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 National Assembly.              

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 companies

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.

2.County-by-Country ("CbC") reporting requirements for Multinational Enterprises ("MNEs") Introduced

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.

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