Photo = IRS

 

 

[Alpha Biz= Paul Lee] South Korea's National Tax Service (NTS) failed to impose taxes on over KRW 900 billion (approx. USD 680 million) in government-funded fishing vessel buyback payments for 15 years, according to a report by Dailian. The lapse occurred despite the expiration of the relevant tax exemption in 2009.



Under the Special Act on the Development of the Fisheries Industry, compensation paid to fishermen for decommissioning vessels under the government’s fleet reduction program was tax-exempt until December 31, 2009. However, the tax exemption was not extended, and payments made from 2010 to 2023 should have been taxed.



From 2010 to 2023, a total of 5,972 vessels were retired under the program, and KRW 902.98 billion was paid out. Based on standard tax calculations—excluding 60% as necessary expenses and applying a 20% tax on the remaining 40%—the government missed out on over KRW 72 billion in tax revenue.



Of this, approximately KRW 275.1 billion paid before 2019 is now beyond the statute of limitations, meaning the NTS can no longer collect taxes on those payments. The statute of limitations for tax collection in Korea is generally 5 years, or up to 7 years for unreported income.



Fishermen who participated in the program say they were unaware the payments had become taxable. Many claim that tax authorities failed to notify them for over a decade, only issuing guidance this year—just ahead of Korea’s annual income tax filing deadline—that the compensation should be reported as taxable income.

 

 

 

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