|Kim & Chang|
|Bae, Kim & Lee|
|Lee & Ko|
|Yoon & Yang|
In December 2016, the South Korean government enacted BEPS-related legislation pertaining to country-by-country reporting (CbCR). Additional elements include new specification for compliance failures in TP documentation and interest rates for foreign related-party loans.
The amendments by the Tax & Customs Office of the Ministry of Strategy and Finance (MOSF) state that CbCR should be filed by the Korean ultimate parent company of an MNE when its consolidated sales revenue exceeds KRW 1 trillion ($887 million) in the preceding fiscal year.
The MOSF has also granted an extension to MNEs to submit the master and local file to 12 months after the end of the fiscal year, from the previous three-month deadline, which was also concurrent with the filing of corporate income tax returns. MNEs with existing APAs have been granted an exemption from having to submit the local file, if the APA already covers relevant transactions and is considered to fall in line with accepted arm's-length standards.
The amendments specify new penalties for failure to submit or adequately prepare the master file, the local file and CbCR. Previously, South Korean law stated that the penalty for failure to submit or submission of falsely described reports was KRW30 million per report. The amendment now states that each report individually is subject to a penalty of KRW10 million.
New guidance also mandates that MNEs conducting business in Korea are required to submit a reporting entity notification form. The form must be submitted within six months of the end of the fiscal year. The filing of the form must be submitted by the ultimate parent company based in Korea and branches located in Korea where the parent company resides in a foreign country.
Effective for inter-company loans from foreign related parties since February 2017, rates can be set in accordance with the MOSF's arm's-length interest rate or a proprietary calculation. This allows the taxpayer to choose between alternative calculation methods.
In early 2017, the MOSF also signed an agreement on the automatic exchange of financial account information with Hong Kong and published plans to foster bilateral exchange with another 45 countries this year, including the Netherlands, Belgium and Ireland.
(As of August 2017)
|Corporate income tax rate||22% (a)(b)|
|Capital gains tax rate||22% (a)(b)(c)|
|Branch income tax rate||22% (a)(b)|
|Branch profits tax rate||n.a. (d)|
|Royalties from patents, know-how, etc.||0 (e)|
Net operating losses (years)
Source: EY 2017 Worldwide Corporate Tax Guide and Deloitte