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National Tax Service (“NTS”) Commissioner Lim Kwang-hyun attended a forum hosted by the Korea Federation of Industries on April 2, 2026, where he listened to the challenges and suggestions from the business community and announced a set of reform measures to improve the operation of tax audits and reduce the corporate compliance burden. In this RSM Korea Newsletter, we summarize the key contents of the NTS press release and present RSM Korea’s views on the practical implications for your business. This document is a general informational summary prepared on the basis of publicly available information, and should not be construed or used as legal, tax, or accounting advice for individual matters. As outcomes may vary depending on specific facts and circumstances, independent professional advice should be sought before making any actual decisions.
■ Overview of Reform Measures
Marking its 60th anniversary in 2026, the NTS has declared this year the inaugural year of fundamental tax audit transformation, and is implementing the following two key reform measures to enhance predictability for taxpayers and reduce the corporate compliance burden.
Reform Measure ① | Reform Measure ② | |
Change | Taxpayer-Selected Regular Audit Timing Full Implementation | 10 Key Verification Items Pre-Disclosure |
Date | April 2026~ | Immediate (Published on NTS Website) |
Purpose | Grants taxpayers the right to determine audit timing; critical business periods can be avoided | Advance guidance on key audit verification items to support self-review and audit preparation |
Reform Measure ① | Full Implementation of Taxpayer-Selected Regular Tax Audit Timing (from April 2026) |
■ Overview
Previously, the NTS unilaterally determined the timing of regular tax audits. Under the new system, taxpayers selected for a regular audit may now choose their preferred audit start month within a three-month window (1st and 2nd preference).
■ Step-by-Step Procedure
Stage | Description | Detail |
STEP 1 | Issuance of Timing Selection Notice | The NTS sends a Timing Selection Notice to taxpayers selected for a regular audit. (e.g., April 2) |
STEP 2 | Taxpayer Submits Preferred Audit Timing | The taxpayer notifies the NTS of preferred audit start months (1st and 2nd choice) within 3 months of receiving the notice. (e.g., 1st choice: June, 2nd choice: July) |
STEP 3 | Confirmation of Selected Timing | The NTS confirms theaudit start month reflecting the taxpayer's preference and notifies the taxpayer. (e.g., June confirmed) |
STEP 4 | Formal Notice | A formal notice is issued 20 days before audit commencement, consistent with the current procedures. (e.g., May 20) |
STEP 5 | Audit Commencement | The tax audit commences in accordance with the confirmed schedule. (e.g., June 10) |
■ Summary of Key Changes
Category | Previous | After Change (from April 2026) |
Audit Timing Authority | Unilaterally determined by NTS | Taxpayer selects by month within 3 months (1st & 2nd choice) |
Prior Notice | Formal notice 15 days prior to audit | Formal notice 20 days before audit |
Corporate Response | Unpredictable timing: reactive approach required | Critical business periods can be avoided; enough time for preparation |
Applicable to | All regular tax audit targets | All regular tax audit targets (full implementation) |
RSM Korea View
1. Upon receipt of the notice, promptly review your tax and business calendar to determine your preferred audit timing (1st and 2nd choice).
2. You may avoid critical corporate events such as year-end closing, annual general meetings, and board meetings when selecting your preferred audit period.
3. After receiving the formal notice, focus on preparing relevant documentation and conduct an internal self-review based on the 10 Key Verification Items (see next page).
4. This timing selection system applies to all regular tax audits, unless there are unavoidable circumstances such as natural disasters.
Reform Measure ② | Pre-Disclosure of 10 Key Tax Audit Verification Items |
■ Overview
The NTS has identified and published 10 key issue types as "Key Verification Items" frequently assessed during tax audits. By conducting self-reviews at the time of corporate/individual income tax filing and preparing relevant documentation in advance, companies can significantly reduce their tax risk exposure.
■ List of 10 Key Verification Items
Tax Category | No. | Key Verification Item | Key Considerations (Critical Documents) |
Corporate Tax (Income Tax) | 01 | Personal Use of Corporate (Business) Credit Cards | Retain thorough documentation of business-related use (internal memos, emails, business trip reports, etc.) |
02 | Unreported Revenue Deposited into Personal Bank Accounts | Revenue should in principle be received through corporate accounts (contracts, tax invoices, etc.) | |
03 | Write-Off of Accounts Receivable without Justifiable Cause | Secure objective evidence of uncollectability (debtor bankruptcy or closure documentation, etc.) | |
04 | Fictitious Payroll Expenses with No Actual Employment | Maintain evidence of actual employment (employment contracts, attendance records, etc.) | |
05 | Improper Tax Credit Claims for R&D and HR Development Expenses | Retain documentation of full-time research dedication (research plans, lab notebooks, R&D records, etc.) | |
06 | Omission of Deemed Interest on Loans to Officers/Shareholders | Include deemed interest on loans to executives and shareholders (loan agreements, interest calculation schedules, etc.) | |
07 | Expensing of Expenditures Meeting Capitalization Criteria | Review criteria for capitalization vs. expense under relevant tax regulaitons (construction contracts, nature-of-work assessments, etc.) | |
VAT | 08 | Receipt/Issuance of Tax Invoices Not Reflecting Actual Transactions | Retain documentation of actual transactions (contracts, payment receipts, purchase orders, etc.) |
09 | Errors in Classification of Taxable vs. VAT-Exempt Transactions | Maintain pro-rata records for taxable and exempt supplies (contracts, statutory provisions, tax rulings, etc.) | |
10 | Failure to Account for VAT on Self Consumption of Business Assets | Review use of business assets for its own purposes (asset and inventory usage registers, etc.) |
RSM Korea View
The key verification items typically arise not from simple errors, but from insufficient documentation, discrepancies between the economic substance and legal form of transactions, and differences between accounting and tax treatment. Even companies with relatively robust internal controls may face repeated tax risk exposure in certain areas.
In particular, even for companies with certain internal controls in place, we recommend proactive review of the following items:
R&D and HR Development Tax Credit: Risk of credit disallowance due to inadequate segregation and documentation of dedicated research personnel
Expensing of Capitalizable Items: Risk of timing issues on deductible expenses due to inconsistency between accounting and tax treatment standards
Tax Invoices Not Reflecting Actual Transactions: VAT risk arising from discrepancies between contractual arrangements and actual transaction
For these items, we recommend an entity to review the documentation framework and basis for judgment.
This document has been compiled by Shinhan Accounting Corporation (RSM Korea) based on the NTS press release dated April 2, 2026, to assist corporate tax managers. The contents are for general informational purposes only and should not be construed as legal, tax, or accounting advice. Please consult your tax professional for guidance on individual matters.
| Issued by | International Business Division, Shinhan Accounting Corporation YS Kim, Vice President | Michael Min, Partner | SH Woo, Senior Manager |