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ADJUSTMENT OF INTERNATIONAL TAXES ACT

Act No. 4981, Dec. 6, 1995

Amended by Act No. 5193, Dec. 30, 1996

Act No. 5584, Dec. 28, 1998

Act No. 5581, Dec. 28, 1998

Act No. 6304, Dec. 29, 2000

Act No. 6299, Dec. 29, 2000

Act No. 6779, Dec. 18, 2002

Act No. 7956, May 24, 2006

Act No. 8139, Dec. 30, 2006

Act No. 8387, Apr. 27, 2007

Act No. 8860, Feb. 29, 2008

Act No. 8852, Feb. 29, 2008

Act No. 9266, Dec. 26, 2008

Act No. 9914, Jan. 1, 2010

Act No. 9924, Jan. 1, 2010

Act No. 10219, Mar. 31, 2010

Act No. 10221, Mar. 31, 2010

Act No. 10410, Dec. 27, 2010

Act No. 10854, Jul. 14, 2011

Act No. 11126, Dec. 31, 2011

Act No. 11606, Jan. 1, 2013

Act No. 12153, Jan. 1, 2014

Act No. 12164, Jan. 1, 2014

Act No. 12849, Dec. 23, 2014

Act No. 13553, Dec. 15, 2015

Act No. 14384, Dec. 20, 2016

Act No. 14474, Dec. 27, 2016

Act No. 15221, Dec. 19, 2017

CHAPTER I GENERAL PROVISIONS
 Article 1 (Purpose)
The purpose of this Act is to prevent double taxation and tax avoidance and to facilitate cooperation in tax affairs among countries by establishing rules to coordinate taxation on international transactions and to promote international cooperation in tax administration.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 2 (Definitions)
(1) The terms used in this Act are defined as follows: <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
1. The term “international transaction” means a transaction in which either or both of the parties are nonresidents or foreign corporations (excluding a domestic place of business of a nonresident or foreign corporation), including trading or leasing tangible or intangible property; providing services; lending or borrowing money; and all other transactions involving profits or losses and property of the parties;
2. The term “tax treaty” means any type of international agreement governed by international law, such as a treaty, convention, pact or note, which the Republic of Korea enters into with another State with respect to taxes on income, capital, and property or cooperation in tax administration;
3. The term “Contracting State” means any country that enters into a tax treaty with the Republic of Korea;
4. The term “competent authority” means the Minister of Strategy and Finance or his/her delegate in the case of the Republic of Korea; and a person who is designated as the competent authority in the tax treaty in the case of the other Contracting State;
5. The term “mutual agreement procedure” means the procedure by which interpretation of a tax treaty, unreasonable taxation, or adjustment of taxable income are resolved through consultations between the competent authority of the Republic of Korea and that of the other Contracting State;
6. The term “domestic place of business” means a domestic place of business of a nonresident, as provided in Article 120 of the Income Tax Act, or a domestic place of business of a foreign corporation, as provided in Article 94 of the Corporate Tax Act;
7. The term “tax authority” means the head of the tax office having jurisdiction over the place of tax payment or the commissioner of the regional tax office;
8. The term “special relationship” means any relationship described below, and the specific criteria therefor shall be prescribed by Presidential Decree:
(a) A relationship in which either party to a transaction owns directly or indirectly at least 50 percent of the voting stocks (including the equity shares; hereinafter the same shall apply) of the other party;
(b) A relationship between both parties to a transaction where a third party owns directly or indirectly at least 50 percent of their respective voting stocks;
(c) A relationship in which the parties to a transaction have a common interest through an investment in capital, trade in goods or services, grant of a loan, etc. and either party to the transaction has the power to substantially determine the business policy of the other party;
(d) A relationship between both parties to a transaction where the parties have a common interest through an investment in capital, trade in goods or services, grant of a loan, etc. and a third party has the power to substantially determine the business policies of both parties;
9. The term “foreign related party” means any nonresident or foreign corporation (excluding a domestic place of business of a nonresident or foreign corporation) in a special relationship with a resident, domestic corporation or domestic place of business;
10. The term “arm’s length price” means a price that is applied or deemed to be applied in an ordinary transaction between a resident, domestic corporation or domestic place of business and a person other than a foreign related party;
11. The term “foreign controlling stockholder” means any of the following persons who substantially controls either a domestic corporation or a domestic place of business of a foreign corporation, and the specific criteria therefor shall be prescribed by Presidential Decree:
(a) In the case of a domestic corporation, a foreign stockholder or investor (hereinafter referred to as “foreign stockholder”) or a foreign corporation financed by such foreign stockholder;
(b) In the case of a domestic place of business of a foreign corporation, the head office or a branch of the foreign corporation, a foreign stockholder of the foreign corporation, or a foreign corporation financed by the foreign corporation or the foreign stockholder;
12. The term “limited tax rate” means the maximum tax rate at which a resident or corporation of the other Contracting State may be taxed under a tax treaty.
(2) Any other term used in this Act and not defined in paragraph (1), unless otherwise specifically provided in this Act, has the meaning defined under Article 2 (1) of the Restriction of Special Taxation Act and the Acts provided in Article 3 (1) 1 through 12, 18, and 19 of the same Act.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 2-2 (Substance over Form Principle concerning International Transactions)
(1) In an international transaction, tax treaties shall apply to the person in whom the taxable income, earnings, property, act, or transaction is actually vested, if a nominal person in the transaction is different from the person in whom the income, earnings, property, act, or transaction is actually vested.
(2) In an international transaction, tax treaties shall apply to the computation of tax base according to the substance of a transaction, regardless of the name or form of the taxable income, earnings, property, act, or transaction.
(3) In an international transaction, if deemed that both parties have conducted such transaction either indirectly through a third party or via at least two acts or transactions to benefit wrongfully from tax treaties and this Act, the tax treaties and this Act shall apply according to the economic substance of the transaction, assuming that such transaction has been conducted directly by both parties or such acts or transactions are a single continuous act or transaction.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 3 (Relationship to Other Acts)
(1) This Act shall take precedence over other Acts providing for national taxes and local taxes.
(2) Article 41 of the Income Tax Act and Article 52 of the Corporate Tax Act shall not apply to any international transactions: Provided, That the same shall not apply to the donation, etc. of assets prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER II ADJUSTMENT OF TAXATION ON TRANSACTIONS WITH FOREIGN RELATED PARTIES
 Article 4 (Tax Adjustment by Arm’s Length Price)
(1) Where the price of an international transaction in which either party to the transaction is a foreign related party is lower or higher than the arm’s length price, the tax authority may determine or rectify the tax base and tax amount of a resident (including a domestic corporation and a domestic place of business; hereafter the same shall apply in this Chapter) based on the arm’s length price: Provided, That where the same method of computing the arm’s length price among the methods prescribed in Article 5 applies to computation of the arm’s length price for at least two taxable years, and the tax base and tax amount for some of such taxable years are determined or rectified based on the arm’s length price so computed, the tax base and tax amount for the remaining taxable years shall also be determined or rectified based on the same arm’s length price. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11126, Dec. 31, 2011>
(2) Paragraph (1) shall not apply where a taxpayer obviously proves that he/she is not in any of the special relationships provided in Article 2 (1) 8 (c) and (d).
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 5 (Methods of Computing Arm’s Length Prices)
(1) The arm’s length price in relation to an international transaction shall be determined by any of the following methods, being the most appropriate method, in consideration of the terms and conditions of transaction, such as the characteristics and functions of goods or services and the economic environment, which are applied or deemed to be applied in an ordinary transaction with a person other than a foreign related party: Provided, That the method provided in subparagraph 6 shall apply only where the arm’s length price cannot be determined by any of the methods provided for in subparagraphs 1 through 5: <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11126, Dec. 31, 2011; Act No. 15221, Dec. 19, 2017>
1. Comparable uncontrolled price method: A method that, in an international transaction between a resident and a foreign related party, regards as the arm’s length price, a trade price between independent unrelated parties in comparable transactions;
2. Resale price method: Where a resident and a foreign related party trade in an asset and the purchaser of the asset, being a party to such transaction, subsequently resells it to an unrelated party, a method that regards as the arm’s length price, the amount computed by deducting the amount considered as the normal profit of the purchaser from the resale price;
3. Cost plus method: A method that, in an international transaction between a resident and a foreign related party, regards as the arm’s length price, the price computed by adding the amount considered as the normal profit of the seller of an asset or the provider of services to the cost incurred in the course of producing and selling the asset or of providing the services;
4. Profit split method: A method that, in an international transaction between a resident and a foreign related party, allocates a net trading profit created by both parties to the transaction according to each such party’s relative contribution, which is measured with a reasonable allocation standard, and regards the trade price computed from such allocated profit as the arm’s length price;
