How I Saved 4,000,000 won in Income Tax Payments

//How I Saved 4,000,000 won in Income Tax Payments

How I Saved 4,000,000 won in Income Tax Payments

So recently, I was travelling around South Korea with my wife for our babymoon and I received a call while we were doing our laundry in Tong-Yeong (통용). Tong-Yeong is at the very southern area of South Korea. It is connected to Geoje-Island and is famous for Chungmu-Kimbap (충무 김밥), has lovely seafood, and has beautiful scenery. So, we were doing our laundry at one of the coin laundries in Tong-Yeong when I received a call from the tax office! They asked me if I was Antonia Jae-Kyung Choi and if I was the owner of IGL English Gyosoopso. I said yes, but said that I closed that business at the end of 2016. And the lady said that, well, I didn’t pay my taxes for 2016! Oh my goodness, I can’t believe I did not pay my taxes. Honestly, it was a little hectic transitioning from IGL English to fully focusing on Flower Gift Korea, but hey, no excuses. But yeah, if you only read this far, know one thing, pay your taxes on time! Or else you will pay more than you would have if you had filed and paid your taxes on time!

TongYeong South Korea Visit during our babymoon

*The above photo is a small collage I put together of our visit to Tongyeong. The photo does not do the visit justice, but it’ll do for now.

So the lady was explaining a bunch of things and I understood most of it, but I knew that it would be more effective to just hand the phone over to my wife. So I hand my wife the phone and she explains that I am a Way-gook-in and that I can’t speak Korean perfectly, and that she would talk on my behalf. So, I’m just standing there, waiting for the bad news, and I hear my wife ask how much do we owe? And she just gasped when she heard the number and then she hung up the phone (End the phone conversation? Do people even say hang up the phone anymore? I’ve been in Korea way too long). And I ask my wife how much do we owe? And she just gets all quiet and says, she said that if we pay the tax office, then we would owe around 6,000,000won for our income tax for 2016. 6 million won?! And maybe you think that the tax amount is a little or a lot, but it’s the largest amount of tax I’ve seen in my 5-6 years as a small business owner in South Korea. I mean, we paid much less than that for one of our years at Flower Gift Korea, and that year we made more money than when I was running IGL English for 2016.

But, the government worker advised us to talk to an accountant and we thought this was good advice. I mean, 6 million won? I mean, our tax payments for 2013, 2014 and 2015 combined did not even come close to 6 million won, so we were really really worried, and not happy. And we did not expect to have this 6 million tax bill, since we just sold our last business and didn’t have many streams of income. So, my wife wanted us to talk to an accountant. And that’s what we did. We put our vacation on hold, since we really couldn’t relax at the moment, and found an accountant nearby. My wife called and we went to get a consultation.

Once we got to the office, we saw that the workers were all busy working. Then one man approached us and asked us what was up. My wife explained our situation, we forgot to pay our taxes for 2016 and just received a call from the tax office. We explained how the tax office said that we would have to owe around 6 million won. So he got a pencil and grabbed a big book. He then asked us around how much we made and what kind of expenses we had. So we explained briefly everything and he did some math on a plain piece of paper. He then told us that it would be best for us to get a document from the government office that officially showed how much money you made in a year. In the end, he said that we would still be paying close to 6 million won with everything that we told him. And then we told him that he would get the paper from the government office and then come back.

So we go to the government office building and get the document that officially shows how much you made in sales. And we keep looking at the piece of paper he scribbled down some numbers. And it just didn’t make sense, how did we pay so little in taxes in the past, but now have this big tax bill. How did the other accountants do it? So, my wife and I were not going togo with this accountant, especially since our business was in Seoul and this guy was in Tong-Yeong. In the end, I got the feeling that he did not want us as his client and kind of just helped us out of the kindness of his heart. I felt bad for not going back to visit him at his office after getting the document, but I did offer to pay for the consultation, but he declined to receive any money. So yeah, we got the document from the government office building and decided that we would contact some accountants back in Seocho-gu, Seoul, which is where we live.

Honestly, the trip wasn’t the same after that. I don’t know if it was only due to this tax bill or if I was anxious that I wasn’t doing any work for a stretch of more than 2 weeks, but I’m sure it was a mixture of a bunch of things. Yeah, sorry to my wife. She said that she would have been fine travelling around Korea for more days, but didn’t want to travel with me, since I looked so anxious! I guess I’m a workaholic or need to feel like I’m building towards something. I guess I need help.

Anyways, we still continued with our trip and travelled for another 5 days or so. We went through Geoje-Island, stayed in Busan a day, then stayed along the mid-east coast for a few days, and then went home to Seoul. And the very first chance we got, we called an accountant and explained our situation. And the accountant we contacted was someone who practiced in Seocho-gu and even had experience working at the government tax office. So my wife and I thought that if anyone would know a way for us to pay less taxes, then this guy is it. So she explained our situation to him and he said that he would do what he could to help us pay less taxes! Okay, now this is an accountant I like!

So my wife visited the accountant and started to gather whatever documents the accountant told us to get. In the end, he was telling us to get things that the other accountant didn’t mention. He also told us that we could include certain expenses that the other accountant didn’t mention. So this accountant was really doing all he could do to help us lower our tax payment. After all that was said and done, what would have been a 6,000,000won tax bill, ended up being a 1,700,000won tax bill! Yup, you read that right. However, we did have to pay him for the services he provided us, which came to a total of 800,000won. And you might think that is high, but that cost includes a VAT payment for our Flower Gift Korea’s business, when we owned it. So I just divided the 800,000won payment into two, so for simplicity sake, we paid 400,000won for the tax service done for IGL English 2016. It is more than the 150,000won tax service fee we paid for 2014, but I would have been okay with paying even 1,00,000won to save 4,000,000won in taxes.

So there are a few lessons to learn from this experience:

  1. Make sure to pay your taxes on time!
  2. Find an accountant who looks for ways to help you pay less in taxes
  3. It is worth it to pay good money for a good accountant

 

 

By | 2018-10-25T13:52:50+00:00 October 25th, 2018|Categories: Korean Business Information|Tags: , , , |0 Comments

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