In Korea, acquiring a company means inheriting its tax history. Under Korean tax law, the "Secondary Tax Liability" rule can make the new majority shareholder liable for the target company’s unpaid taxes. Therefore, TDD is not just about checking numbers—it is about shielding yourself from future audits and penalties.

At Star Tax & Legal, we assess tax risks based on the aggressive standards of the National Tax Service (NTS).

1. Full Scope TDD (Comprehensive Compliance Review)

Recommended for Share Deals (Stock Acquisitions) where you inherit all past liabilities. We review all tax filings for the past 5 years (the standard statute of limitations in Korea).

• Key Focus: Corporate Income Tax, VAT, Withholding Tax, and "Deemed Gift" issues regarding related-party transactions. We also verify the strict documentation requirements for expenses.

• Deliverable: A comprehensive tax risk report quantifying potential additional taxes and penalties.

2. Limited Scope TDD (Major Risk Review)

A targeted approach for asset deals or smaller investments. We focus on the most material tax items for the recent 1 or 2 years.

• Best For: Asset deals (where tax liability inheritance is limited), small targets, or internal health checks.

• Key Focus: High-risk areas such as non-deductible expenses and VAT invoicing issues.

• Deliverable: A "Red Flag" memo highlighting only material tax exposures.

Important Note on Transfer Pricing (TP): Please note that a detailed Transfer Pricing study (benchmarking analysis) is distinct from standard tax compliance and requires a separate economic analysis. Therefore, TP risk assessment is excluded from the standard TDD scope