Correction Application for Underpaid Import Declaration Tax: Detailed Procedures, Including Amendment Period, Application Method, and Additional Penalty Tax Released

When a shortfall 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 there is a shortfall in the declared and paid tax amount, the taxpayer can voluntarily correct it through a system called 'amendment'. Unlike 'correction' resulting from post-clearance audits or investigations by customs, this is an important system that allows the taxpayer to minimize the burden of additional taxes that may arise by discovering and rectifying errors themselves.

1. Amendment Period and Eligibility

Amendment (補正) refers to a system where a taxpayer voluntarily applies to the head of customs for correction when they realize there is a shortfall in the tax amount they declared and paid, or an error in the basis for tax calculation such as the dutiable value, tariff classification, etc. This amendment is only possible within 6 months from the date of the initial import declaration and payment. This period is called the 'amendment period'. Within the amendment period, not only can the deficient tax amount be corrected, but also errors in items fundamental to tax calculation, such as dutiable value, tariff classification, and application of tariff rates. However, in the case of a final price declaration following a provisional price declaration, it is excluded from amendment as it has its own prescribed procedure.

If 6 months have passed since the import declaration and payment date, the 'amendment' system cannot be used, and in this case, the correction must be made through a 'revised declaration'. Since a revised declaration can result in a greater burden of additional taxes than an amendment, it is crucial to process it as quickly as possible within the amendment period if an error is discovered.

2. Amendment Application Method and Procedure

If you recognize a tax shortfall and wish to make a correction within the amendment 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 shortfall (e.g., omission of dutiable value, tariff classification error, incorrect application of tariff rate, error in applying exemption/reduction, etc.) and thoroughly prepare supporting documents such as contracts, invoices, packing lists, B/L, cost statements, etc. The accuracy and completeness of supporting documents are crucial for customs review.
• Application Form Completion and Submission: The taxpayer must complete the 'Application for Correction of Import/Tax Declaration' (Form No. 6 of the Enforcement Rule of the Customs Act) and submit it to the head of customs through the Korea Customs Service's electronic clearance system (UNI-PASS). This application form must detail 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. Customs will then review the appropriateness of the amendment application based on the submitted materials.
• Customs Notification of Amendment and Payment: The head of customs reviews the application details and supporting documents and notifies the approval status of the amendment. If the amendment is approved, the taxpayer must pay the deficient customs duties, etc., by the day after the amendment application was submitted. In other words, once an amendment application is received, preparations for prompt tax payment should be made.

3. Additional Amount to Be Paid: Surcharge

If, as a result of amending the tax amount according to an application, a deficient tax amount occurs, the head of customs collects a 'surcharge' in addition to the deficient tax amount. The surcharge referred to here is different in nature from the 'additional tax' under general tax law. Since an amendment acknowledges a voluntary effort to correct, a surcharge, which has the nature of a late payment 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 in case of pre-clearance 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 rate applied to fixed deposits of financial institutions." The current rate is approximately 9.125% per annum (0.025% per day). Therefore, the longer the period from the occurrence of the deficient tax amount to its payment, the greater the burden of the surcharge.

4. Role and Advice of a Customs Broker

Import declarations involve various regulations and complex procedures, so there is always a possibility of errors. Especially, the determination of dutiable value or tariff classification is an area that requires specialized knowledge. A customs broker provides expert advice to prevent such errors in advance and, should errors occur, to respond quickly and accurately using the most appropriate method for the situation, such as amendment, revised declaration, or request for correction. We can alleviate this burden by supporting all procedures, from preparing necessary supporting documents to drafting applications and dealing with customs, during the process of correcting a deficient tax amount.

If you recognize a tax shortfall, consulting with a customs broker without delay and taking appropriate action within the amendment period is the wisest way to reduce the burden of unnecessary surcharges or additional taxes.