Korea: Amendments in pending legislation would revise APA, MAP rules

Korea: Amendments would revise APA, MAP rules

Tax legislation in South Korea is pending consideration by the National Assembly, with votes expected from September through December 2020.


Among the tax measures in the pending bill are provisions that would extend the retroactive application period for advance pricing agreements (APAs) and would revise the rules concerning mutual agreement procedure (MAP) cases.


With regard to APAs, the proposals would allow retroactive application of an APA:

  • For seven years (from the current five-year period) for bilateral APAs
  • For five years (from the current three-year period) for unilateral APAs

These measures are proposed to be effective for an APA submitted on or after 1 January 2021.

MAP proposals

Concerning the MAP-related proposals, under the current tax law, if a final court decision is rendered, a MAP cannot be initiated or a MAP in progress is automatically terminated. With the amendment, even if a final court decision is rendered, to the extent the tax authorities of the other contracting country need to make a corresponding tax adjustment of the related party in that country, a MAP could be initiated, or a MAP in progress would not automatically be terminated. The amendment is proposed to be effective for a MAP initiated or a MAP for which a final court decision is rendered on or after 1 January 2021.

Another MAP-related proposal would aim to address conflicts between a court decision and a MAP. Under current tax law, even if a mutual agreement is reached through a MAP, a tax appeal for the relevant issue can separately advance. Under the proposal, in order for a mutual agreement to be reached, the taxpayer that has applied for the MAP would have to accept the mutual agreement and withdraw any tax appeal for the relevant issue.

Finally, the legislation includes a provision to establish the basis for arbitration for MAP purposes. Under the amendment, a taxpayer could apply for arbitration by an arbitration committee if the matter is not resolved after initiating a MAP request and during the period specified in the relevant income tax treaty. However, for this amendment to be effective, there would need to be a change to the applicable tax treaty.

Read an August 2020 report [PDF 844 KB] prepared by the KPMG member firm in South Korea

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