Yes, you can. You can report a business vehicle expense up to KRW 15,000,000 a year.
According to Korean income tax law, you can deduct your vehicle expense which is only related to ‘business usage’. The business usage amount is computed as ‘business usage mileage’ divided by a ‘total mileage’.
The term ‘business usage mileage’ refers to the distance traveled to perform business such as commuting to work, visiting business sites, vendors, clients, and attending meetings.
To keep track of this business usage mileage, the NTS(National Tax Service) requires to update a business mileage journal of the following form.
Now, it looks VERY tedious to keep a diary of the business vehicle and the tax office also understands you are too busy to manage your business itself afloat. If you choose not to write this Business Vehicle Mileage Report, then a default expense limit of KRW 15 MIL would be applied.
General automobile costs such as repairs, gas, tires, parking fee, and auto insurance premiums are tax-deductible items.
Please note that 5-year useful life will be used to compute the depreciation cost of your car. In other words, when you purchase a car for KRW 30MIL the depreciation cost is KRW 6MIL per year, which is derived by 30MIL / 5 years.
There is a lawful limit to this depreciation cost (KRW 8MIL per car), hence no matter how high valued car you bought for your business, you can only deduct a maximum of KRW 8MIL per year. (This KRW 8MIL limit is included in the annual expense limit of KRW 15MIL).
YES you can. As long as you can prove that the car was used for your business, the tax office allows you to deduct the expense from business income (This is only related to the self-employed person or 개인사업자, I will write about Corporate car expense later)
소득46011–527, 1993.03.04
1. 공부상의 등기, 등록이 타인의 명의로 되어있다 하더라도 사실상 당해 사업자가 취득하여 당해 사업에 공하였음이 확인되는 경우에는 이를 당해 사업자의 사업용 자산으로 보는 것이므로 그 자신의 유지 등에 관련된 비용은 당해 사업자의 소득금액계산에 있어서 필요경비에 산입할 수 있는 것임.
If you would like to ask more questions on business car, please feel free to reach myself at www.aratax.net
Written by Ara Jung (CTA)
All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation with appropriate professionals