Inquiry: Detailed procedures for correcting an import declaration due to insufficient tax payment, including correction period, application method, and additional tax payable. Released

When a deficiency occurs in the tax amount paid after an import declaration and one wishes to correct it, many people are curious about the procedures and necessary details. As a customs broker, I will provide clear and detailed guidance on such situations. If the declared and paid tax amount is insufficient, the taxpayer can voluntarily correct it through a system called 'Correction'. Unlike 'Correction by assessment' (경정) resulting from post-audit or investigation by customs, this is an important system that allows taxpayers to minimize the burden of additional taxes (가산세) that may arise by voluntarily discovering and rectifying errors.

1. Correction Period and Eligibility

Correction (補正) refers to a system where a taxpayer voluntarily applies to the head of customs for correction when they realize that there is a deficiency in the tax amount declared and paid by themselves, or an error in the basis for calculating the tax amount, such as customs value or tariff classification. This correction is only possible within 6 months from the date of the initial import declaration and tax payment. This period is called the 'Correction Period'. Within the correction period, not only insufficient tax amounts but also errors in items fundamental to tax calculation, such as customs value, tariff classification, and applied tariff rates, can be corrected. However, in the case of a final value declaration following a provisional value declaration, it is excluded from correction as it has its own established procedures.

If 6 months have passed since the date of import declaration and tax payment, the 'Correction' system cannot be used, and in this case, the correction must be made through an 'Amended Declaration'. An amended declaration may entail a greater burden of additional taxes (가산세) than a correction, so it is important to handle it promptly within the correction period if an error is discovered.

2. Method and Procedure for Correction Application

If you recognize a tax deficiency and wish to correct it within the correction period, you will follow these procedures:

• Error Recognition and Preparation of Supporting Documents: The importer, either independently or through a customs broker's review, must clearly identify the cause of the tax deficiency (e.g., omission of customs value, tariff classification error, incorrect application of tariff rate, error in duty reduction/exemption application, etc.) and thoroughly prepare supporting documents such as contracts, invoices, packing lists, B/L, and cost statements. The accuracy and completeness of supporting documents are crucial for customs review.
• Application Form Preparation and Submission: The taxpayer prepares the 'Application for Correction of Import/Tax Declaration' (Form No. 6 of the Enforcement Rule of the Customs Act) and submits it to the head of customs through the Korea Customs Service Electronic Customs Clearance System (UNI-PASS). This application form must specify the details of the deficient tax amount and the reasons for it.
• Submission of Supporting Documents: After submitting the application form, the prepared supporting documents are submitted to customs. These can be attached electronically or submitted directly, and customs will review the appropriateness of the correction application based on the submitted materials.
• Customs' Notification of Correction and Payment: The head of customs reviews the application details and supporting documents and notifies whether the correction is approved. If the correction is approved, the taxpayer must pay the corresponding deficient customs duties, etc., by the day after the date of the correction application. In other words, once a correction application is accepted, preparations for prompt tax payment should be made.

3. Additional Amount to Be Paid: Surcharge

If a deficiency in the tax amount arises as a result of correcting the tax amount based on the application, the head of customs collects a 'surcharge' in addition to the deficient tax amount. The surcharge mentioned here differs in nature from 'additional taxes' (가산세) under general tax law. As correction is an acknowledgment of voluntary rectification efforts, a surcharge in the nature of late interest is imposed on the tax amount paid after the statutory payment deadline.

The surcharge is calculated for the period from the day after the initial payment deadline (or the payment date for pre-acceptance payment) until the date the deficient tax amount is actually paid. The applicable interest rate is calculated according to 'the interest rate prescribed by presidential decree, considering the interest rates applied to time deposits of financial institutions'. Currently, the rate is around 9.125% per annum (0.025% per day). Therefore, the longer the period from the moment the deficient tax amount arises until its payment, the greater the burden of the surcharge.

4. Role and Advice of a Customs Broker

Import declarations involve various laws and complex procedures, meaning there is always a possibility of errors. In particular, customs valuation and tariff classification are areas that require specialized knowledge. Customs brokers provide professional advice to prevent such errors in advance, and if errors occur, to respond quickly and accurately using the most appropriate method for the situation, such as Correction, Amended Declaration, or Request for Assessment Correction. They can alleviate this burden by supporting all procedures, from preparing necessary supporting documents to drafting applications and responding to customs during the process of correcting deficient tax amounts.

If a tax deficiency is recognized, consulting a customs broker without delay and taking appropriate action within the correction period is the wisest way to reduce unnecessary surcharges or additional tax burdens.