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Korea: Tax law changes, amendments reflected in “enforcement decrees”

Korea: Tax law changes, amendments

The Ministry of the Economy and Finance announced 21 amendments to the "enforcement decrees" for implementing changes to the tax law as passed by the National Assembly in December 2018.


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The enforcement decrees will be effective in February 2019 after certain steps are completed.


Changes that may affect foreign investors or foreign invested companies include:

  • The requirements for the business or commercial rational for international transactions (generally adopting international standards of transfer pricing taxation)
  • A basis for the use of open-market pricing when applying comparable uncontrolled price method to open-market products (an option to calculate an 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 of payment guarantees
  • Improved arm's length price calculation methods for intangible asset transactions
  • Principles of the arm's length price for intangible asset transactions and for hard-to-value intangible assets


Changes that may affect the corporate income tax include:

  • Adding a compromise by a court and a compromise recommended by a court as reasons for a bad debt (thereby reducing a taxpayer's burden) by considering such as having the same effect as a final judgment
  • Revising the time for claiming a deduction for a fixed asset impairment loss (generally deductible not only in the business year when the damage or loss occurs but also in the business year when the damage or loss is confirmed)
  • Determining when a foreign organization or entity (for instance, a partnership) may be treated as a foreign corporation in order to tax the members of the organization and modifying the criteria for a determination of a foreign corporation


Among the changes with respect to the tax incentive limitation law are measures that concern:

  • A special tax provision for accelerated depreciation for capital expenditures
  • A system within the National Tax Service for advanced review of research and development (R&D) tax credits


The provisions with respect to value added tax (VAT) concern:

  • An extension of the due date for tax invoice receipts with respect to an input VAT deduction
  • Allowing an input VAT deduction when a tax invoice was erroneously filed or when there was an error in the determination of consignment sales
  • A revised taxable period with respect to a consolidated VAT payment


For individual income taxation, one change relates to an improved foreign tax credit regime, and for the tax procedure measures, there is a change that reduces the scope of secondary tax liability for an acquirer in a transaction.


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

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