In line with the OECD’s BEPS prevention project and Guidance on Transfer Pricing Documentation, the proposed tax law change imposes a new documentation requirement for certain multinational companies to submit information on international transactions.
In order to comply with the recommendations of OECD/G20 BEPS prevention project, the proposed revision to the International Tax Coordination Law (“ITCL”) requires a Multinational Enterprise (“MNE”) with a certain size of transactions and assets (to be regulated in the Presidential Decree of ITCL) to submit additional transfer pricing (“TP”) documentation (i.e., a comprehensive report on cross-border transaction information) which would address management information and current status of cross-border transactions of the MNE. To be specific, the following information should be included in the comprehensive report on cross-border transaction information:
Report I (Master file)
●Comprehensive legal ownership structure and location of
subsidiaries or offices of the MNE
●Details of top 5 goods or services covering 5% of MNE group's
●Explanation on major business restructuring, share acquisition,
sale of business, etc.
●Detailed explanation on business and business strategies of
●Explanation on major related parties and circumstances leading
to related party transactions
●List of related parties involved and indication of relationship by
the type of related party transactions
If certain conditions are met (e.g., subscription of insurance policy for business purposes which allows only directors/employees of the company to drive the vehicles, reporting of the company vehicles used for business purposes to the district tax office, etc.),
(1) a certain ratio (e.g., 50%) of the expenses are allowed to be tax deductible, but if an actual usage ratio of the vehicles for business purposes are proved through a daily driving log, etc., the actual usage ratio will be applicable; OR
(2) when the company’s logo is attached to the vehicles (other than that in a detachable form), 100% of the expenses will be allowed to be tax deductible.
If the conditions mentioned above are not met, the entire company vehicle-related expenses shall be denied for tax deduction. Discussions are also being made among politicians to set the price limit of the car which can be used for business purpose (i.e., if a car value exceeds certain limit, any expenses related to such car will not be tax deductible).