Korean Bookkeeping & Filing Duty Checker

A sole proprietor filing Korean income tax runs into three questions at once. Must the books be kept by double-entry, or is a simplified ledger enough? If no books are kept and income is estimated, may the simplified expense ratio be used, or does the standard expense ratio apply? And must a tax accountant's verification report be filed with the return? Choose the business group, enter last year's and this year's revenue, and the tool answers all three and gives the filing deadline.

All three regimes use the same frame: three business groups crossed with a revenue threshold. Wholesale and retail have the highest thresholds, manufacturing, food and construction sit in the middle, and rental and services have the lowest. That is why a tutoring academy can be obliged to keep double-entry books at a level of sales where a clothing shop still qualifies for the simplified ledger.

Use it at the start of the year, once last year's sales are known. The bookkeeping duty is fixed by the previous year's revenue, so entering last year's figure in January tells you which books to keep this year. If double-entry is required, that is the moment to engage a tax accountant, so that financial statements can be produced later. Finding out in May is too late.

Use it again at the end of the year. The verification requirement is judged on the current year's revenue, so if sales are near the threshold, enter the year's figure in December and budget for the report and its timetable. It is also the first thing to settle when getting quotes for tax representation, because the fee for a simplified ledger, double-entry books and a verification report differ completely.

The bookkeeping duty comes from 소득세법 시행령 제208조제5항. If the previous year's revenue was at least ₩300 million for wholesale, retail, agriculture, fishing and property dealing, ₩150 million for manufacturing, food, lodging, construction, transport and IT, or ₩75 million for rental, professional services, education, health and personal services, the business must keep double-entry books. Below those lines a simplified ledger is acceptable.

The expense ratio for estimated returns is set by 제143조제4항 of the same decree. If the previous year's revenue was under ₩60 million, ₩36 million or ₩24 million for the three groups respectively, income may be estimated with the simplified expense ratio; at or above those figures the standard expense ratio applies. Under the standard ratio only purchases, rent and wages count as documented expenses, and a low ratio covers everything else, so the tax rises sharply.

The verification requirement is in 제133조제1항. It is judged on the current year's revenue: ₩1500 million for the wholesale group, ₩750 million for the manufacturing group and ₩500 million for the service group. Those caught must file a report prepared by a tax accountant under 소득세법 제70조의2, and in return the deadline moves from 31 May to 30 June. In the year a business opens there is no previous year, so the books and the expense ratio default to the lightest option, but verification is judged on that year's sales and can apply even in year one.

Take the default on screen: the service group with ₩50 million of revenue last year and ₩50 million this year. Last year's ₩50 million is under the ₩75 million double-entry line, so a simplified ledger will do, with ₩25 million of headroom. It is over the ₩24 million simplified-ratio line, though, so an estimated return would use the standard expense ratio. This year's ₩50 million is nowhere near the ₩500 million verification line, so the deadline is 31 May.

Change it to ₩80 million last year and ₩520 million this year and everything flips. ₩80 million exceeds ₩75 million, so double-entry books are required, and ₩520 million exceeds ₩500 million, so a verification report is due and the deadline becomes 30 June. A clothing shop in the wholesale group with ₩50 million last year, by contrast, is under both the ₩300 million bookkeeping line and the ₩60 million ratio line, and may use the simplified ledger and the simplified expense ratio.

The most common error is judging all three tests on one year's number. Books and expense ratios follow last year's sales; verification follows this year's. People relax because last year was small and then get caught by verification when this year jumps, or assume a quiet year frees them from double-entry when last year's revenue still binds them.

A business obliged to keep double-entry books that files on a simplified ledger pays a non-bookkeeping penalty of 20% of the computed tax and loses the bookkeeping credit that simplified-ledger businesses earn by keeping full books voluntarily. Anyone running two trades or several premises must convert the other revenue into the main trade's terms and add it up, so judging by one shop's sales alone gives the wrong answer. And professional service businesses such as lawyers and tax accountants face the ₩500 million verification line regardless of which group they fall into, which is easy to miss.