Service (NTS) announced on the 31st that corporations affected by large-scale wildfires recently occurring in the Ulsan, Gyeongbuk, and Gyeongnam regions can receive tax credits for disaster losses.

According to the Corporate Tax Act, if a corporation loses 20% or more of its business assets due to a natural disaster or calamity and is recognized as having difficulty in tax payment, the corporate tax corresponding to the disaster loss ratio is credited. The disaster loss ratio is calculated by dividing the value of lost assets by the value of assets before the loss (excluding land).

At this time, business assets are calculated based on the book value of the corporation as of the date of the disaster. If the books are lost or destroyed and the book value cannot be determined, the value confirmed by the investigation of the competent tax office chief is used. The asset value does not include land value, but includes assets owned by others for which the corporation has compensation liability due to loss. Also, if the disaster assets are insured and insurance proceeds are received, the value of the lost assets is not calculated by deducting the insurance proceeds.

The deductible tax amount is calculated by multiplying the disaster loss ratio by the corporate tax that has not been imposed as of the disaster date, unpaid corporate tax that has been imposed, and the corporate tax for the business year including the disaster date. The deduction is limited to the value of the assets lost due to the disaster.

Corporations wishing to receive the tax credit must submit a disaster loss tax credit application form to the competent tax office of their tax jurisdiction by mail or through Hometax within three months from the date of the disaster.

For corporate tax whose taxable income reporting deadline has not passed as of the disaster date, submission can be made by the reporting deadline. If the period from the disaster date to the reporting deadline is less than three months, submission must be made within three months from the disaster date.

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