Recent Korean Tax Law Changes

l Amendment to the Enforcement Decree of the International Tax Coordination Law related to global minimum tax pre-announced

Ahead of the implementation of the global minimum tax scheme starting from January 1, 2024, the Ministry of Economy and Finance (“MOEF”) pre-announced the amendment to the Enforcement Decree of the Korean International Tax Coordination Law (“ITCL”) as of November 9, 2023 to regulate matters as delegated by the Law.

The global minimum tax, agreed upon in the OECD/G20 Inclusive Framework on BEPS (IF), is designed to prevent tax competition among countries and create a fair competition environment. Each country is required to implement the global minimum tax through the legislation of relevant rules. In this regard, the amendment to the ITCL, including the global minimum tax rules, was passed by the Korean National Assembly in December 2022.

The amendment to the Enforcement Decree of the ITCL is expected to enable Korean taxpayers to assess and analyze the impact of the implementation of the global minimum tax scheme, including determination of its applicability and calculation of additional tax liabilities.

The amendment will be officially promulgated in December 2023 after going through necessary procedures including the pre-announcement of legislation (November 9 to December 7, 2023), vice-ministerial and cabinet meetings, etc.

Key Contents of the Amendment include the following:

1) Overview:

When one country applies an effective tax rate that is lower than the minimum tax rate (15%) to a multinational corporation, additional taxing rights shall be granted to other countries.

2) Target:

A multinational corporate group with consolidated financial statement revenues exceeding EUR 750 million (approx. KRW 1 trillion) for at least 2 of the last 4 business years.

3) Tax Amount:

Additional taxation is applied to the extent that the effective tax rate calculated on a country-by-country basis falls below the minimum tax rate (15%).

4) Effective Date:

Applicable for the business year commencing on or after January 1, 2024.