"Are Congratulatory and Condolence Payments Deductible?"... Missing Out on Tax Benefits If You Don't Know

National Tax Service’s Essential Q&A on Valid Documentation
for Young Entrepreneurs

If you are a young entrepreneur who has just started a business, it is just as important to accurately reflect all legitimate expenses as it is to increase sales in order to reduce your taxes. To do this, you must obtain valid documentation that officially recognizes that your business-related expenditures actually occurred. If you fail to collect such valid documentation, these expenses may not be recognized, or you may face disadvantages such as additional taxes, so caution is required.

Recently, the National Tax Service explained its tax support policies to young entrepreneurs in the agri-food foodtech sector through on-site communication sessions. First, the National Tax Service launched the "Startup Tax Care Service" to provide comprehensive support for young entrepreneurs. To minimize additional taxes for young entrepreneurs, the agency swiftly reviews the eligibility of deductions and reductions through comprehensive income tax return verification, proactively guiding on revised tax returns. In addition, it operates a variety of tax education programs in cooperation with 17 nationwide Startup One-Stop Support Centers, and provides various benefits to companies that complete these programs.

The Asia Business Daily DB

An official from the National Tax Service stated, "The requirements for various deductions and reductions are complicated, so there is a high chance that young entrepreneurs may apply them incorrectly when filing. We quickly review the eligibility of deductions and reductions through the comprehensive income tax return verification system and proactively provide guidance for revised returns," adding, "Although it is difficult to quickly review income amounts and necessary expenses that require various supporting documents and explanations, we focus on reviewing and guiding the appropriateness of deductions and reductions to help minimize the burden of additional taxes."

The following are key Q&As regarding valid documentation for young entrepreneurs.

-Can expenses be recognized if payment is made in cash?

▲If the expense is related to the business, cash payments can also be recognized as expenses. However, you must obtain valid documentation, such as a cash receipt, to prove the transaction actually occurred.

-Can expenses be recognized if paid with a personal credit card?

▲To have an expense recognized based on a credit card sales slip, the card must be issued in the business owner's name. Expenses paid with a credit card issued in another person's name cannot be recognized. However, if the credit card sales slip is in the name of an employee or family member, it may still be recognized as an expense if it can be objectively verified that the expense was related to the business.

-Are expenses recognized if a business credit card is used on weekends?

▲If it was used for business purposes, the day of the week does not matter. However, since weekend usage may be mistaken for personal use and the expense may not be recognized, you must ensure you have clear documentation to prove it was for business purposes.

-Are congratulatory or condolence payments recognized as expenses?

▲Congratulatory or condolence payments for employees can be recognized as welfare expenses within socially acceptable limits. To do this, you must keep documentation that proves the event and details of the payment. In the case of payments to employees of a business partner, up to 200,000 won can be recognized as business promotion expenses.

-How can documentation be obtained when paying influencers or others without a business registration number?

▲When making payments under a contract, you should retain the contract and financial documents as proof. If there is no contract, other documents that can confirm the actual work performed may be substituted. However, when making payments, you must withhold taxes such as business income tax, file and pay the withholding tax, and submit a payment statement.

-Is a receipt required for purchases under 30,000 won?

▲For business-related expenditures, you are generally required to obtain valid documentation (such as a tax invoice, credit card sales slip, or cash receipt). However, for small transactions under 30,000 won, the obligation to obtain such documentation is exempted. Nevertheless, you should still keep a simple receipt or other proof of the business-related expenditure, and to avoid unnecessary misunderstandings, it is recommended to use a credit card.

This content was produced with the assistance of AI translation services.