South Korea: New Tax Audit Scheduling Rules and 10 Priority Tax Checks

South Korea's National Tax Service allows taxpayers selected for regular audits to request their preferred audit period within three months and has published 10 priority verification areas. The measures, highlight VAT invoice accuracy, unreported sales and the importance of reviewing tax records before an audit.

South Korea's Tax Authority (National Tax Service - NTS) has introduced changes to its regular tax audit procedures, allowing selected taxpayers greater flexibility in scheduling audits and providing advance information about frequently examined tax compliance issues.

The changes are relevant to retailers, retail chains, e-Commerce businesses, accounting software providers and tax compliance professionals, particularly because several disclosed audit priorities directly concern sales reporting, tax invoices and VAT classification.

The Tax Authority introduced two measures in April 2026 as part of its efforts to make regular tax audits more predictable and reduce disruption to business activities.

The first is the Regular Tax Audit Timing Selection System. Taxpayers selected for a regular audit can indicate their preferred starting month within three months, rather than having the audit date determined entirely by the tax authority.

Businesses may provide first and second preferences. The Tax Authority then determines the audit schedule and issues formal advance notification at least 20 days before the investigation begins.

This flexibility allows companies to avoid particularly demanding business periods, including financial year-end closing, external audits or other significant operational activities. However, it does not permit taxpayers to cancel an audit or choose an unrestricted starting date.

The second measure is the advance publication of 10 priority verification areas, based on tax issues repeatedly identified in previous investigations.

The Tax Authority provides explanations, practical examples and guidance to help taxpayers identify potential problems before an audit takes place.

The published verification areas cover corporate income tax, individual income tax and VAT.

These are existing tax compliance obligations rather than newly prohibited activities.

The Tax Authority has identified them as recurring problems that businesses should examine before submitting tax returns or undergoing an investigation.

For retailers and businesses processing large numbers of transactions, three of the disclosed verification areas have direct implications for invoicing, accounting and transaction reporting.

The first concerns unreported sales. Businesses must ensure that revenue received through company accounts, personal accounts or online platforms is correctly included in their tax records. Payments received outside the usual business banking arrangements can create discrepancies between actual sales and reported revenue.

The second concerns tax invoices that do not accurately reflect the underlying transaction. Businesses should ensure that electronic tax invoices correspond to genuine supplies and contain accurate supplier, customer and transaction information.

The third concerns incorrect VAT classification. In South Korea, the standard VAT rate is generally 10%, while certain supplies qualify for zero-rating or exemption. Businesses must distinguish these treatments correctly when recording sales and preparing VAT returns.

The Tax Authority has also identified unreported supplies for personal purposes. Depending on the circumstances, business goods used privately may create VAT obligations even when no ordinary customer sale occurs.

Under South Korea's Framework Act on National Taxes, certain additional taxes may be waived where a taxpayer establishes a legally justified reason for failing to comply.

However, ignorance of an obligation does not automatically constitute a justified reason.

More serious cases involving fraudulent conduct may lead to higher penalties. For example, the additional tax for fraudulent underreporting can reach 40%, compared with the ordinary 10% underreporting penalty. The assessment limitation period may also extend to 10 years in cases involving fraud.

These consequences depend on the specific circumstances and legal classification of the violation. The publication of audit priorities does not automatically establish fraudulent conduct or remove existing statutory protections.

Impact on retailers, POS and software providers

For retailers, the changes reinforce the importance of maintaining accurate connections between sales transactions, payment records, tax invoices and VAT reporting.

Businesses operating multiple stores, online platforms or separate accounting systems should be able to reconcile revenue across different sales channels.

For POS, electronic invoicing and ERP software providers, the practical considerations include accurate transaction recording, tax classification, traceable corrections and reliable data exports for audits.

The reforms concern how the Tax Authority conducts audits and which existing tax compliance issues it intends to examine.

What should businesses do?

Businesses should review the published Tax Authority verification areas and assess whether their accounting and transaction records contain similar risks.

Retailers should prioritise reconciliation of reported sales against payment records, verification of electronic tax invoices and correct classification of taxable, zero-rated and exempt transactions.

Where discrepancies are identified, businesses should evaluate whether corrective filings are appropriate before receiving an audit notice.

Companies selected for regular audits should use the available scheduling flexibility to organize existing records and prepare supporting documentation. They should not create or backdate documents to justify transactions that did not occur.

The main relevance is the connection between transaction accuracy and tax audit readiness. Retail and invoicing systems should allow businesses to demonstrate how recorded transactions correspond to reported revenue and VAT liabilities.

The reforms offer additional preparation opportunities, but the strongest protection remains accurate transaction processing and timely correction of errors before an investigation begins.

The principal source is the National Tax Service announcement of April 2, 2026 introducing the audit timing selection system and publishing the 10 priority verification areas - Source

Ivana Picajkić Medior Legal Consultant Linkedin profile