Most small and medium-sized companies often opt to outsource their bookkeeping and payroll to tax firms. This is because bookkeeping, which involves creating financial statements, requires expertise in accounting and tax knowledge. It's more efficient for companies to outsource this task to a reliable tax accountant rather than hiring an employee for the job.
Consequently, you'll receive financial statements from your tax accountant. These statements typically include the Balance Sheet and Profit & Loss Statement, providing a snapshot of the company's current financial standing.
However, understanding the numbers in these statements can be challenging if you're not well-versed in accounting. To bridge that gap, I'll walk you through each item in the financial statement, helping you grasp your company's current financial status.
In Profit & Loss Statement, it reveals the company's revenue and expenses.
What do you know about yout Profit & Loss statement? (Salary and wages)
Most small and medium-sized companies often opt to outsource their bookkeeping and payroll to tax firms. This is because bookkeeping, which involves creating financial statements, requires expertise in accounting and tax knowledge. It's more efficient for
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In this first chapter, following the previous post (Salary exepense) let's talk about salary paid to family memebrs.
1.Is it allowed to pay a salary to family members?
Certainly, it's permissible when they are actively working in the company. Many small and large companies hire their family members because they are trustworthy and may be more motivated to contribute to the company's growth than other employees. So, hiring and paying family members is not a problem at all.
2.If a salary is paid to family members who don't work in the company?
It can be problematic. The Korean tax office may reject the salary expense paid to family members, leading to an increase in your company's income tax. Additionally, there could be penalties for underreporting your company's income due to the salaries paid to family members who are not actively working in the business.
3.How does the tax office determine if family members are working or not?
If the family member has another job and lives far from your company's location, the tax office might question whether they are actually working. The tax office can verify this through your company's work logs, testimony from other employees, or by examining the actual work done by the family members.
4.If the salary to family members is higher than that of other employees?
Without a valid reason, it's not allowed to pay a higher salary than other employees in the same position and with the same responsibilities. When setting the salary for your family members, check the salaries of other employees in similar positions. Any excess amounts may be denied as your company's expenses.
5.What's the impact of paying salaries to family members?
The properly paid salary is considered a company expense, which can reduce corporate income tax. However, it's essential to follow the correct process, including making a contract, hiring as an employee, registering for social insurance, and ensuring payroll includes withholding taxes.
If you are in search of a reliable English-speaking tax accountant, please don't hesitate to contact us! G-Tax Firm specializes in providing tax services exclusively for foreigners and foreign corporations in Korea. With extensive experience working with international companies, you can trust us for accurate and professional assistance
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