Tax Audit Reform Measures Announced by the Korean NTS

The Korean National Tax Service (“NTS”) recently announced new tax audit measures intended to improve predictability and reduce administrative burdens for taxpayers. Beginning in April 2026, taxpayers selected for regular tax audits may choose the preferred timing of the audit within a designated three-month period. The NTS also disclosed 10 key audit focus areas that are frequently challenged during tax audits.

1. Introduction of the tax audit timing election regime

Under the new regime, taxpayers selected for regular tax audits may choose the preferred month for the commencement of the audit within a three-month period designated by the tax office. Taxpayers may indicate first and second preferences after receiving the initial notice from the tax office, and the tax office will subsequently confirm the final audit commencement date. Formal advance notice procedures will continue to apply, and the official audit notice will still be issued at least 20 days prior to the audit commencement date.

The new regime is expected to allow taxpayers to better manage audit timing around important business events such as financial closing periods, shareholder meetings or other periods involving significant internal workload.

2. Advance disclosure of key audit focus areas

The NTS also disclosed 10 categories of audit focus areas that are frequently identified during tax audits. The categories cover both corporate income tax and VAT matters and provide useful insight into the areas currently receiving increased scrutiny from the Korean tax authorities.

Examples of the disclosed focus areas include:

- personal or non-business use of corporate credit cards;
- omission of sales revenue through the use of personal accounts;
- improper write-off of receivables;
- inappropriate R&D tax credit claims;
- failure to recognize deemed interest on loans or advances to related parties;
- capitalization versus expense treatment issues (including ERP implementation costs); and
- incorrect VAT treatment, including misclassification between VAT-taxable and VAT-exempt transactions.

The NTS stated that practical guidance materials, including examples of actual assessment cases and Q&A materials, will also be made available through the NTS website and during the audit process.