5. Transactional net margin method: A method that, in an international transaction between a resident and a foreign related party, regards as the arm’s length price, a trade price calculated on the basis of an ordinary transactional net margin realized in comparable transactions between a resident and a unrelated party;
6. Other methods recognized as appropriate by Presidential Decree.
(2) Further details concerning the methods of computing arm’s length prices provided in paragraph (1) shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 6 (Advance Pricing Agreements)
(1) Where a resident intends to apply a method of computing an arm’s length price for a specific period of taxable years, he/she may file an application for an advance pricing agreement with the Commissioner of the National Tax Service by not later than the day before the commencement of the first taxable year in the specific period of taxable years to which he/she intends to apply the method of computing an arm’s length price, as prescribed by Presidential Decree. <Amended by Act No. 15221, Dec. 19, 2017>
(2) Upon receipt of a resident’s application for an advance pricing agreement pursuant to paragraph (1), the Commissioner of the National Tax Service may accept such application if agreed with the competent authority of the other Contracting State by mutual agreement, as prescribed by Presidential Decree: Provided, That he/she may make an advance pricing agreement without undergoing the mutual agreement procedure (hereafter in this Article referred to as “unilateral advance pricing agreement”) in cases prescribed by Presidential Decree.
(3) Upon receipt of a resident’s application for the retroactive application of a method of computing an arm’s length price to a taxable year before the period subject to the application for an advance pricing agreement, the Commissioner of the National Tax Service may approve the method to apply retroactively to a maximum of five years immediately preceding the period subject to the application for such agreement: Provided, That where an application for the retroactive application of a method of computing an arm’s length price is filed as regards a unilateral advance pricing agreement, he/she may approve the method to apply retroactively to a maximum of three years immediately preceding the period subject to the application for such agreement. <Amended by Act No. 10410, Dec. 27, 2010>
(4) Where a method of computing an arm’s length price is agreed upon pursuant to paragraphs (2) and (3), the Commissioner of the National Tax Service and the resident shall use the agreed method: Provided, That the same shall not apply in cases prescribed by Presidential Decree.
(5) Where a method of computing an arm’s length price is agreed upon pursuant to paragraphs (2) and (3), the resident shall submit a report containing the arm’s length price computed by the method and the process of computation to the Commissioner of the National Tax Service, as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 6-2 (Tax Adjustment by Arm’s Length Cost Sharing)
(1) Where a resident enters into an agreement with a foreign related party on the sharing of the cost, expenses, risks (hereafter in this Article referred to as “cost”) to jointly develop or secure intangible property (hereafter referred to as “joint development” in this Article) and performs such joint development in accordance with the agreement, the tax authority may adjust the cost share of the resident based on the arm’s length cost share to determine or rectify the tax base and tax amount of the resident, if the cost share of the resident is less or more than the arm’s length cost share. <Amended by Act No. 11126, Dec. 31, 2011>
(2) Where a resident has determined shares of respective participants through reasonably allotting the cost for intangible property jointly developed with a foreign related party, but the benefits expected from the jointly-developed intangible property (hereafter in this Article referred to as “expected benefits”) are subsequently changed by not less than the rate prescribed by Presidential Decree, the tax authority may determine or rectify the tax base and tax amount of the resident by adjusting the original shares of the participants based on the expected benefits as changed. <Amended by Act No. 11126, Dec. 31, 2011>
(3) For the purposes of paragraphs (1) and (2), the scope of intangible property, the determination of arm’s length cost shares and expected benefits, the computation of the changed shares of participants, and other necessary matters, shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 6-3 (Pre-Adjustment of Arm’s Length Transfer Prices for National Taxes and Customs Duties)
(1) A resident who applies for an advance pricing agreement on national tax under Article 6 (1) (limited to cases subject to a unilateral advance pricing agreement pursuant to the proviso to Article 6 (2)) may simultaneously file an application for prior examination of the method of determining the dutiable value under Article 37 (1) 3 of the Customs Act (hereafter in this Article referred to as “prior examination of dutiable value”) with the Commissioner of the National Tax Service for pre-adjustment of the arm’s length price for national tax and the dutiable value (hereafter in this Article referred to as “pre-adjustment”). <Amended by Act No. 15221, Dec. 19, 2017>
(2) Upon receipt of an application under paragraph (1), the Commissioner of the National Tax Service shall notify the Commissioner of the Korea Customs Service that he/she has received such application, along with an application for prior examination of dutiable value, and shall consult with the Commissioner of the Korea Customs Service about the method of computing an arm’s length price, the method of determining a dutiable value, and the range of price to be pre-adjusted, as prescribed by Presidential Decree. <Amended by Act No. 15221, Dec. 19, 2017>
(3) The Commissioner of the National Tax Service shall make a pre-adjustment based on the results of consultation under paragraph (2). <Amended by Act No. 15221, Dec. 19, 2017>
(4) The Commissioner of the National Tax Service shall notify the applicant for pre-adjustment and the Minister of Strategy and Finance of the results of processing the application under paragraph (1). <Amended by Act No. 15221, Dec. 19, 2017>
(5) The method and procedure for applying for pre-adjustment under paragraphs (1) through (4), and other necessary matters, shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 12849, Dec. 23, 2014]
 Article 7 (Transaction Involving Third Party)
Even when a resident engages in an international transaction with a person who is not a foreign related party, Articles 4, 5, and 6-2 shall apply to the international transaction, assuming that such transaction is conducted with a foreign related party, if the transaction satisfies all of the following criteria: <Amended by Act No. 11126, Dec. 31, 2011>
1. The resident and the foreign related party have made prior arrangements (including where a substantial agreement is deemed to have been reached in advance based on evidence of transaction; hereinafter the same shall apply) for the relevant transaction;
2. The resident and the foreign related party have imposed conditions of the transaction between themselves.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 8 (Recognition of Setoff Transactions)
(1) Where an international transaction price differs from the arm’s length price, if a resident has entered into an agreement in advance with the same foreign related party to offset the difference through another international transaction conducted during the same taxable year and proves the fact and details of such transaction, the tax authority shall apply Articles 4 and 5, treating all the international transactions so offset as a single international transaction. <Amended by Act No. 11126, Dec. 31, 2011>
(2) Where any of the offset transactions proved in accordance with paragraph (1) becomes subject to withholding tax as provided in Articles 98, 98-2, and 98-3 of the Corporate Tax Act and Articles 156 and 156-2 of the Income Tax Act, withholding tax-related provisions shall apply, assuming that there is no offset transaction.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 9 (Secondary Income Adjustment and Tax Adjustment after Income Adjustment)
(1) Where it is not verified that the amount to be included in gains has been returned by a foreign related party to a domestic corporation as prescribed by Presidential Decree for the purposes of Article 4 or 6-2, such amount shall be adjusted as a dividend to or an investment in the foreign related party as prescribed by Presidential Decree, notwithstanding Article 67 of the Corporate Tax Act. <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
(2) For the purposes of paragraph (1), the method of income adjustment and other necessary matters shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 10 (Special Provisions on Income Computation)
(1) Where any other Contracting State adjusts a transaction price between a resident and a foreign related party at the arm’s length price and the mutual agreement procedure thereon are completed, the tax authority may adjust and calculate the amount of income and the assessed amount of tax of the resident for each taxable year pursuant to the relevant agreement. <Amended by Act No. 11126, Dec. 31, 2011>
(2) Methods of applying for adjustments of the amount of income and the assessed amount of tax and methods of adjustment under paragraph (1), and other necessary matters, shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 10-2 (Rectification Claim for Adjustment of Arm’s Length Transfer Prices for National Taxes and Customs Duties)
(1) Where a taxpayer has submitted a return on his/her corporate tax base or income tax base to the tax authority in connection with the import transaction of goods from a foreign related party and, subsequently, any difference occurs between the dutiable value and the transaction price used for computing the tax base and tax amount of the corporate tax or income tax returned due to a rectification made by the head of a customs office under Article 38-3 (4) of the Customs Act, the taxpayer may file a claim for rectifying the tax base and tax amount of the corporate tax or income tax with the tax authority within three months from the date he/she becomes aware of the rectification (where he/she receives notice of such rectification, from the date of receipt), as prescribed by Presidential Decree. <Amended by Act No. 15221, Dec. 19, 2017>
