※ Recent revisions to tax laws (1) - Multinational companies’ obligation to submit
international transaction information
- Article 11 of the Adjustment of International Taxes Act, Articles 21-2 and 51 (1) of the
Enforcement Decree of the Act
■ Taxpayers that have transactions with a foreign special related party are
obligated to submit information on overall management and transfer pricing.
○ Documents to submit: International related party transaction integrated report
* Including information on overall management and transfer pricing of the multinational company.
- Local file: Information on each company within a corporate group (e.g.,organizational
structure, line of business), transfer pricing information of major foreign related party
transactions, financial status
- Master file: Information on special related parties prescribed by the Decree of the
of Strategy and Finance – organizational structure, line of business, intangible assets,
financial transactions, debt and taxation status
- Country-by-Country Report : Tax jurisdiction by tax jurisdiction basis sales, income
tax, amount of taxes paid, amount of capital, retained earnings, number of
tangible assets, list of local companies and their business activities
○ Taxpayers required to submit file
- Local file, master file: Domestic corporation and domestic place of business of
corporation that fall under both of the following conditions:
① Annual sales exceed KRW 100 billion
② Annual transactions with foreign special related parties exceed KRW 50 billion
- Country-by-Country Report : Domestic companies (ultimate parent company) whose
consolidated sales in the previous year exceed KRW 1 trillion
○ Submission period: Within 12 months of the last day of the relevant business year
○ Fine for failure to submit files: Up to KRW 10 million for each file (maximum of KRW
30 million in total)
○ Deadline for submission: By the end of 2017 for the files attributable to the taxable
year of 2016
※ Major revisions to tax laws (2) - Imposition of fine for failure to submit a specification of
international trade within the deadline
- Article 51 (1) of the Enforcement Decree of the Adjustment of International Taxes Act
■ A taxpayer who failed to submit all or part of the specification of international trade
submitted false data shall be fined.
* The amount of the fine imposed for failure to submit a specification of international trade
or submission of a false specification shall be KRW 5 million per foreign special related party.
※ Applicable period: The previous regulations (fine of KRW 10 million) will apply for
violations that occurred on or before Feb. 7, 2017.
※ Recent changes to rules on business-purpose vehicles
If a passenger vehicle for business use is used for business entertainment, can the distance traveled for this purpose be recognized as distance traveled for business use?
When applying Article 27-2 of the Corporate Tax Act (Special Cases, Including
Non-Inclusion of Expenses Incurred in Relation to Passenger Vehicles for Business Use), if
a domestic company purchased or leased a business-use passenger vehicle and used it for
business-related purposes, the distance travelled for such purpose shall be considered
‘distance travelled for business use’ as prescribed by Article 27-2 (4) of the Enforcement
Rule of the same Act.
What is the scope of ‘vehicles for business use’ and how can the related expenses be
recognized as loss depending on whether the company has a business auto insurance?
A domestic company’s passenger vehicles to which Article 27-2 of the Corporate Tax Act
applies refers to those that fall under Article 1 (2) 3 of the Individual Consumption Tax
Act, excluding passenger vehicles used for the purpose of making profit by companies
operating a business in Article 19 of the Enforcement Decree of the Value Added Tax Act,
a facility leasing business as defined in Article 2 Subparagraph 9 of the Specialized Credit
Finance Business Act, or a business classified as a funeral home and funeral related
business under the Korea Standard Industrial Classification. Also, where a company
does not have an auto insurance that only insures drivers who are the company’s
executive or employees, or others who drive the car for the company’s business under a
contract (business auto insurance) for the full business year (in the case of leased
vehicles, the lease period during the business year shall apply), income for the business
year shall be calculated in accordance with Article 50-2 (4) 2 of the Enforcement Decree of
the Corporate Tax Act.
Is payment for the service of a driver included in “expenses related to
Where a domestic company hired a driver for business-use vehicles from an outside
company, the payment for the driver’s service shall not be included in “expenses related
to business-use vehicles” under Article 50-2 (2) of the Enforcement Decree of the
Corporate Tax Act.