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| Article 55 (Calculation of Necessary Expenses for Business Income) |
| (1) | Necessary expenses corresponding to the total amount of income in each taxable period of business income are as follows, except as otherwise expressly provided for in the Act and this Decree: <Amended by Presidential Decree No. 14860, Dec. 30, 1995; Presidential Decree No. 15565, Dec. 31, 1997; Presidential Decree No. 15969, Dec. 31, 1998; Presidential Decree No. 17032, Dec. 29, 2000; Presidential Decree No. 17456, Dec. 31, 2001; Presidential Decree No. 18173, Dec. 30, 2003; Presidential Decree No. 18705, Feb. 19, 2005; Presidential Decree No. 19327, Feb. 9, 2006; Presidential Decree No. 19890, Feb. 28, 2007; Presidential Decree No. 20618, Feb. 22, 2008; Presidential Decree No. 21214, Dec. 31, 2008; Presidential Decree No. 21301, Feb. 4, 2009; Presidential Decree No. 22034, Feb. 18, 2010: Presidential Decree No. 22075, Mar. 15, 2010; Presidential Decree No. 22580, Dec. 30, 2010; Presidential Decree No. 23356, Dec. 8, 2011; Presidential Decree No. 24356, Feb. 15, 2013; Presidential Decree No. 24638, Jun. 28, 2013; Presidential Decree No. 25193, Feb. 21, 2014; Presidential Decree No. 26067, Feb. 3, 2015; Presidential Decree No. 26982, Feb. 17, 2016; Presidential Decree No. 27829, Feb. 3, 2017> |
| 1. | Purchase price (excluding a reduction of purchase or a purchase discount) of raw materials for commodities or products sold and expenses incidental thereto. In such cases, the original purchase price and expenses incidental thereto shall be applicable, if the relevant business has consumed such for business use, as have been purchased for other purposes; |
| 1-2. | Incidental expenses in connection with sale, such as storage, packing charges, carriage, sales bounty, sales benefit, etc. of goods and products sold (in cases of sales bounty and sales benefit, including where they are paid without a prior agreement); |
| 2. | The book value of real estate at the time of its transfer (only applicable to cases of building construction business and real estate development and supply business). In such cases, with regard to real estate acquired for purposes, other than business, but has been used for business, the acquisition value calculated by applying Article 89 |
| 3. | Expenses for forestry business: |
| (a) | Purchase expenses for seeds, seedlings, and fertilizers; |
| (b) | Expenses for afforestation; |
| (c) | Management expenses; |
| (d) | Expenses for deforestation; |
| (e) | Equipment expenses; |
| (f) | Improvement expenses; |
| (g) | Expenses for selling forest trees; |
| 4. | Expenses for sericultural business: |
| (a) | Purchase expenses; |
| (b) | Breeding expenses; |
| (c) | Management expenses; |
| (d) | Equipment expenses; |
| (e) | Improvement expenses; |
| (f) | Sales expenses; |
| 5. | Expenses for livestock and poultry: |
| (a) | Expenses for hatchery eggs; |
| (b) | Delivery expenses; |
| (c) | Breeding expenses; |
| (d) | Equipment expenses; |
| (e) | Improvement expenses; |
| (f) | Sales expenses; |
| 6. | Employees' salaries; |
| 7. | Expenses for assets for business: |
| (a) | Repair expenses for maintaining current status of assets for business (including a part of idle facilities attached to the relevant business); |
| (b) | Expenses for management and maintenance; |
| (c) | Rent for assets for business; |
| (d) | Non-life insurance premiums of assets for business; |
| 7-2. | The book value of a passenger vehicle for business use at the time of selling the vehicle (referring to the amount computed by subtracting an amount excluded from the amount of business use, out of the depreciation costs under Article 33-2 (1) of the Act, in computing the book value, if the depreciation costs include such amount), where a person liable to double-entry bookkeeping under Article 160 (3) of the Act (hereinafter referred to as "person liable to double-entry bookkeeping") includes the sale price for the passenger vehicle for business use in gross revenue pursuant to Article 25 (3) of the Act; |
| 8. | Taxes and public charges related to business: |
| 9. | Deleted; <by Presidential Decree No. 22034, Feb. 18, 2010> |
| 10. | Mutual aid installments paid by a mutual aid business operator to the Construction Workers Retirement Mutual Aid Association pursuant to the Act on the Employment Improvement, etc. of Construction Workers; |
| 10-2. | Charges which an employer defrays under the Act on the Guarantee of Workers' Retirement Benefits; |
| 10-3. | Contributions from small and medium enterprises as defined under subparagraph 1 of Article 35-3 of the Special Act on Support for Human Resources of Small and Medium Enterprises; |
| 11. | Insurance premiums or charges which an employer defrays under the National Health Insurance Act, the Employment Insurance Act, and the Act on Long-Term Care Insurance for Older Persons; |
| 11-2. | Insurance premiums of an employer himself, which are defrayed as an employment-provided policyholder under the National Health Insurance Act and the Act on Long-Term Care Insurance for Older Persons; |
| 11-3. | Insurance premiums borne as a regional insured under the National Health Insurance Act and the Act on Long-Term Care Insurance for Older Persons; |
| 12. | Insurance premiums for a group genuine guaranty insurance and group refund-cum-guaranty insurance; |
| 13. | Interest paid on the debt incurred directly for gaining the gross amount of income; |
| 14. | Depreciation costs of fixed assets for business; |
| 15. | Appraisal losses on assets; |
| 16. | Irrecoverable bad debts (including bad debts to which a tax credit has not been applied under Article 45 of the Value-Added Tax Act, of irrecoverable receivables of the output value-added tax); |
| 17. | Bounties and other amounts similar thereto paid to any other party according to trade quantity or transaction amount; |