(2) Upon receipt of a claim for rectification under paragraph (1), the tax authority may rectify the tax amount if he/she deems that, in connection with the relevant transaction, the method of, and grounds for, computation of the transaction price of the imported goods used for calculating the tax base and tax amount of the corporate tax or income tax conform to Article 5. <Newly Inserted by Act No. 12849, Dec. 23, 2014>
(3) The tax authority shall rectify the tax base or tax amount or notify the claimant of the purport that no ground exist to make a rectification within two months from the date of receipt of a claim for rectification under paragraph (1). <Amended by Act No. 12849, Dec. 23, 2014>
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
 Article 10-3 (Adjustment of Taxation on International Trade Price)
(1) A taxpayer may request the Minister of Strategy and Finance to adjust the arm’s length price for national tax and the dutiable value within 30 days from the date of receipt of notice given under Article 10-2 (3) (or upon expiration of 2 months if he/she receive no notice within 2 months). In such cases, the Minister of Strategy and Finance may recommend the tax authority or the head of the customs office to adjust taxes on the transaction price, and shall request a plan for fulfilling the recommendation for adjustment (in the case of nonfulfillment, including the grounds therefor) from the tax authority or the head of the customs office and notify the taxpayer thereof within 90 days from the date of receipt of the request for adjustment. <Amended by Act No. 14384, Dec. 20, 2016>
(2) Making requests for adjustment and the methods of adjustment under paragraph (1), and other necessary matters, shall be prescribed by Presidential Decree.
(3) The period from the date of a request for adjustment to the date of receipt of notice provided in paragraph (1) shall be excluded from the period for filing requests or applications provided in Articles 61, 66, and 68 of the Framework Act on National Taxes and Articles 121, 131, and 132 of the Customs Act.
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
 Article 11 (Obligation to Submit Data on International Transactions)
(1) A taxpayer that conducts international transactions with a foreign related party shall submit a statement of international transactions in the form prescribed by Ordinance of the Ministry of Strategy and Finance (hereinafter referred to as “statement of international transactions”) to the head of the tax office having jurisdiction over the place for tax payment by the deadline for filing a tax return set under Articles 70, 70-2, 71, 73, and 74 of the Income Tax Act or Articles 60 (1) and 76-17 (1) of the Corporate Tax Act. <Amended by Act No. 15221, Dec. 19, 2017>
(2) A taxpayer, if he/she meets the requirements prescribed by Presidential Decree in the volume of international transactions with a foreign related party and the turnover therefrom, shall submit a consolidated business report, individual business reports, and reports by country prescribed by Presidential Decree regarding his/her business activities, the details of transactions, etc. (hereinafter referred to as “consolidated report on international transaction information”) to the head of the tax office having jurisdiction over the place for tax payment within 12 months from the last day of the month in which the end date of the business year under Article 6 of the Corporate Tax Act falls. <Newly Inserted by Act No. 15221, Dec. 19, 2017>
(3) Where a taxpayer is unable to submit a statement of international transactions or a consolidated report on international transaction information by the deadline referred to in paragraph (1) or (2) in extenuating circumstances prescribed by Presidential Decree and files an application to extend such deadline, the head of the tax office having jurisdiction over the place for tax payment may extend the deadline for submission by up to 1 year. <Newly Inserted by Act No. 13553, Dec. 15, 2015; Act No. 14384, Dec. 20, 2016; Act No. 15221, Dec. 19, 2017>
(4) For the purposes of Articles 4, 5, and 6-2, the tax authority may request a taxpayer to submit related data, such as the method of computing transaction prices, as prescribed by Presidential Decree.
(5) A person in receipt of a request to submit data under paragraph (4) shall submit the relevant data within 60 days of receipt of the request: Provided, That where the person files an application to extend the deadline for submission for good cause prescribed by Presidential Decree, the tax authority may extend the deadline by up to 60 days on one occasion only. <Amended by Act No. 13553, Dec. 15, 2015; Act No. 15221, Dec. 19, 2017>
(6) Where a person in receipt of a request to submit data under paragraph (4) fails to submit data by the deadline without good cause prescribed by Presidential Decree and submits the data at the time of applying for appeal, or of the mutual agreement procedure, the tax authority and related agencies need not use such data for assessing taxes. <Amended by Act No. 13553, Dec. 15, 2015; Act No. 15221, Dec. 19, 2017>
(7) The detailed scope of information to be contained in the statements of international transactions or consolidated reports on international transaction information, the methods and procedures for submitting the same, and other necessary matters, shall be prescribed by Presidential Decree. <Amended by Act No. 14384, Dec. 20, 2016; Act No. 15221, Dec. 19, 2017>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 11-2 (Provision of Information on International Transactions)
(1) The tax authority may request information or data prescribed by Presidential Decree from the head of the customs office where necessary to assess and collect taxes in relation of an international transaction and adjust the arm’s length price for national tax and the dutiable value.
(2) The head of the customs office in receipt of a request under paragraph (1) shall comply therewith except in extenuating circumstances.
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
 Article 12 (Sanctions against Non-Compliance with Obligation to Submit Data)
(1) Any of the following persons who fails to submit data by the deadline without good cause prescribed by Presidential Decree or submits false data shall be subject to an administrative fine not exceeding 100 million won: <Amended by Act No. 10410, Dec. 27, 2010; Act No. 12849, Dec. 23, 2014; Act No. 13553, Dec. 15, 2015; Act No. 15221, Dec. 19, 2017>
1. A person obligated to submit a statement of international transactions or a consolidated report on international transaction information;
2. A person in receipt of a request to submit data under Article 11 (4).
(2) An administrative fine provided in paragraph (1) shall be assessed and collected by the tax authority, as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 13 (Special Provisions on Application of Penalty Tax)
(1) For the purposes of Articles 4 through 6, 6-2, and 7 through 9, the tax authority shall not assess a penalty tax for under-reporting provided in Article 47-3 of the Framework Act on National Taxes if any of the following is applicable: <Amended by Act No. 15221, Dec. 19, 2017>
1. Where it is confirmed by the mutual agreement procedure that a taxpayer has not made any mistake with regard to the difference between the trade price reported and the arm’s length price (referring to where the Commissioner of the National Tax Service determines that the taxpayer has not made any mistake, if an advance pricing agreement was made without undergoing the mutual agreement procedure as provided in the proviso to Article 6 (2));
2. Where a taxpayer keeps and provides data verifying the method of computing an arm’s length price applied in filing his/her income tax or corporate tax return or submits individual business reports pursuant to Article 11 (2) within the deadline and is acknowledged as having selected and applied the method of computing an arm’s length price based on reasonable determination.
(2) Whether the taxpayer has made a mistake or whether the determination is reasonable as provided in the subparagraphs of paragraph (1) shall be determined based on the standards prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER III ADJUSTMENT OF TAX ON INTEREST PAID TO FOREIGN CONTROLLING STOCKHOLDERS, ETC.
 Article 14 (Exclusion of Interest Deemed Dividend from Deductible Expenses)
(1) Where a domestic corporation (including a domestic place of business of a foreign corporation; hereafter in this Chapter the same shall apply) borrows funds from a foreign controlling stockholder (including funds borrowed from a related party of a foreign controlling stockholder prescribed by Presidential Decree, including relatives) or from a third party under a payment guarantee (including security provided to guarantee payments) by a foreign controlling stockholder, and such borrowings exceed twice the amount invested by the foreign controlling stockholder, the interest and discount fees paid in relation to the excess amount shall be excluded from deductible expenses of the domestic corporation and shall be deemed to have been disposed of as a dividend of or an outflow from the domestic corporation pursuant to Article 67 of the Corporate Tax Act, as prescribed by Presidential Decree. In such cases, the scope of borrowings and the methods of computing the amount deemed excluded from deductible expenses and the amount of investment shall be prescribed by Presidential Decree. <Amended by Act No. 11606, Jan. 1, 2013; Act No. 12849, Dec. 23, 2014>
(2) The multiplier of the borrowings against the amount of investment by a foreign controlling stockholder provided in paragraph (1) may be separately prescribed by Presidential Decree for each type of business. <Amended by Act No. 11606, Jan. 1, 2013>
(3) Where a domestic corporation attests that the amount and conditions of borrowings are identical or similar to the amount and conditions of ordinary borrowings between the persons who are not in a special relationship, as prescribed by Presidential Decree, paragraphs (1) and (2) shall not apply to the interest and discount fees paid in relation to such borrowings.
(4) Where a domestic corporation subject to paragraph (1) has withheld income tax or corporate tax on the interest and discount fees it has paid to a foreign controlling stockholder in each business year, it shall offset such withheld tax amount against the income tax or corporate tax assessed on the dividend provided in paragraph (1).
(5) For the purposes of paragraphs (1) through (4), if there exist different interest or discount fees whereto separate interest rates apply, the interest or discount fees shall be excluded from deductible expenses in order of those subject to a higher interest rate. <Newly Inserted by Act No. 15221, Dec. 19, 2017>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 15 (Borrowing Transactions through Third Party)
