Commentary from Brabners, Lee & Ko and Gaon describes tougher UK and South Korean tax enforcement, though the three pieces address different issues.
Brabners' Dan Stowers and Andy Horsfield say taxpayers face greater risks because HMRC has access to information through international reporting agreements, data-sharing arrangements and enhanced compliance powers. They write that even historic arrangements can come under scrutiny many years later, and that reliance on professional advisers does not necessarily provide a defence. The commentary follows a BBC Panorama programme on Roman Abramovich's financial affairs, which examined allegations that documents were falsified or backdated within structures connected to his wealth. Abramovich is reported to deny wrongdoing and any tax evasion.
Brabners says UK law permits tax-efficient arrangements, but problems arise where documentation does not reflect reality, ownership arrangements are obscured or information given to tax authorities is inaccurate or misleading. It says investigations can escalate from civil enquiries to allegations involving fraud, money laundering, sanctions compliance or other financial crime. The Criminal Finances Act 2017 creates a failure to prevent offence covering facilitation of UK or foreign tax evasion by an associated person. The UK offence applies to any corporate, anywhere. Penalties on conviction include an unlimited fine, debarment from public contracts and a variety of legal orders.
In South Korea, Lee & Ko's Jung Ho Ryu writes that the National Tax Service reportedly concluded several celebrities' one-person corporations were nominal entities lacking personnel, facilities and operational substance. The NTS denied their separate tax status and treated the income as personal income of shareholders, many of whom owned 100%. The authorities suggested the arrangements could potentially constitute tax evasion carrying possible criminal liability. Ryu says the marginal personal rate ranges from 6.6% to 49.5%, with 49.5% applying above US$719,000 (KRW1 billion), while effective corporate rates generally range from 11% to 27.5%. He says establishing a closely held corporation is not inherently abusive.
Separately, Gaon's Songkyeong Kim, Jaeyun Shim and Younggi Baek write that South Korean authorities historically refrained from taxing gains of foreign corporations without a permanent establishment from derivatives transactions with South Korean securities companies and underlying assets. They say this approach has fundamentally shifted, with the substance-over-form principle applied more strictly. Where the Tax Tribunal has cancelled assessments, they say, the authorities have taken a firm stance, even amending the Corporate Income Tax Act to reinforce the legal basis for taxation.
