Tax Tips

    lReporting requirements of transfer pricing (“TP”) documentation

A company including a foreign-invested company must submit the following TP documents within 6 months from the end of each fiscal year to the tax authorities:

Ÿ Report on the method of arm's length price determination

Ÿ Schedules of international transactions with Overseas Specially Related Parties ("OSRP")

Ÿ Summarized Profit and Loss Statements of OSRP

A company may omit submission of the “Report on the Method of Arm’s Length Price Determination”, if the company meets one of the following conditions:

Ÿ goods transactions (including both sales and purchase transactions) with its OSRP must not exceed KRW 5 billion in total AND service transactions (including both services rendered and received) with its OSRP must not exceed KRW 1 billion in total; or

Ÿ goods transactions (including both sales and purchase transactions) with its each OSRP must not exceed KRW 1 billion AND service transactions (including both services rendered and received) with its each OSRP must not exceed KRW 200 million.

Also, a company may omit submission of the “Summarized Profit and Loss Statement of OSRP”, if goods transactions (including both sales and purchase transactions) with its concerned OSRP does not exceed KRW 1 billion AND service transactions (including both services rendered and received) with its concerned OSRP does not exceed KRW 200 million.

If a company does not submit the reports explained above within the filing due date and fails to submit the reports upon request of the tax authorities, a penalty up to KRW 100 million may be assessed.

l Reporting requirements of Base Erosion and Profit Shifting (“BEPS”)

In addition to the requirements of TP documentation, Multinational Enterprises (“MNE”) which meet the following conditions are also required to submit the Combined Report of International Transactions (“CRIT”), which is comprised of three elements (Local file, Master file, and Country-by-Country (“CbC”) report).

CRIT	Local file and Master file	CbC report
Conditions	Domestic corporations and foreign corporations with a domestic place of business that satisfy the following criteria: a. Annual gross sales of an individual entity exceed KRW100 billion; and b. Annual overseas specially related party transaction exceeds KRW 50 billion.	Ÿ In the case where 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. Ÿ In the case where the ultimate parent company is a foreign 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: a. There is no obligation to submit a CbC report under the laws and regulations of the country where the ultimate parent company is located; OR b. There is no arrangement for the exchange of CbC report information between South Korea and the country where the ultimate parent company is located; OR c. The Korean affiliated company did not submit CbC Reporting Notification within 6 months from the end of each fiscal year (e.g., by June 30, 2021 for the Korean company having the fiscal year ended December 31, 2020).
Due date	Within 12 months from the end of each fiscal year (e.g., by December 31, 2021 for the MNE having the fiscal year ended December 31, 2020).

In the case where the threshold condition of Local file, Master file, and CbC report is satisfied, MNE failing to submit such reports (in whole or in part) or found to have submitted incorrect information may be subject to penalties up to KRW 30 million per report.