Where funds borrowed by a domestic corporation from a person who is not a foreign controlling stockholder satisfy all of the following criteria, Article 14 shall apply to the funds, assuming that such funds are borrowed directly from a foreign controlling stockholder: Provided, That Article 14 shall apply even when only the criteria provided in subparagraph 2 is satisfied if the domestic corporation has borrowed funds from a foreign related party other than a foreign controlling stockholder: <Amended by Act No. 11126, Dec. 31, 2011>
1. The domestic corporation and the foreign controlling stockholder have made prior arrangements;
2. The domestic corporation and the foreign controlling stockholder have imposed conditions of borrowings between themselves.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 15-2 (Exclusion of Interest Expense Exceeding Income from Deductible Expenses)
(1) If the net interest expense in subparagraph 1 on funds borrowed by a domestic corporation from its foreign related parties exceeds 30/100 of the adjusted gross income in subparagraph 2, the excess amount shall be excluded from deductible expenses and deemed disposed of as other outflow from the domestic corporation pursuant to Article 67 of the Corporate Tax Act:
1. Net interest expense: Interest and discount fees paid to foreign related parties less the amount of interest income received from the foreign related parties;
2. Adjusted gross income: The amount of income before subtracting both the depreciation cost and the net interest expense referred to in subparagraph 1.
(2) Paragraph (1) shall not apply to any domestic corporation prescribed by Presidential Decree that engages in financial business or other similar business.
(3) For the purpose of paragraph (1), if there exist different interest or discount fees whereto separate interest rates apply, the interest or discount fees shall be excluded from deductible expenses in order of those subject to a higher interest rate.
(4) The method of computing the net interest expenses and adjusted gross income pursuant to paragraph (1) and other necessary matters shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 15221, Dec. 19, 2017]
<<Enforcement Date: Jan. 1, 2019>>
 Article 15-3 (Exclusion of Interest Expenses Incurred in Hybrid Financial Instrument Transactions from Deductible Expenses)
(1) The interest and discount fees paid by a domestic corporation in relation to transactions in financial instruments (referring to financial instruments prescribed by the Presidential Decree that have the nature of both capital and liabilities; hereafter in this Article the same shall apply) with a foreign related party, which are not included in the income of the counter-party to such transactions nor taxable in the country where the counter-party is located within the period of time prescribed by Presidential Decree (hereafter in this Article referred to as “reasonable period of time”), shall be excluded from deductible expenses of the domestic corporation, as prescribed by Presidential Decree, in calculating the amount of income for the pertinent business year, and deemed disposed of as other outflow from the domestic corporation pursuant to Article 67 of the Corporate Tax Act.
(2) If the amount that a domestic corporation has excluded from deductible expenses in accordance with paragraph (1) is included in the income of the counter-party to transaction or taxable in the country where the counter-party is located within a reasonable period of time, it may be included in deductible expenses, as prescribed by Presidential Decree, in calculating the amount of income for the business year in which the end date of the reasonable period of time falls.
(3) If an amount equivalent to interest paid by a domestic corporation in relation to financial instrument transactions is included in deductible expenses in calculating the amount of income for the pertinent taxable year on the assumption that it does not fall under paragraph (1), but thereafter the amount is found to fall under paragraph (1), it shall be included in gains, as prescribed by Presidential Decree, in calculating the amount of income for the business year in which the end date of the reasonable period of time falls and shall be deemed disposed of as other outflow from the domestic corporation pursuant to Article 67 of the Corporate Tax Act. In such cases, the domestic corporation shall additionally pay an amount equivalent to interest calculated pursuant to Presidential Decree, plus the corporate tax for the business year in which the end date of the reasonable period of time falls.
(4) The scope of financial instrument transactions pursuant to paragraph (1), the scope of non-taxable amounts, and other necessary matters, shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 15221, Dec. 19, 2017]
 Article 16 (Order of Applying Exclusion of Paid Interest from Deductible Expenses)
(1) Where both Articles 14 and 15-2 can be applicable, only one of them shall be applied if the amount calculated according thereto to be excluded from deductible expenses is relatively larger. In such cases, if the amounts calculated according to both Articles are the same, Article 14 shall apply.
(2) Article 14 or 15-2 shall take precedence over Articles 4 and 15-3 of this Act and Article 28 of the Corporate Tax Act.
(3) Article 15-3 shall take precedence over Article 4 of this Act and Article 28 of the Corporate Tax Act.
[This Article Wholly Amended by Act No. 15221, Dec. 19, 2017]
<<Enforcement Date of the amended provisions of Article 16 (applicable only in relation to Article 15-2: Jan. 1, 2019>>
CHAPTER IV ACCUMULATIVE TAXATION OF RETAINED EARNINGS OF SPECIFIC FOREIGN CORPORATIONS
 Article 17 (Specific Foreign Corporations’ Retained Earnings Deemed Dividends)
(1) Where a Korean national has invested in a foreign corporation, the head office or principal office of which is located in a country or region in which the tax burden does not exceed 15/100 of the income actually earned by the corporation, the amount attributable to the Korean national out of the corporation’s retained earnings distributable as at the end of each business year shall be deemed a dividend paid to the Korean national if the corporation (hereinafter referred to as “specific foreign corporation”) is in a special relationship (in determining whether it is in the relationship provided in Article 2 (1) 8 (a), stocks held directly or indirectly by a related party of the Korean national prescribed by Presidential Decree, including relatives, shall be included) with the Korean national. <Amended by Act No. 11606, Jan. 1, 2013; Act No. 12849, Dec. 23, 2014>
(2) The scope of Korean nationals eligible under paragraph (1) shall be those who directly or indirectly hold at least 10 percent of the total outstanding stocks or the total equity investment of a specific foreign corporation as at the end of each business year. In such cases, outstanding stocks or equity investment held directly by persons prescribed by Presidential Decree among related persons, as defined in subparagraph 20 of Article 2 of the Framework Act on National Taxes, shall be included for the purposes of determining 10 percent of the total outstanding stocks or the total equity investment. <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
(3) Paragraph (1) shall not apply where the income actually earned by a specific foreign corporation as at the end of each business year does not exceed the amount specified by Presidential Decree.
(4) For the purposes of paragraphs (1) and (2), the scope of the income actually earned, non-taxable income and its scope, methods of computing distributable retained earnings and the amount deemed a dividend, the method of computing the stock-holding ratio, and other necessary matters, shall be prescribed by Presidential Decree. <Amended by Act No. 11606, Jan. 1, 2013>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 18 (Scope of Application)
(1) Article 17 shall not apply where a specific foreign corporation owns a permanent establishment required for business activities, such as an office, a store, or a factory, in a country or region provided in Article 17 (1) and engages in business activities mainly in such a country or region by managing, controlling, or operating the business for itself: Provided, That the same shall not apply to the following specific foreign corporations: <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
1. A specific foreign corporation that engages in wholesale trade; financial and insurance activities; real estate activities and real estate lease; professional, scientific and technical services (excluding architectural, engineering and related services); or business facilities management and business support services and that satisfies the criteria prescribed by Presidential Decree;
2. A corporation, the primary business of which is to hold stocks or bonds; to provide intellectual property rights; to lease ships, aircraft or equipment; or to invest in investment trusts or funds.
(2) Where a foreign corporation has its place of actual business control in a country or region provided in Article 17 (1), the tax authority may apply Article 17 to the corporation, assuming that the place of actual business control is its head office or principal office provided in Article 17 (1).
(3) For the purposes of paragraph (1) 1, the classification of businesses by type shall be governed by the Korean Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea under Article 22 of the Statistics Act.
(4) Article 17 shall not apply where a specific foreign corporation that engages in wholesale trade referred to in paragraph (1) 1 sells goods to a person not in a special relationship who is in the same country or the same area prescribed by Ordinance of the Ministry of Strategy and Finance (hereinafter referred to as “same country, etc.”) and satisfies the criterion prescribed by Presidential Decree. <Amended by Act No. 11606, Jan. 1, 2013>
(5) Where the income that a specific foreign corporation not subject to Article 17 pursuant to the main sentence of paragraph (1) and paragraph (4) earns by engaging in the following activities satisfies the criterion prescribed by Presidential Decree, such income shall be deemed distributable retained earnings subject to Article 17, as prescribed by Presidential Decree: <Newly Inserted by Act No. 12164, Jan. 1, 2014>
1. Holding stocks or bonds;
2. Providing intellectual property rights;
3. Leasing ships, aircraft, or equipment;
4. Investing in investment trusts or funds.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 18-2 (Special Provisions on Overseas Holding Companies’ Retained Earnings Deemed Dividends)
