The Ministry of Strategy and Finance announced that Korea and the US signed a bilateral agreement for an automatic exchange of Country-by-Country Reporting (“CbCR”) in the Netherlands on June 22, 2017. The agreement took effect from the following day on June 23, 2017.
CbCR is a form of reporting by multinational enterprises (MNE) initiated by the Organization for Economic Cooperation and Development (OECD) to improve tax transparency. A CbCR of a MNE group shall include information on the group’s global income, profits, assets, taxes paid in different jurisdictions, and other financial data. A CbCR shall be submitted to the tax authorities in the country where the headquarters reside and will be shared by other jurisdictions, which are signatories to bilateral or multilateral agreements for automatic exchange of CbCR. In June 2016, Korea signed the Multilateral Competent Authority Agreement on the exchange of CbCR which was concluded by 57 countries except the US.
Under the bilateral agreement, Korea and the US will automatically exchange CbCR information every year beginning from 2018. This will facilitate the exchange of information on business activities of MNEs to prevent offshore tax evasion.