Corporate Credit Card
Corporate credit card is the one that can enhance the transparency of expenses incurred in a business and satisfy the required use of credit card recommended by the tax law. It also provides various benefits such that it can be used to control amount of expenses and the purpose and timing of use, and it can also be used for evidential document later. Especially, since the credit card expenditure became tax deductible by the tax law of 2001, the use of credit cards has been increased. It can be used to pay for the purchase of devices, furniture, office equipments and supplies, entertainment expenses and employee benefits, insurance premiums, vehicle related expenses, educational expenses and advertisement expenses.
1. Type of corporate cards
1) Corporate card for joint use – This is issued depending on a corporation’s credit and the corporate name is imprinted on the card. This card is used by the officers and employees of a corporation and withdrawals are only made from corporate account and the corporation is wholly responsible for payments and liabilities.
2) Corporate card for an individual use – A corporate name and an individual officer’s or employee’s name are imprinted on this card. Withdrawals are made not only from a corporate account but also from a personal account and an individual is responsible for payments and the corporation is jointly responsible. Only the person whose name is imprinted on the card can use this card.
2. Criteria for the issuance of corporate card
Since each credit card company has its own criteria, it will be difficult to give a general description. For example, in the case of Hyundai Card, the card is issued to only a foreign corporation with the capital of 500 million won which has been established for more than 2 years.
3. Documents to be submitted for the issuance of a corporate card
- Original application form: Official corporate seal needs to be affixed.
- Photocopy of the business registration certificate
- Original corporate seal certificate: A certificate issued within the last three months
- Certified copy of the corporate register: A certificate issued within the last three months
- Latest financial statements: This can be omitted for a newly established company. The required number of periods varies depending on a card company (For example, the latest 2 periods for Hyundai Card)
- Other: A photocopy of the bankbook of the payment account, etc.
4. Range of use of a corporate card
1) Payment of the purchases made
Payments for all types of general expenses including furniture, fixtures, office equipments, supplies and computers, equipments and materials.
2) Payments for amenity and employee’s benefits
Various types of amenity service and employee’s benefits including gift purchases, officer’s and employee’s medical care and welfare expenses
3) Expenses related to travel and business trip
Expenses related to travel and business trip including hotel reservations, plane tickets, and transportation expense
4) Entertainment expenses and meeting expenses
Since 2001, it is mandatory to use a corporate card for entertainment expenses. (If paid by a personal card or cash, the payments are not tax deductible)
5) Taxes and the public utilities charges
Local taxes, communication expenses, electric bills, postal fees, etc.
5. Benefits from the use of a corporate card
1) Savings of expenses
- The payment of expenses is simplified since the cumbersome procedure of cash preparation is not needed in the disbursement process.
- Labor and transactional expenses are saved due to the improvements in the payment method of the transactions conducted between companies.
2) Benefits in terms of taxes
- When the payment of entertainment expenses for one occasion exceeds 10,000 won, it can be deductible only when it is paid by a credit card (including tax invoice).
- Since the National Tax Service reflects the rate of the transactions made by credit cards among the total entertainment expenses in the corporate faithfulness evaluation index, tax audits such as the scrutiny of entertainment expenses and a corporate tax audit may be waived.
3) Improvements in handling finance related tasks
- It helps to simplify many administrative tasks accompanied by the preparation of evidential documents and the verification of expenditures made arising out of budget appropriation made by the finance team.