Article 17 shall not apply where a specific foreign corporation (hereafter in this Article referred to as “overseas holding company”) the primary business of which is to hold stocks and which holds stocks issued by any of its affiliates (referring to a foreign corporation the stocks of which are held by the specific foreign corporation and which satisfies the criteria prescribed by Presidential Decree; hereafter the same shall apply in this Article) meets all of the following conditions, regardless of whether the corporation engages in business activities at a permanent establishment, such as an office, a store, or a factory: <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
1. The overseas holding company has held stocks issued by any of its affiliates for at least six consecutive months as of the date of record for dividends by that affiliate;
2. The rate of the total amount of interest income, dividend income, and other income prescribed by Presidential Decree that the overseas holding company has received from any of its affiliated companies having its head office or principal office in the same country, etc. among the affiliates referred to in subparagraph 1 to the income (excluding the income generated by actually engaging in any business other than those provided in the subparagraphs of Article 18 (1) at a permanent establishment, such as an office, a store, or a factory, and the income generated by disposing of stocks of the affiliate) of that overseas holding company shall be equal to or exceed the rate prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 19 (Timing of Treating Dividends as Taxable Gains)
(1) The amount deemed a dividend as provided in Article 17 (1) (hereafter in this Article referred to as “deemed dividend”) shall be included in a Korean national’s gains or dividend income (hereafter in this Chapter referred to as “gains”) for the taxable year in which the sixtieth day after the end of the pertinent business year of the specific foreign corporation falls. <Amended by Act No. 11606, Jan. 1, 2013>
(2) Where a specific foreign corporation has paid taxes to a foreign country when actually distributing a dividend to a Korean national, a deemed dividend for the taxable year, which is included in gains in accordance with paragraph (1), shall be treated as foreign source income, while the taxes paid to the foreign country as at the time of the actual distribution shall be deemed paid to the foreign country in the taxable year during which the amount is included in gains in accordance with paragraph (1), and Article 57 (1) and (2) of the Corporate Tax Act and Article 57 (1) and (2) of the Income Tax Act shall apply thereto. <Amended by Act No. 11606, Jan. 1, 2013>
(3) For the purposes of Article 57 (4) of the Corporate Tax Act, a deemed dividend included in gains in accordance with paragraph (1) shall be deemed a dividend earned during the taxable year in which it is included in gains. <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
(4) Any person who wishes to quality for paragraph (2) may file a request for rectification with the head of the tax office having jurisdiction over the place of tax payment, as prescribed by Presidential Decree, within one year following the expiration of the deadline for filing the income tax or corporate tax return of the taxable year in which he/she has actually received a dividend.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 20 (Exclusion of Actually Dividends from Taxable Gains)
(1) Where a specific foreign corporation actually distributes its retained earnings as dividends (including dividends or distributions provided in Article 16 of the Corporate Tax Act) subsequent to the inclusion of the retained earnings in the gains of a Korean national under Article 17 (1), the distributed amount shall be deemed the gross income carried forward referred to in subparagraph 2 of Article 18 of the Corporate Tax Act or deemed not to fall within the dividend income provided in Article 17 (1) of the Income Tax Act. <Amended by Act No. 10410, Dec. 27, 2010>
(2) Where the retained earnings of a specific foreign corporation are included in the gains of a Korean national under Article 17 (1) and the Korean national transfers stocks of the specific foreign corporation, the amount provided in subparagraph 1, less the amount provided in subparagraph 2 (if the amount so calculated is less than zero, it shall be deemed zero) shall be deemed the gross income carried forward referred to in paragraph (1) or deemed not to fall within the income generated from the transfer of stocks, as provided in subparagraph 3 of Article 118-2 of the Income Tax Act. In such cases, if the amount deemed the gross income carried forward or deemed not to fall within the income generated from the transfer of stocks exceeds the capital gains on transfer of such stocks, the excess amount shall be deemed nil: <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013>
1. The amount equivalent to the aggregate of the amounts treated as the dividends on the transferred stocks;
2. The amount of actually distributed dividends on the transferred stocks.
(3) The books of account and evidentiary documents necessary for calculating the gross income carried forward pursuant to paragraphs (1) and (2) shall be preserved until the expiration of the statutory deadline for filing a return for the taxable year in which the date of dividend payment or transfer falls, notwithstanding Article 85-3 (2) of the Framework Act on National Taxes. <Amended by Act No. 10410, Dec. 27, 2010>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 20-2 (Submission of Data on Specific Foreign Corporations)
Each Korean national subject to Article 17, 18, 18-2, 19, or 20 shall submit the following documents to the head of the tax office having jurisdiction over the place for tax payment by the deadline for filing a tax return set under Articles 70 (1) and 70-2 (2) of the Income Tax Act, or Articles 60 (1) and 76-17 (1) of the Corporate Tax Act, as prescribed by Presidential Decree: <Amended by Act No. 13553, Dec. 15, 2015>
1. Financial statements of a specific foreign corporation;
2. A corporate tax return of a specific foreign corporation and supporting documents;
3. A detailed statement on calculation of retained earnings of a specific foreign corporation;
4. Other documents prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 12164, Jan. 1, 2014]
CHAPTER V SPECIAL PROVISIONS ON ASSESSMENT OF GIFT TAX ON OVERSEAS DONATION
 Article 21 (Special Provisions on Assessment of Gift Tax on Overseas Donation)
(1) Where a resident donates (excluding a donation that takes effect upon the death of a donor) his/her overseas property to a nonresident, the donor is liable to pay gift tax pursuant to this Act: Provided, That such donor shall be exempt from gift tax when the donee is not in a special relationship, as defined in subparagraph 20 of Article 2 of the Framework Act on National Taxes, with the donor, and gift tax (including taxes substantially similar thereto) is assessed (including exemption) on the property pursuant to statutes of the relevant foreign country. <Amended by Act No. 11606, Jan. 1, 2013; Act No. 12849, Dec. 23, 2014; Act No. 13553, Dec. 15, 2015; Act No. 14384, Dec. 20, 2016>
(2) For the purposes of the main sentence of paragraph (1), the value of donated property shall be based on its market price reflecting the situations as at the time of such donation in the foreign country wherein the donated property is located, but the matters concerning the computation of such market price shall be prescribed by Presidential Decree: Provided, That where it is impracticable to compute a market price, the market price shall be computed by the methods specified by Presidential Decree, taking account of the type, scale, and circumstances of the transaction of the relevant property. <Amended by Act No. 12849, Dec. 23, 2014>
(3) For the purposes of the main sentence of paragraph (1) and paragraph (2), where gift tax has been paid pursuant to statutes of the relevant foreign country, the amount equivalent to the gift tax paid shall be deducted from the amount of gift tax computed, as prescribed by Presidential Decree. <Newly Inserted by Act No. 12849, Dec. 23, 2014>
(4) Articles 4-2 (1) and (2), 47, 53, 56 through 58, 68, 69 (2), 70 through 72, and 76 of the Inheritance Tax and Gift Tax Act shall apply mutatis mutandis the assessment of gift tax under paragraph (1). <Amended by Act No. 11126, Dec. 31, 2011; Act No. 12849, Dec. 23, 2014; Act No. 13553, Dec. 15, 2015>
(5) The resident referred to in paragraph (1) includes a non-profit corporation that has its head office or principal office in the Republic of Korea, and the nonresident referred to in paragraph (1) includes a non-profit corporation that has no head office or principal office in the Republic of Korea. <Newly Inserted by Act No. 11606, Jan. 1, 2013; Act No. 12849, Dec. 23, 2014>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER VI MUTUAL AGREEMENT PROCEDURES
 Article 22 (Conditions for Commencing Mutual Agreement Procedure)
(1) Any national, resident, or domestic corporation of the Republic of Korea, any nonresident or foreign corporation may apply for commencing the mutual agreement procedure to any of the following persons, as prescribed by Presidential Decree: <Amended by Act No. 14384, Dec. 20, 2016>
1. The Minister of Strategy and Finance where it is necessary to consult with the other Contracting State on the application and interpretation of the tax treaty;
2. The Commissioner of the National Tax Service where any tax has been or is likely to be assessed by the tax authority of the other Contracting State, not in compliance with the provisions of the tax treaty;
3. The Commissioner of the National Tax Service where a tax adjustment is required under the tax treaty between the Republic of Korea and the other Contracting State.
(2) Upon receipt of an application for commencing the mutual agreement procedure under paragraph (1), the Minister of Strategy and Finance or the Commissioner of the National Tax Service shall request the competent authority of the other Contracting State to commence the mutual agreement procedure and notify the applicant of the fact of such request, except in the following circumstances:
1. Where the final ruling has been made by a domestic or foreign court;
2. Where the application has been filed by a person ineligible under the tax treaty;
3. Where it is recognized that the taxpayer intends to utilize the mutual agreement procedure for tax avoidance;
4. Where the application has been filed three years after the applicant became aware of the tax assessed.
(3) Upon receipt of an application under paragraph (1), the Commissioner of the National Tax Service shall report thereon to the Minister of Strategy and Finance, and the Minister of Strategy and Finance may give an instruction as to the mutual agreement procedure, if necessary.
(4) In the circumstances provided in paragraph (1) 1, the Minister of Strategy and Finance may ex officio request the competent authority of the other Contracting State to commence the mutual agreement procedure.
