Social distance postponed tax investigations

Daewoong Bio, Hanmi, Bayer, 5 years to investigate tax

The serious and urgent matters such as act of cornering and hoarding are expected to be implemented as scheduled

In order to prevent the spread of COVID-19, tax investigations by some pharmaceutical companies in progress are reportedly delayed.

 

According to the industry, Daewoong Bio, Bayer Korea, and Hanmi Pharm are currently under investigation by the National Tax Service.

 

This survey is believed to be a regular tax investigation, not a special tax investigation.

 

On the 30th of last month, the National Tax Service announced the policy of minimizing on-site tax investigations of local tax offices and front-line tax offices to actively participate in the government's social distance following COVID-19.

 

As a result, the pharmaceutical industry's tax investigation schedule is also postponed until the COVID-19 situation calms down.

 

When conducting an on-site tax investigation, the National Tax Service is minimizing on-site investigations based on the judgment that face-to-face contact with investigators and the company's working team is inevitable, and it can also put more psychological burden on the company.

 

However, it said that it is performing as scheduled on issues that are bad or urgent such as act of cornering and hoarding of masks or hand sanitizers.

 

Since mid-February, the NTS Jungbu Regional Office has been conducting tax investigations by dispatching employees from the Bureau 1 to the Daewoong Bio Office.

 

A representative of Daewoong Bio explained, "The NTS Jungbu Regional Office Bureau 1, 2, and 3 are usually in charge of general tax investigations.

 

Since 2015, they have been faithfully engaged in regular tax investigations received in five years." In the 2015 tax investigation, the NTS Jungbu Regional Office judged the commission paid by Daewoong Bio to CSO (sales agency) in full, and collected ₩15.3 billion in taxes the following year.

 

In response, Daewoong Bio brought a judgment against the Tax Tribunal and was finally judged by the National Tax Service's misconduct.

 

In 2017, there was a precedent that received a total of ₩15.3 billion back, which is the total collection tax amount related to sales agency fees.

 

Unlike the claims of the Korea Customs Service, through the final ruling, the tax tribunal clearly identified the substance of the CSO, paid a fee according to the contract, and the CSO also filed a tax return as an import amount while also acting as a pharmaceutical sales agent for pharmaceutical companies other than Daewoong Bio.

 

Was judged to be a normal business activity.

 

In addition, on the basis of the fact that it was difficult to judge that the CSO sales agency activity violated related laws and social order, such as the pharmaceutical affairs law the company decided that it was difficult to consider the company to spend entertainment expenses.

 

At the time, about 40% of the fees that Daewoong Bio paid to the CSO were judged as entertainment expenses, and taxes were collected.

 

In a ruling, the tax tribunal said that there was no specificity at the industry's normal level.

 

Currently, the pharmaceutical industry typically pays 40% to 50% of the fees paid to CSOs.

 

The owner-related specialty corporation mentioned in the last tax investigation was also found to be one of the largest number of CSOs operated by Daewoong Bio, which is currently less than 1% of the total CSO operation fee.

 

At that time, Daewoong Bio was using about 200 CSOs.