l Guidance on CbC Reporting Requirements
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, 2021 for the taxpayers having the fiscal
year ended December 31, 2020).
Other key points of
the government’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
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
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.
l Guidance on Overseas Financial Account
Under the International Tax Coordination Law
of Korea, if Korean resident individuals or domestic companies have financial
accounts opened with overseas financial institutions and the total value of
such accounts exceeds KRW 0.5 billion on any last day of each month of the
relevant year, the Korean residents and domestic companies are required to file
a report on their overseas financial accounts to the tax office from June 1 to
30 of the following year.
In case where Korean resident individuals or
domestic companies who are required to report their overseas financial accounts
fail to report their financial accounts by the reporting deadline or
underreport the relevant amount, an administrative fine shall be imposed as
Up to KRW 2 billion
Over KRW 2 billion up to KRW 5 billion
200,000,000 + [(A) – KRW 2 billion] x 15%
Over KRW 5 billion
KRW 650,000,000 + [(A) – KRW 5 billion] x 20% with the maximum cap of
KRW 2 billion
In addition, if the non-reported or
underreported amount exceeds KRW 5 billion, the Korean resident individuals or
companies that violated reporting requirements can be subject to imprisonment
of up to 2 years.
l Reporting of Deemed Gift Taxes on Transactions
with Specially Related Corporations
In case where a company’s proportion of sales
to another company which is a related party of dominant shareholder of the
company accounts for more than 30% (50% for SMEs and 40% for defined medium-scale
companies), the deemed gift taxes shall be imposed to the dominant shareholder
and its relatives.
In applying the deemed gift taxation rule, the
closing date of the relevant business year of a beneficiary corporation shall be
deemed the date of donation. And the deemed gift tax return of the dominant
shareholder should be filed within 3 months from the due date of annual corporate
income tax return of the beneficiary company (e.g., by June 30, 2021 for the shareholders
of the companies having the fiscal year ended December 31, 2020).
If the gift tax return is filed within the due
date, the tax credit at 3% can be applied.