(5) In the circumstances provided in paragraph (1) 2 or 3, the Commissioner of the National Tax Service may ex officio request the competent authority of the other Contracting State to commence the mutual agreement procedure. Paragraph (3) shall apply mutatis mutandis to such cases.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 23 (Commencing and Closing Dates of Mutual Agreement Procedure)
(1) The commencement date of the mutual agreement procedure shall be either of the following dates:
1. Where the competent authority of the other Contracting State makes a request to commence the mutual agreement procedure, the date of notifying the competent authority of the other Contracting State of its intent to accept the request;
2. Where a request to commence the mutual agreement procedure is forwarded to the competent authority of the other Contracting State, the date of receiving an intent to accept the request from the competent authority of the other Contracting State.
(2) The closing date of the mutual agreement procedure shall be the date on which the competent authority of the Republic of Korea enters into a written agreement with the other Contracting State: Provided, That where no mutual agreement is reached, the closing date of the mutual agreement procedure shall be the date on which five years elapse from the date following the commencement date.
(3) Where the competent authority of the Republic of Korea agrees with the other Contracting State to continue the mutual agreement procedure, the mutual agreement procedure shall not be closed, notwithstanding the proviso to paragraph (2). In such cases, the closing date of the mutual agreement procedure shall not exceed eight years, beginning on the date following the commencement date.
(4) In any of the following cases, a date classified accordingly shall be the closing date of the mutual agreement procedure: <Amended by Act No. 14384, Dec. 20, 2016>
1. Where the final ruling is made by a court in the course of the mutual agreement procedure: The date the final ruling is made;
2. Where the applicant withdraws his/her application for commencing the mutual agreement procedure in the course of the mutual agreement procedure: The date the application is withdrawn.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 24 (Special Provisions on Period for Applying for Appeal, Deferment of Collection, etc.)
(1) Where the mutual agreement procedure has commenced, the period from the commencement date to the closing date of the mutual agreement procedure shall be excluded from the period for making requests provided in Articles 56 (3), 61, and 68 of the Framework Act on National Taxes and Article 91 of the Framework Act on Local Taxes and in the period for making decisions provided in Articles 65 and 81 of the Framework Act on National Taxes and Article 96 of the Framework Act on Local Taxes. <Amended by Act No. 10219, Mar. 31, 2010; Act No. 14474, Dec. 27, 2016>
(2) Where the mutual agreement procedure has commenced before a notice of the amount of tax payable is given, the head of the tax office having jurisdiction over the place for tax payment or the head of the local government may either defer a notice of the amount of tax until the end of the mutual agreement procedure or notify an installment payment of the assessed amount of tax. In such cases, the head of the tax office having jurisdiction over the place of tax payment or the head of the local government shall notify the amount of tax payable within 30 days from the date following the closing date of the mutual agreement procedure.
(3) Where the mutual agreement procedure has commenced after the notice of tax payment or a demand notice was served on the taxpayer, the head of the tax office having jurisdiction over the place for tax payment or the head of the local government may either defer the collection of tax or defer the seizure of property due to disposition for arrears or the sale of seized property from the commencement date to the closing date of the mutual agreement procedure. In such cases, the head of the tax office having jurisdiction over the place for tax payment or the head of the local government shall set a new payment deadline and collect the deferred tax amount, within 30 days from the date following the closing date of the mutual agreement procedure.
(4) Paragraphs (2) and (3) shall apply only where the other Contracting State allows the deferment of tax collection and of disposition for arrears, in the course of the mutual agreement procedure.
(5) Where the head of the tax office having jurisdiction over the place for tax payment or the head of the local government allows the deferment of tax collection or of disposition for arrears under paragraph (3), he/she shall additionally collect the amount equivalent to the interest for the relevant period as calculated pursuant to Presidential Decree.
(6) Any person who wishes to qualify for paragraphs (2) and (3) shall file an application for the special provisions on the deferment of tax collection or of disposition for arrears with the head of the tax office having jurisdiction over the place for tax payment or the head of the local government, as prescribed by Presidential Decree.
(7) Where any of the deferred notice, notice of installment payment, deferment of tax collection, and deferment of disposition for arrears (hereafter in this paragraph referred to as “deferred notice”) is applied to the amount of income tax or corporate tax under paragraph (2) or (3), the deferred notice shall also be applied, as it stands, to the amount of local tax to be added to the amount of income tax or corporate tax without undergoing any separate procedure provided in this Article. In such cases, the Commissioner of the National Tax Service shall notify the head of the local government of the fact of deferred notice, as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 25 (Special Provisions on Statute of Limitations for Tax Assessment)
(1) Where the mutual agreement procedure agreed upon with the other Contracting State commences, no national taxes shall be assessed upon the expiration of the one-year period beginning on the date following the closing date of the mutual agreement procedure and of the period provided in Article 26-2 (1) of the Framework Act on National Taxes, whichever comes later.
(2) Where the mutual agreement procedure agreed upon with the other Contracting State commences, no local taxes shall be assessed upon the expiration of the one-year period beginning on the date following the closing date of the mutual agreement procedure and of the period provided in Article 38 (1) of the Framework Act on Local Taxes, whichever comes later. <Amended by Act No. 10219, Mar. 31, 2010>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 26 (Taxpayer’s Obligation to Cooperate)
(1) The Minister of Strategy and Finance or the Commissioner of the National Tax Service may request a taxpayer who has applied for commencement of the mutual agreement procedure to submit documents necessary for proceeding with the mutual agreement procedure.
(2) The Minister of Strategy and Finance or the Commissioner of the National Tax Service may terminate ex officio the mutual agreement procedure if the taxpayer fails to comply conscientiously with a request to submit documents under paragraph (1). In such cases, the closing date of the mutual agreement procedure shall be the date the applicant is notified of the termination of such procedure.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 27 (Enforcement of Terms and Conditions Mutually Agreed Upon)
(1) The Commissioner of the National Tax Service shall report the terms and conditions mutually agreed upon to the Minister of Strategy and Finance upon closing of the mutual agreement procedure.
(2) Upon closing of the mutual agreement procedure, the Minister of Strategy and Finance or the Commissioner of the National Tax Service shall notify the tax authority, the head of a local government, the Director of the Tax Tribunal, other relevant agencies, and the applicant for the commencement of the mutual agreement procedure of the terms and conditions mutually agreed upon within 15 days from the date following the closing date of the mutual agreement procedure. In such cases, the Minister of Strategy and Finance may publicly notify the contents of the agreement reached. <Amended by Act No. 11126, Dec. 31, 2011>
(3) The tax authority or the head of a local government shall assess taxes, determine to make a rectification, or take other necessary action under the tax laws pursuant to the terms and conditions mutually agreed upon.
(4) Where a final ruling has been made by a court after conclusion of the mutual agreement procedure, and the contents of such final ruling are contrary to any of the terms and conditions mutually agreed upon, the said mutual agreement shall be deemed nonexistent from the beginning.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 27-2 (Extended Application, etc. of Terms and Conditions Mutually Agreed Upon)
(1) Where a person who applied for commencement of the mutual agreement procedure, after the mutual agreement has been concluded, files an application for applying the terms and conditions mutually agreed upon to transactions between the applicant and a related party who resides in any country, other than the country bound by the mutual agreement, within three years from the date the notice of conclusion of the mutual agreement is delivered, as prescribed by Presidential Decree, the tax authority or the head of the relevant local government may apply the terms and conditions mutually agreed upon to the transactions with the related party who resides in any country, other than the country bound by the mutual agreement, if all of the following requirements are met: <Amended by Act No. 11126, Dec. 31, 2011>
1. The transactions are of the same type as that upon which the terms and conditions were mutually agreed;
2. Taxes have been assessed in the same manner as stipulated in the terms and conditions mutually agreed upon;
3. Other requirements prescribed by Presidential Decree are met.
(2) Article 27 shall apply mutatis mutandis to the extended application of the terms and conditions mutually agreed upon in accordance with paragraph (1) to a related party who resides in any country, other than the country bound by the mutual agreement. <Amended by Act No. 11126, Dec. 31, 2011>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER VII INTERNATIONAL COOPERATION IN TAX AFFAIRS
 Article 28 (Preferential Application of Income Classification under Tax Treaty)
