In line with the recommendations contained in the OECD BEPS
report on Action 13, South Korea has adopted new documentation
requirements of master file and local file for income years
beginning on or after 1 January 2016. Adoption of the
country-by-country report will commence at a later stage after the
government evaluates the legislation of other countries adopting
the CbC requirement. The new master and local files reporting
requirement is applicable to all domestic corporations and all
foreign corporations with permanent establishments in Korea
annual net sales from the domestic place of business in Korea
greater than 100 billion KRW; and
annual cross-border related-party transactions of a value
greater than 50 billion KRW.
Both the master file and the local file should be submitted to
the Korean tax authorities by the corporate tax return filing due
date. Filing may be performed electronically or in paper. The
master file may be submitted in English on the condition that a
Korean translation of the documentation will be filed within one
month after the submission of the English version; while the local
file is to be submitted in Korean only.
Further to signing the Multilateral Competent Authority
Agreement on Automatic Exchange of Financial Account Information in
October 2014 and committed to early adoption of the Common
Reporting Standard as Early Adopters Group, Korea has amended its
Law for Coordination of International Tax Affairs (LCITA) to
provide a legal framework for implementing CRS on 1 January 2016
and participation in the AEOI in 2017. Final guidance on AEOI was
issued in December 2015 by the Korea's Financial Services
Commission. The guidance requires financial institutions to
determine whether they are reportable financial institutions under
CRS and those so classified must collect self-certification forms
from on-boarding new account holders.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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