'Due to Exchange Tax Reclamation'... Korea Capital Market Institute Still Hasn't Received This Year's Budget

30 Exchanges and Others Pay Association Fees to Capital Research Institute
Capital Research Institute Uses Association Fees as Budget
Seoul National Tax Service Recognizes Association Fee Expenses
Only Busan National Tax Service Raises Issues with Association Fee Expenses

The Korea Exchange has yet to execute the Capital Market Research Institute's budget for this year. This is because the Busan National Tax Service has raised issues with the way the Capital Market Research Institute's budget is being executed and has initiated tax assessments. If the Capital Market Research Institute's budget is executed, additional tax assessments may be imposed. Since failing to allocate the budget could lead to its recovery, it is expected that the budget will be executed toward the end of December.

According to financial authorities and the financial investment industry on the 29th, the Korea Exchange underwent a tax audit by the Busan National Tax Service from April to July this year and received demands for additional tax payments. Currently, the Korea Exchange is undergoing an appeal process against the tax assessments from the Busan National Tax Service.

The issue concerns the membership fees paid to the Capital Market Research Institute. Until now, the Korea Exchange has paid membership fees to the Capital Market Research Institute and recognized these costs as deductible expenses. Deductible expenses refer to income disposition amounts that differ between corporate accounting and tax accounting, which are included as deductible expenses through tax adjustments to calculate taxable income. Simply put, the membership fees paid to the Capital Market Research Institute were recognized as expenses, providing corporate tax benefits.

The Busan National Tax Service suddenly raised this issue during this year's tax audit and imposed additional taxes. A Korea Exchange official explained, "The Busan National Tax Service pointed out that the expenses paid to the Capital Market Research Institute should be treated as 'non-designated donations' rather than membership fees," adding, "The Exchange maintains that treating them as membership fees is correct and that all taxes have been properly paid."

Not only the Korea Exchange but also about 30 organizations, including the Korea Financial Investment Association, pay membership fees to the Capital Market Research Institute. The Capital Market Research Institute uses these membership fees as its budget to exclusively conduct capital market research. With the Korea Exchange facing demands for additional tax payments, the Capital Market Research Institute has yet to receive its full budget for this year.

Another exchange official stated, "Since we are currently undergoing an appeal process against the tax assessments from the National Tax Service, executing the membership fees could lead to further tax demands," adding, "We are currently exploring options." He further noted, "If the budget is not allocated this year, a recovery process must be followed, so we plan to monitor the situation until the end of December before considering budget execution."

The Capital Market Research Institute is officially refraining from commenting on this issue. They explained that salaries for researchers and others are currently being paid without problems. The financial investment industry points out that it is unusual for the Busan National Tax Service to raise issues about the expenditure of membership fees.

A financial investment industry official said, "Institutions headquartered in Seoul, such as the Korea Financial Investment Association, are known to have no issues," adding, "The Seoul National Tax Service has reportedly responded that there is no problem with the membership fees paid to the Capital Market Research Institute."

In response, the Busan National Tax Service stated, "We do not officially comment on matters related to tax audits," but explained, "Membership fees can be treated as expenses if they meet work-related criteria, but if they are paid arbitrarily without relation to work, there are regulations that prohibit treating them as expenses."