The provisions of the tax treaty shall preferentially apply to the classification of a domestic source income of a nonresident or foreign corporation, notwithstanding Article 119 of the Income Tax Act and Article 93 of the Corporate Tax Act.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 29 (Special Provisions on Application of Tax Rates to Interest, Dividends, and Royalties)
(1) The lower of the limited tax rate provided by a tax treaty or any of the following tax rates shall apply to interest, dividends, or royalties on intellectual property, etc. (where any income generated from the rental of industrial, commercial, or scientific machinery, facilities, equipment, etc. provided in subparagraph 4 of Article 119 of the Income Tax Act and subparagraph 4 of Article 93 of the Corporate Tax Act is classified as a royalty on intellectual property under the tax treaty, including such royalty) that constitute a domestic source income of a nonresident or foreign corporation under the tax treaty: Provided, That for the purposes of Article 156-4 (1) of the Income Tax Act or Article 98-5 (1) of the Corporate Tax Act, taxes shall be withheld in accordance with Article 156-4 (1) of the Income Tax Act or Article 98-5 (1) of the Corporate Tax Act. In such cases, the lower of the limited tax rate provided by the tax treaty or any of the following tax rates shall apply where the tax base and tax amount are rectified pursuant to Article 156-4 (3) of the Income Tax Act or Article 98-5 (3) of the Corporate Tax Act: <Amended by Act No. 9924, Jan. 1, 2010; Act No. 10221, Mar. 31, 2010; Act No. 11606, Jan. 1, 2013; Act No. 12153, Jan. 1, 2014>
1. Where no local income tax is included in taxes subject to the tax treaty, the tax rate provided in Article 156 (1) 3 of the Income Tax Act or Article 98 (1) 3 of the Corporate Tax Act;
2. Where local income tax is included in taxes subject to the tax treaty, the tax rate computed by adding ten percent of the income tax withheld under Article 103-18 (1) of the Local Tax Act or ten percent of the corporate tax withheld under Article 103-52 (1) of the same Act to the tax rate provided in Article 156 (1) 3 of the Income Tax Act or Article 98 (1) 3 of the Corporate Tax Act.
(2) Where the other Contracting State requests a resident or domestic corporation to furnish a resident certificate in relation to the application of the limited tax rate, the tax authority may issue such certificate, as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 30 (Entrustment of Tax Collection)
(1) The head of a tax office having jurisdiction over the place for tax payment or the head of a local government may request that the Commissioner of the National Tax Service request the other Contracting State to take measures necessary to collect taxes where it is deemed inevitable that the other Contracting State collects the taxes payable as it is impracticable to collect such taxes in the Republic of Korea.
(2) Upon receipt of a request under paragraph (1), the Commissioner of the National Tax Service may entrust the competent authority of the other Contracting State with the collection of the relevant taxes, as prescribed by Presidential Decree.
(3) Where the competent authority of the other Contracting State request the collection of taxes payable to the other Contracting State in the Republic of Korea under the tax treaty, the Minister of Strategy and Finance or the Commissioner of the National Tax Service may have the head of the tax office having jurisdiction over the place for tax payment collect such taxes in the same manner as national taxes are collected, as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 31 (Exchange of Tax and Financial Information)
(1) The competent authority may obtain tax information required for the assessment and collection of taxes, review of tax appeals, and criminal prosecution as well as tax information generalized by international practices to the extent not in contravention of other Acts, and exchange such information with the other Contracting State. <Amended by Act No. 10410, Dec. 27, 2010>
(2) Where the competent authority of the other Contracting State demands financial information (referring to information or data relating to the details of financial transactions defined in subparagraph 3 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality; hereafter in this Article the same shall apply) on residents, domestic corporations, nonresidents, or foreign corporations under the tax treaty, the competent authority may request a specific branch (or the head of a finance company, etc. where a general inquiry about financial property is made under Article 83 (1) of the Inheritance Tax and Gift Tax Act or where the information requested by the competent authority of the other Contracting State is about a group that is unable to specify the personal information of a title holder related to the specific financial transaction) of a finance company, etc. (referring to a finance company, etc. defined in subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality; hereinafter the same shall apply) to provide any of the following financial information, notwithstanding Article 4 of the Act on Real Name Financial Transactions and Confidentiality, and no employee of the finance company, etc. shall reject such request: <Amended by Act No. 10410, Dec. 27, 2010; Act No. 10854, Jul. 14, 2011; Act No. 11606, Jan. 1, 2013; Act No. 12164, Jan. 1, 2014>
1. Financial information that constitutes data for tax assessment that shall be submitted under tax-related Acts;
2. Financial information necessary to verify property acquired by inheritance or donation;
3. Financial information necessary for the competent authority of the other Contracting State to verify data sufficient to prove a suspicion of tax avoidance;
4. Financial information necessary to inquiry about the property of a delinquent taxpayer of the other Contracting State;
5. Financial information required by the competent authority of the other Contracting State due to any of the causes provided in the subparagraphs of Article 14 (1) of the National Tax Collection Act.
(3) The competent authority may request the head of a finance company, etc. to provide financial information, such as details of financial transactions of residents, domestic corporations, nonresidents, and foreign corporations, necessary for the assessment, collection, and management of taxes by the other Contracting State where necessary for regularly exchanging financial information with the other Contracting State on the principle of reciprocity under the tax treaty, notwithstanding Article 4 of the Act on Real Name Financial Transactions and Confidentiality. In such cases, an employee of the finance company, etc. shall provide such financial information, as prescribed by Presidential Decree. <Newly Inserted by Act No. 11606, Jan. 1, 2013; Act No. 12164, Jan. 1, 2014>
(4) Although the competent authority makes no request under paragraph (3), a finance company, etc. may verify and maintain beforehand personal information, including the taxpayer numbers (referring to a unique number assigned to each taxpayer by an individual country for identification purposes) of the counter-parties to financial transactions (including the counter-parties to financial transactions of countries other than the other Contracting State under the tax treaty) of the finance company, etc. to the minimum extent necessary for supporting the exchange of financial information among the Contracting States. <Newly Inserted by Act No. 13553, Dec. 15, 2015>
(5) None of the following persons shall unreasonably interfere with or delay the acquisition, exchange, or provision of any tax or financial information referred to in paragraphs (1) through (4): <Amended by Act No. 13553, Dec. 15, 2015>
1. A person related to the tax or financial information referred to in paragraphs (1) through (3);
2. A counter-party to financial transactions referred to in paragraph (4).
(6) Each employee of a finance company, etc. shall refuse to provide financial information upon receipt of a request, in violation of paragraph (2) or (3). <Amended by Act No. 10410, Dec. 27, 2010; Act No. 10854, Jul. 14, 2011; Act No. 11606, Jan. 1, 2013; Act No. 13553, Dec. 15, 2015>
(7) No person who has become aware of financial information under paragraphs (2) through (4) shall provide or divulge such information to any third person, other than the competent authority of the other Contracting State, or misappropriate such information, and no person shall request any person that has become aware of financial information to provide such financial information. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013; Act No. 13553, Dec. 15, 2015>
(8) No person who has obtained financial information provided or divulged in violation of paragraph (2), (3), or (7) shall provide or divulge such financial information to any third person if he/she becomes aware of the violation. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013; Act No. 13553, Dec. 15, 2015>
(9) Notwithstanding paragraph (2), the competent authority may restrict the provision of financial information to the other Contracting State on the principle of reciprocity. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013; Act No. 13553, Dec. 15, 2015>
(10) The head of a finance company, etc. who intends to provide financial information under paragraph (3), or to verify financial information under paragraph (4), may request the counter-party to a financial transaction to submit data necessary to verify its personal information, etc. <Newly Inserted by Act No. 12164, Jan. 1, 2014; Act No. 13553, Dec. 15, 2015>
(11) Detailed matters concerning the exchange of tax information under paragraph (1), exchange of financial information under paragraphs (2) and (3), and verification of personal information, etc. under paragraph (10) shall be prescribed by Presidential Decree. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013; Act No. 12164, Jan. 1, 2014; Act No. 13553, Dec. 15, 2015>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 31-2 (Penalty Provisions)
(1) A person who violates Article 31 (6) through (8) or 36 shall be punished by imprisonment for not more than five years, or by a fine not exceeding thirty million won. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013; Act No. 13553, Dec. 15, 2015>
(2) Imprisonment and a fine provided in paragraph (1) may be imposed concurrently.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 31-3 (Joint Penalty Provisions)
Where the representative of a corporation, or an agent, employee, or other servant of a corporation or an individual commits a violation provided in Article 31-2 (1) (excluding a violation of Article 36) in the course of performing the business affairs of the corporation or the individual, not only shall such violator be punished, but the corporation or individual also shall be punished by a fine prescribed in the relevant provisions: Provided, That this shall not apply where such corporation or individual has not been negligent in duly monitoring and supervising the relevant business affairs to prevent such violation.
