New Annual Status Reporting Requirement for Foreign Liaison Offices in Korea (due first filing by February 10, 2023)

n New Annual Status Reporting Requirement for Foreign Liaison Offices in Korea (due first filing by February 10, 2023)

For Korean tax purposes, liaison offices of foreign (non-Korean) corporations may engage in non-revenue generating liaison activities exclusively for the entity of which the liaison offices are a part (i.e., the head office). The non-revenue generating activities include conducting advertising, public relations, collection and supply of information, scientific research, or other similar activities of a preliminary or auxiliary nature and other liaison activities solely for the head office. Since a liaison office, by definition, acts only for its home office and does not generate revenue in Korea, it is not subject to the Korean corporate income tax and need not file a corporate income tax return in Korea.

Under the tax law changes, the liaison offices of foreign corporations shall be required to submit certain information on the status of the liaison office by February 10th of the following year. The required information includes basic information of the liaison office, its representative, information relating to its headquarters, other branches of the foreign corporation in Korea, list of domestic customers, etc. The purpose of this new reporting requirements of liaison offices in Korea is to prevent avoidance of corporate income tax liability of foreign corporations through their liaison offices in Korea, when in essence it is operated as a permanent establishment (PE) of the concerned foreign corporation.

Eash of the liaison offices of foreign corporation in Korea is required to file the first annual report on its status in a designated form to the governing tax authority no later than February 10, 2023.