Korea: Tax amendments reflecting transfer pricing - KPMG Global
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Korea: Tax amendments reflecting transfer pricing standards

Korea: Tax amendments reflecting transfer pricing

The Ministry of the Economy and Finance announced 21 amendments to the "enforcement decrees" for implementing the tax laws.

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These 21 changes reflect revisions to the tax law passed by the National Assembly in December 2018, and the enforcement decrees will be effective in February 2019 after certain steps are completed.

Transfer pricing standards

Changes in the enforcement decrees that may affect foreign investors or foreign invested companies include:

  • The criteria for establishing the commercial rationalization of international transactions (adopting international standards of transfer pricing taxation)
  • A basis for the use of open-market pricing when applying the comparable uncontrolled price method to open-market products (in general, allowing the calculation of the arm's length price based on an open-market transaction price by adopting international standards of transfer pricing taxation)
  • An improved safe harbor for arm's length price with respect to a payment guarantee (by diversifying the methods of the arm's length price calculation for guarantee fees)
  • Improved arm's length price calculation methods for intangible asset transactions (clarifying the definition of intangible asset and the scope of application)
  • Principles of the arm's length price for intangible asset transactions (establishing principles of compensation for functions performed and for the use of intangible assets; determining the arm's length price calculation methods by adopting international standards of transfer pricing taxation)
  • Principles of the arm's length price for hard-to-value intangible assets (allowing for a determination of appropriateness of the transactions price based on after-the-fact outcomes)
     

Read a 2019 report [PDF 653 KB] prepared by the KPMG member firm in South Korea

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