Detailed Procedures for Amending an Import Declaration with Underpaid Tax: Correction Period, Application Method, and Additional Surcharges. Released

When a deficit occurs in the tax amount paid after 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 'Rectification' which results from a customs post-audit or investigation, this is an important system that allows the taxpayer to minimize the burden of additional taxes that may arise by discovering and correcting errors themselves.

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 there is a deficit in the tax amount they declared and paid, or an error in the basis for calculating the tax amount, such as dutiable value or tariff classification. This correction is only possible within 6 months from the date of the initial import declaration and payment. This period is called the 'Correction Period'. Within the correction period, not only insufficient tax amounts but also errors in the basis for tax calculation, such as dutiable value, tariff classification, and tariff application, can be corrected. However, in the case of a final price declaration following a provisional price declaration, it is excluded from correction as it has its own prescribed procedure.

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

2. Correction Application Method and Procedure

If you recognize a tax deficit and wish to correct it within the correction period, you will follow the procedures below.

• Error Recognition and Preparation of Supporting Documents: The importer must clearly identify the cause of the tax deficit (e.g., omission of dutiable value, tariff classification error, incorrect tariff application, exemption application error, etc.) either independently or through a customs broker's review, and thoroughly prepare supporting documents such as contracts, invoices, packing lists, B/Ls, and cost statements. The accuracy and completeness of supporting documents are crucial for customs review.
• Application Form Preparation and Submission: The taxpayer fills out the 'Application for Correction of Import and Tax Declaration' (Customs Act Enforcement Rule Form No. 6) and transmits it to the head of customs through the Korea Customs Service Electronic Customs Clearance System (UNI-PASS). This application form must detail the insufficient tax amount and its reasons.
• Submission of Supporting Documents: After transmitting 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 relevant insufficient customs duties, etc., by the day after the date of the correction application. In other words, once a correction application is submitted, preparations for prompt tax payment should be made.

3. Amount to be Additionally Paid: Additional Charge

If a deficit in the tax amount occurs as a result of correcting the tax amount according to the application, the head of customs collects an ‘additional charge’ in addition to the insufficient tax amount. The additional charge referred to here differs in nature from 'additional tax' under general tax law. As correction is an acknowledgment of voluntary efforts to rectify, an additional charge in the nature of late interest is imposed on the tax amount paid after the legal payment deadline.

The additional charge is calculated for the period from the day after the initial payment deadline (or the payment date in case of pre-clearance payment) until the date the insufficient tax amount is actually paid. The applicable interest rate is calculated according to the "interest rate prescribed by presidential decree, considering the interest rate applied to financial institutions' time deposits." Currently, the rate is approximately 9.125% per annum (0.025% per day). Therefore, the longer the period from when the tax deficit occurs until payment, the greater the burden of the additional charge.

4. Role and Advice of Customs Broker

Import declarations always carry the potential for errors due to the entanglement of various laws and complex procedures. Especially, the determination of dutiable value or tariff classification are areas that require specialized knowledge. Customs brokers help prevent such errors in advance, and if errors occur, they provide professional advice to ensure quick and accurate responses using the most appropriate method for the situation, such as Correction, Amended Declaration, or Request for Rectification. They can alleviate this burden by supporting all procedures, from preparing necessary supporting documents to drafting applications and responding to customs, throughout the process of correcting insufficient tax amounts.

If a tax deficit is recognized, consulting a customs broker without delay and taking appropriate action within the correction period is the wisest way to reduce the burden of unnecessary additional charges or additional taxes.