On July 28, 2016, the Ministry of Strategy and Finance
("MOSF") announced the proposed tax law amendments for
2017. MOSF has submitted the draft tax law amendment to the
The proposed amendment is expected to effect for the fiscal year
commencing on or after January 1, 2017.
Major Tax Amendments Being Proposed:
1.New limit on utilization of Net
Operating Losses ("NOL") carryforwards for foreign
xUp to fiscal year that ended on or before December 31, 2015,
NOL of a domestic company may be carried forward for 10 years, and
fully deducted against taxable income in subsequent years.
However, as a result of the 2015 tax law amendment, from the
fiscal year commencing on or after January 1, 2016, the amount of
NOL carryforward that can be deducted in any given year is limited
to 80% of taxable income for such year.
The new limit does not apply to foreign companies with a
permanent establishment in Korea ("Korean branch"). This
means there will be a discrepancy in NOL utilization between
domestic companies and foreign companies with Korean branches.
To remove such incongruity, a new tax amendment is being
proposed to impose the same limitation on the utilization of NOL
carryforwards by foreign companies with Korean branches as
currently applicable to domestic companies.
reporting requirements for Multinational Enterprises
xIn the wake of OECD/G20's on-going efforts to prevent Base
Erosion and Profit Shifting ("BEPS"), amendments to the
tax law have been proposed to require the filing of
Country-by-Country ("CbC") report.
This would be an additional requirement. Under the tax law,
which passed last year (2015), companies are required to file the
Comprehensive Report on International Transactions.
More specifically, domestic parent companies of MNEs with prior
fiscal year consolidated revenue exceeding KRW 1 trillion will be
required to submit: (i) the CbC report that includes details of
overseas affiliates' business activities (e.g., revenue,
profit, headcount, assets, etc.); and (ii) their tax payment in
overseas jurisdictions, within 12 months of such taxpayers'
fiscal year end.
The proposed amendment applies to Comprehensive Report on
International Transactions filed on or after January 1, 2017.
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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