A total of 303 public interest foundations were found to have committed accounting irregularities and other violations last year despite receiving inheritance and gift tax exemptions, resulting in 19.8 billion won ($14.3 million) in back taxes, the National Tax Service (NTS) said.
The NTS announced the enforcement cases on Tuesday while outlining disclosure obligations for public interest foundations. These foundations are exempt from inheritance and gift taxes on donated assets, but must fulfill legal obligations including reporting donated assets, using funds for public purposes and disclosing financial statements.
Foundation A was assessed approximately 200 million won in gift taxes after using foundation funds to pay construction costs for a building registered under the chairman's son's name.
Foundation B was caught paying millions of won in membership fees for a social club operated for the chairman's personal networking purposes and was assessed back gift taxes.
Foundation C was found to have used corporate credit cards on a scale exceeding 100 million won for the chairman's family, including purchases of jewelry, duty-free shopping, golf outings and pet and skincare products. The NTS assessed a total of 250 million won on Foundation C, including corporate taxes related to the misuse of corporate cards.
Foundation D was found to have employed the donor's spouse, children and daughter-in-law as executives and staff, paying them approximately 100 million won in salaries. The foundation also failed to report donated artworks, resulting in an additional 14 million won in penalty taxes.
Public disclosures and filings by foundations serve as the starting point for detecting such violations. Foundations that closed their books at the end of December last year must disclose their financial statements on Hometax, the NTS's online tax platform, by April 30.
Foundations can use the Hometax integrated filing system to complete all five types of required documents at once rather than preparing each separately. The NTS also provides tailored guidance on frequently violated items such as personal use of corporate cards and improper hiring of related parties.
"Disclosures and reports are the most important and fundamental information for the public to evaluate public interest foundations," the NTS said. "We urge foundations to file accurately and faithfully so that they become organizations the public can trust when making donations. We will respond sternly to illegal and improper conduct that undermines sound operations, such as the private use of donations or misappropriation of funds."