Business registration
Concept of business registration- The term “business registration" refers to the reporting of a business operator, who is subject to an obligation to pay VAT, and relevant business details to the competent tax office (Source: 『Legal Terminology Casebook』, Ministry of Government Legislation·Korea Legislation Research Institute, 2003).
Q. What happens if I run a makeup shop without registering it as a business?
A. The following disadvantages will be incurred if you run a makeup shop without registering it as a business.
· You will be unable to issue tax invoices to customers, and thus you will not be able to benefit from related input tax deductions.
· Any transactions carried out in the absence of business registration will be deemed as unregistered transactions, and thus you will be responsible for paying additional taxes for the non-registration.
· In relation to any transactions at the place of business for which a VAT report could not be made, because of the absence of business registration, an additional tax for dishonest reporting and dishonest payment will be levied in addition.
Application period and method of application- A makeup shop operator shall file an application for business registration for each place of business with the head of the tax office having jurisdiction over each place of business, with the requisite documents, within 20 days from the commencement date of his/her business. However, a person who intends to newly start a business may file an application for business registration even before the commencement date of the business (Article 8 (1) of the Value-Added Tax Act).
- A makeup shop operator may also file an application for business registration with the head of any tax office other than the head of the tax office having jurisdiction over his/her place of business. In such cases, he/she shall be deemed to have filed an application for business registration with the head of the tax office having jurisdiction over his/her place of business (Article 8 (2) of the Value-Added Tax Act).
- A makeup shop operator who has two or more places of business (including those who currently operate one place of business but wish to open an additional one) may file an application for registration, per business unit, with the head of the tax office having jurisdiction over his/her main shop or principal office. In such cases, a business operator so registered shall be treated as a per-business unit taxable business operator (Article 8 (3) of the Value-Added Tax Act).
Documents to be submitted- A makeup shop operator who seeks to have his/her business registered shall submit the following documents to the competent tax office head or another tax office head considered favorable by the applicant (including submissions via the information network system of the National Tax Service (Article 11 (1) and (3) of the Enforcement Decree of the Value-Added Tax Act and Form 4 of the Enforcement Regulations of the Value-Added Tax Act).
· A copy of business commencement report certificate
· A copy of lease agreement (applicable only to those who have leased their place of business)
· If you have leased part of a commercial building, a floor plan of the relevant part (applicable only to the buildings that are subject to the Commercial Building Lease Protection Act)
· If a business operator that runs two or more places of business seeks to apply for registration per business unit with the head of the tax office having jurisdiction over his/her main shop or principal office, the above documents for attachment in respect of the places of business other than the one that is subject to taxation by business unit, in addition to documents specifying the location, business type, business item, etc. of such places of business
- A business operator that runs two or more places of business (including those who currently operate one place of business but wish to open an additional one), who seeks to apply for registration per business unit with the head of the tax office having jurisdiction over his/her main shop or principal office, shall also submit the above documents for attachment in respect of the places of business other than the one that is subject to per-business unit taxation, in addition to documents specifying the location, business type, business item, etc. of such places of business, to the tax office that has jurisdiction over the business unit to which the per-business unit taxation applies (Article 11 (2) and (3) of the Enforcement Decree of the Value-Added Tax Act).
※ Application for business registration on National Tax Service’s Hometax website (www.hometax.go.kr)
Issuance of business registration certificate- Upon receipt of an application for business registration, the head of a tax office having jurisdiction over the applicant’s place of business (main shop or principal office), shall issue to the applicant a business registration certificate stating the business operator’s personal details and other necessary matters within 2 days (the following day in cases falling on Saturdays, Sundays, holidays, substitute holidays, and Labor Day(Article 8(7) of the Value-Added Tax Act, Article 11(5) of the Enforcement Decree of the Value-Added Tax Act, and attached Form 7 of the Enforcement Regulations of the Value-Added Tax Act).
Sanctions in case of violation- If a makeup shop operator fails to file an application for registration of his/her business within the time limit for application, 1 percent of the total value of supplies during the period from the commencement date of the business to the date immediately preceding the registration application filing date shall be added to the amount of tax payment or deducted from the refunded tax amount (Subparagraph 1 of Article 60 (1) of the Value-Added Tax Act).