| 18. | Where the purchasing costs of those items destroyed by disaster, from among purchased commodities, products, real estate, and forest, are included among necessary expenses in the calculation of the amount of income in the taxable period which the relevant disaster occurs, the relevant costs; |
| 19. | Amounts paid for employees as expenses of sports activities and cultural activities at work, expenses for supporting family planning programs, expenses for employees’ get-together, etc.; |
| 20. | Value for free medical treatment paid by free treatment tickets determined by the Minister of Health and Welfare; |
| 21. | Expenses for inspection and training overseas which are related to business duties; |
| 22. | Operating expenses for special classes or middle or high schools attached to the industrial enterprises for working teenagers established under the Elementary and Secondary Education Act; |
| 23. | Operating expenses for child care centers at work established under the Infant Care Act; |
| 24. | Expenses paid for a geological survey, drilling, or digging galleries for prospecting minerals, and expenses for the relevant development; |
| 24-2. | Deleted; <by Presidential Decree No. 20618, Feb. 22, 2008> |
| 25. | Expenses (in cases of goods (excluding goods worth not exceeding 10,000 won per piece) donated to a specific person, limited to an amount not exceeding 30,000 won a year) paid for samples, calendars, diaries, cups, fans, and other similar articles to be donated to many and unspecified persons for purposes of advertisement and publicity; |
| 26. | Membership fees paid to organizations constituted by business operators, which are juristic persons, or the cooperatives or associations registered with the competent authorities; |
| 27. | Expenses that meet the requirements prescribed by Ministerial Decree of Strategy and Finance, out of expenses paid in a lump sum to surviving family members after death of an employee, such as schooling expenses; |
| 28. | Expenses related to the relevant gross revenue, out of expenses similar in nature to those specified in subparagraphs 1 through 27. |
| (2) | Bad debts specified in paragraph (1) 16 shall be those falling under any of Article 19-2 (1) 1 through 11 of the Enforcement Decree of the Corporate Tax Act. <Amended by Presidential Decree No. 22580, Dec. 30, 2010> |
| (3) | Among the charges to be included in necessary expenses pursuant to paragraph (1) 10-2, all the amount of charge paid by an employer to a retirement pension account shall be included in necessary expenses, and the maximum amount of the charge paid to the defined payment retirement pension shall be the amount obtained by deducting in the order the following amounts from the estimated amount pursuant to Article 57 (2); and where at least two charges exist, a charge of the retirement pension whose subscription agreement was first concluded shall first be included in necessary expenses: <Amended by Presidential Decree No. 22034, Feb. 18, 2010; Presidential Decree No. 22185, Jun. 8, 2010; Presidential Decree No. 22580, Dec. 30, 2010; Presidential Decree No. 23987, Jul. 24, 2012; Presidential Decree No. 24356, Feb. 15, 2013> |
| 1. | Reserves for retirement benefits as of the date of termination of taxable period concerned; |
| 2. | Amount of charge paid until the date of termination of immediately preceeding taxable period. |
| (4) | A business operator that has included charges in necessary expenses under paragraph (1) 10-2, shall submit a written report on a final tax base along with a statement of adjusted retirement pension charges determined by Ministerial Decree of Strategy and Finance to the head of the competent tax office having jurisdiction over the place for tax payment. <Amended by Presidential Decree No. 15565, Dec. 31, 1997; Presidential Decree No. 15747, Apr. 1, 1998; Presidential Decree No. 19327, Feb. 9, 2006; Presidential Decree No. 20720, Feb. 29, 2008; Presidential Decree No. 22580, Dec. 30, 2010> |
| (5) | Where a business operator who has included charges under paragraph (3) in necessary expenses falls under any of the following cases, the amount stipulated in the respective subparagraph shall be included in the gross amount of income, in calculating the amount of income during the taxable period wherein such causes have occurred: <Amended by Presidential Decree No. 15565, Dec. 31, 1997; Presidential Decree No. 19327, Feb. 9, 2006; Presidential Decree No. 22580, Dec. 30, 2010; Presidential Decree No. 23987, Jul. 24, 2012; Presidential Decree No. 24356, Feb. 15, 2013> |
| 1. | Deleted; <by Presidential Decree No. 24356, Feb. 15, 2013> |
| 2. | Where an insurance contract or trust contract is terminated: Amount of money to be reverted to a business operator; |
| 3. | Deleted; <by Presidential Decree No. 24356, Feb. 15, 2013> |
| 4. | Where the reserves revert to an employer under each subparagraph of Article 24 of the Enforcement Decree of the Act on the Guarantee of Workers' Retirement Benefits: The relevant reserves. |
| (6) | Where a resident who engages in a business of manufacturing, wholesale, or retail of food or daily necessities defined in subparagraphs 1 and 1-2 of Article 2 of the Act on Donation Encouragement of Food, Etc., (hereafter in this Article referred to as "food, etc.") donates, free of charge, surplus food, etc. left over from the business to a business operator specified in subparagraph 5 of Article 2 of the same Act or a person designated by such business operator, the book value of such donated food, etc. shall be included in necessary expenses. In such cases, the amount shall not be included in donations under Article 79 (1) 1. <Amended by Presidential Decree No. 22034, Feb. 18, 2010; Presidential Decree No. 27829, Feb. 3, 2017> |
| (7) | Bad debts specified in paragraph (2) shall be necessary expenses for the taxable period to which any of the dates prescribed by subparagraphs of Article 19-2 (3) of the Enforcement Decree of the Corporate Tax Act belongs. <Added by Presidential Decree No. 22580, Dec. 30, 2010> |