Guidance on CbC Reporting Requirements/Transfer Pricing

The Korean tax authorities has adopted the requirement to comply with the country-by-country (CbC) reporting in line with the recommendations by the Organization for Economic Co-operation and Development (OECD) following the implementation of the new transfer pricing rules requiring multinational companies in Korea to submit local files and master files on their cross-border transactions, which is effective for the fiscal year starting on or after January 1, 2016.

 

With the adoption of this CbC reporting requirement under the Korean tax law, the Korean ultimate parent company of a multinational group whose consolidated revenue exceeds KRW1 trillion during the preceding fiscal year is required to file the CbC reports within twelve months from the fiscal year end. The CbC reports must include information on a multinational group’s revenue in each country, profit or loss before income tax, etc.

 

The Korean ultimate parent company and the taxpayers whose ultimate controlling shareholder is established in a foreign country is required to submit the application for the information concerning the CbC reporting obligator to the Korean tax authority within six months from the fiscal year end (e.g. by June 30, 2018 for the taxpayers having the fiscal year ended December 31, 2017).

 

Other key points of the Ministry’s guidance include:

 

■ CbC Reporting Obligator

 

• In case the ultimate parent company is a domestic company or a resident of Korea, the CbC reporting obligator is the domestic parent company preparing the consolidated financial statements of a multinational group whose consolidated revenue exceeds KRW1 trillion during the preceding fiscal year.

 

• In case the ultimate parent company is a foreign(non-Korean) company or a non-resident of Korea, the CbC reporting obligator is a Korean affiliated company of a multinational group whose consolidated revenue exceeds 750 million Euros (or equivalent) in the preceding fiscal year if any of the following conditions are met:

 

1. There is no obligation to submit a CbC report under the laws and regulations of the country where the ultimate parent company is established; or

    

2. There is no arrangement for the exchange of CbC report information between Korea and the country where the ultimate parent company is established.

 

■ Covered Scope of Entities

 

A CbC reporting obligator is required to prepare and submit a CbC report for affiliate companies which belong to a multinational group.