Seoul, South Korea – South Korea's National Tax Service (NTS) has announced a significant overhaul of its year-end tax settlement system, effective from January 2024. The new regulations are aimed at curbing tax evasion and ensuring accurate tax declarations.

One of the most notable changes is the tightening of rules for dependent deductions. Starting next year, taxpayers will no longer be able to claim deductions for parents or spouses whose annual income exceeds 1 million won. Previously, there was more flexibility in these deductions.

To enforce these new regulations, the NTS will proactively identify and exclude ineligible dependents from the year-end tax settlement system. Taxpayers will receive notifications if any of their claimed dependents do not meet the new income criteria.

"We are taking these steps to prevent excessive deductions and promote honest tax reporting," said an official from the NTS. "The new system will make it easier for taxpayers to comply with the tax laws."

Other changes to the tax settlement system include:

No deductions for deceased dependents: Deductions for dependents who passed away before December 31, 2023, will no longer be allowed.
Stricter rules for married couples: Spouses who have divorced before the end of the tax year cannot be claimed as dependents, even if they meet the income requirements.
Limited deductions for extended family: Deductions for relatives beyond the immediate family, such as uncles, aunts, and nieces, will be restricted.
The NTS has warned that taxpayers who make false or exaggerated claims on their tax returns could face penalties of up to 40%. The agency also plans to increase scrutiny of taxpayers who claim excessive charitable donations or other deductions.

"We will not tolerate any attempts to evade taxes," the NTS official said. "We will continue to take strong action against those who violate the tax laws."

The new rules are expected to have a significant impact on the year-end tax settlement process for millions of South Koreans. Taxpayers are advised to carefully review the updated guidelines and consult with a tax professional if they have any questions.