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REGULATIONS CONCERNING RE-CLASSIFICATION OF UNPAID EXPENSES AS "OTHER INCOME" DECLARED UNCONSTITUTIONAL
The Grand Justice No. 657 Interpretation declared two regulations unconstitutional under Article 19 of the Constitution: Paragraph 3, Article 82 of the Enforcement Rules of Income Tax Act and Article 108-1 of the Tax Audit Rules.
These regulations stated that a profit-seeking enterprise must re-classify unpaid expenses overdue for two years as "other income." The Interpretation points out that the regulations lacked clear and specific authorization from the Income Tax Act, and that they increase tax burdens which do not legally exist for profit-seeking enterprises. Accordingly, these regulations should be rendered ineffective no later than one year from the date of issue of this Interpretation.