'Tax-saving Terminals' Luring Self-Employed... Risk of Heavy Tax Burden

National Tax Service Cracks Down on Unregistered Payment Agencies
Exploiting Excessive Fees Through False Advertising

While moving around with a food truck, Mr. A recently faced difficulties as he refused credit card payments and only accepted cash from customers. During this time, he came across an advertisement for a 'non-business operator terminal that allows credit card affiliation without business registration' and signed a contract with an unregistered payment agency, enabling him to accept credit card payments from customers. However, the National Tax Service (NTS) discovered this fact while detecting unregistered payment agencies and analyzing the sales data of affiliated stores they secured, ultimately imposing a retroactive tax assessment of several million won including value-added tax.

On the 21st, the NTS announced that it is taking strict action against unregistered payment agencies that falsely advertise 'tax-saving terminals' and encourage affiliated stores to falsify sales. The NTS views that payment agencies not registered with the Financial Services Commission are collecting excessive fees of about 7-8% from self-employed individuals through false advertisements such as 'tax-saving terminals,' thereby promoting tax evasion and avoidance of the four major social insurances. These unregistered electronic payment agencies hide the sales of self-employed individuals by not submitting payment agency data to the NTS.

Credit Card Payments Must Use PG Companies Registered with the Financial Services Commission

When self-employed individuals make payments with credit cards, they must use electronic payment gateway (PG) companies registered with the Financial Services Commission. Additionally, the National Tax Service utilizes data collected from these companies to provide reporting assistance materials on the Hometax system.
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Self-employed individuals must use electronic payment gateway (PG) companies registered with the Financial Services Commission when accepting credit card payments. Additionally, the NTS utilizes data collected from these companies to provide reporting assistance materials on the Hometax system. If phrases such as 'tax-saving terminal,' 'split sales,' or 'card sales cash conversion' are used, or if false advertisements are made claiming non-business operator or tax-exempt terminals that do not impose taxes, health insurance, or national pension, it is all illegal. However, some self-employed individuals knowingly evaded taxes using so-called 'tax-saving terminals.' If such facts are revealed, they must pay up to 40% in penalties for non-reporting or underreporting, as well as late payment penalties.

The NTS regularly reviews the value-added tax filings of affiliated stores suspected of using unregistered PG companies. It also shares information on unregistered PG companies with the Financial Supervisory Service and maintains a cooperative system through practical consultations.

An NTS official urged, "Please be cautious not to be misled by tax-saving terminals," and added, "To avoid disadvantages such as penalty burdens due to reporting errors, please check the reporting assistance materials before filing and ensure to include sales made through unregistered PG companies for sincere reporting."