[This Article Newly Inserted by Act No. 13553, Dec. 15, 2015]
 Article 31-4 (Administrative Fines)
(1) Where a finance company, etc. in receipt of a request to provide financial information under Article 31 (2) or (3) fails to provide it without good cause, or provides false financial information, it shall be subject to an administrative fine not exceeding 30 million won. <Amended by Act No. 12164, Jan. 1, 2014>
(2) The administrative fine provided in paragraph (1) shall be imposed and collected by the tax authority, as prescribed by Presidential Decree. <Amended by Act No. 13553, Dec. 15, 2015>
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
 Article 32 (Cooperation in Tax Audit)
(1) Where it is deemed necessary to conduct a tax audit on a transaction with a person to whom the tax treaty applies, the competent authority may conduct a tax audit on the transaction along with the other Contracting State; dispatch tax officials to the other Contracting State to directly conduct a tax audit; or to participate in a tax audit by the other Contracting State. <Amended by Act No. 11126, Dec. 31, 2011>
(2) Where the other Contracting State requests cooperation in a tax audit under the relevant tax treaty, the competent authority may accept such request. <Amended by Act No. 11126, Dec. 31, 2011>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
 Article 33 (Enforcement of Tax Treaties)
Matters necessary for the enforcement of tax treaties shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER VIII REPORTING ON OVERSEAS FINANCIAL ACCOUNTS
 Article 34 (Reporting on Overseas Financial Accounts)
(1) A resident or domestic corporation holding an overseas financial account at an overseas finance company, the balance of which (or the aggregate balance of all accounts, if the resident or domestic corporation holds more than one account) as at the last day of any month of the relevant year exceeds the amount prescribed by Presidential Decree (hereafter in this Chapter referred to as “person required to report”), shall report the following information (hereafter in this Chapter referred to as “information on overseas financial account”) to the head of the tax office having jurisdiction over the place for tax payment from June 1 to 30 of the following year: <Amended by Act No. 11606, Jan. 1, 2013>
1. Information on the identity of the account holder, such as the name and address;
2. Information on the account held, such as the account number, the name of the finance company, and the largest balance of the account as at the last day of each month;
3. Information on persons related to the overseas financial account referred to in paragraph (4).
(2) “Overseas finance company” in paragraph (1) means a finance company prescribed by Presidential Decree, which is located overseas (including a domestic corporation’s places of business in foreign countries, but excluding a foreign corporation’s places of business in the Republic of Korea) and engages in the business of finance, insurance, pension, or finance and insurance-related service business, or other similar business. <Amended by Act No. 11606, Jan. 1, 2013>
(3) “Overseas financial account” in paragraph (1) means any of the following accounts opened for financial transactions (including financial transactions defined in subparagraph 3 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality and similar transactions) with an overseas finance company: <Amended by Act No. 11606, Jan. 1, 2013>
1. An account opened in connection with banking services pursuant to Article 27 of the Banking Act;
2. An account opened for trading securities defined in Article 4 of the Financial Investment Services and Capital Markets Act and similar overseas securities;
3. An account opened for trading derivatives defined in Article 5 of the Financial Investment Services and Capital Markets Act and similar overseas derivatives;
4. An account, other than those prescribed in subparagraphs 1 through 3, which is opened with an overseas finance company for other financial transactions.
(4) Persons related to an overseas financial account as provided in paragraph (1) (referring to the nominal holder and the actual holder of an overseas financial account if the nominal holder and the actual holder are different, and each of the nominal holders of an overseas financial account if it is a joint checking account) shall be deemed to hold the relevant account, respectively.
(5) A person required to report shall be exempt from the obligation to report if the person is: <Amended by Act No. 10854, Jul. 14, 2011; Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013; Act No. 13553, Dec. 15, 2015>
1. A foreign resident referred to in the proviso to Article 3 (1) of the Income Tax Act, or a Korean national residing abroad as defined in subparagraph 1 of Article 2 of the Act on the Immigration and Legal Status of Overseas Koreans, who has his/her residence in the Republic of Korea for a total period not exceeding 183 days within the two-year period before the end of the relevant year subject to reporting (in such cases, a total period having a residence in the Republic of Korea shall be computed in the manner prescribed by Presidential Decree);
2. The State, a local government, or a public institution provided in the Act on the Management of Public Institutions;
3. A finance company, etc.;
4. A person who meets the requirements prescribed by Presidential Decree, including where the information on his/her overseas financial account is verifiable through a report by another nominal holder of the overseas financial account among those related to the overseas financial account provided in paragraph (4);
5. An institution prescribed by Presidential Decree, which is subject to management and supervision by the State under other statutes.
(6) Matters necessary for reporting overseas financial accounts, such as standards for determining persons required to report, methods for computing the balance of the account held, and methods of reporting, shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 10410, Dec. 27, 2010]
 Article 34-2 (Penalty Provisions for Non-Fulfillment of Obligation to Report Overseas Financial Accounts)
(1) Where the amount on which a person required to report information on his/her overseas financial account pursuant to Article 34 (1) fails to report by the reporting deadline or the under-reported amount (hereafter in this Chapter referred to as “amount unreported”) exceeds 5 billion won, the person shall be punished by imprisonment for not more than 2 years, or by a fine not exceeding 20 percent of the amount unreported: Provided, That the same shall not apply where good cause exists. <Amended by Act No. 12164, Jan. 1, 2014; Act No. 12849, Dec. 23, 2014>
(2) Imprisonment and a fine provided in paragraph (1) may be imposed concurrently.
(3) No administrative fine provided in Article 35 (1) shall be imposed where a person is punished pursuant to paragraph (1). <Amended by Act No. 12164, Jan. 1, 2014>
(4) Where the representative of a domestic corporation, or an agent, employee or other servant of a domestic corporation or a resident commits a violation provided in this Article in the course of performing the business affairs of the domestic corporation or the resident, not only shall such violator be punished, but also the domestic corporation or resident shall be punished by a fine provided in this Article: Provided, That the same shall not apply where such domestic corporation or resident has not been negligent in duly monitoring and supervising the relevant business affairs to prevent such violation.
[This Article Newly Inserted by Act No. 11606, Jan. 1, 2013]
 Article 34-3 (Explanation about Source of Amount Unreported in Relation to Overseas Financial Accounts)
(1) Where a resident required to report information on his/her overseas financial account under Article 34 (1) fails to do so by the reporting deadline or under-reports the relevant amount, the head of the tax office having jurisdiction over the place for tax payment may request him/her to explain the source of the amount unreported.
(2) Upon receipt of a request for explanation pursuant to paragraph (1), person required to report shall give an explanation in a manner prescribed by Presidential Decree within 90 days after receipt of the notice (hereafter in this paragraph referred to as “period for explanation”): Provided, That where the person required to report requests an extension of the period for explanation in any extenuating circumstances prescribed by Presidential Decree, such as collecting and preparing data require considerable time, the head of the tax office having jurisdiction over the place for tax payment may extend the period by up to 60 days on only one occasion.
(3) Paragraphs (1) and (2) shall not apply where a person required to report files a revised report or after-deadline report under Article 37 (excluding where he/she files such a report, knowing beforehand the intent of the tax authority to impose an administrative fine).
[This Article Newly Inserted by Act No. 12164, Jan. 1, 2014]
 Article 35 (Administrative Fines for Non-Fulfillment, etc. of Obligation to Report Overseas Financial Accounts)
(1) Where a person required to report under Article 34 (1) fails to report his/her overseas financial account by the reporting deadline or under-reports the relevant amount, an administrative fine not exceeding 20 percent of the amount calculated as follows shall be imposed: <Amended by Act No. 12849, Dec. 23, 2014>
1. Where the person fails to report: The amount not reported;
2. Where the person under-reports: The difference between the amount actually reported and the amount that should have been reported.
(2) Where a person required to report fails to explain the source of the amount unreported or submits a false explanation in violation of Article 34-3 (2), the person shall be subject to an administrative fine equivalent to 20 percent of the amount that has not been explained or has been falsely explained: Provided, That no administrative fine shall be imposed where there exists good cause prescribed by Presidential Decree, such as a natural disaster. <Newly Inserted by Act No. 12164, Jan. 1, 2014; Act No. 12849, Dec. 23, 2014>
(3) Administrative fines provided in paragraphs (1) and (2) shall be imposed and collected by the tax authority, as prescribed by Presidential Decree. <Amended by Act No. 11126, Dec. 31, 2011; Act No. 12164, Jan. 1, 2014>
[This Article Newly Inserted by Act No. 10410, Dec. 27, 2010]
 Article 36 (Confidentiality of Information on Overseas Financial Accounts)
(1) No tax official shall offer or divulge any information on overseas financial accounts to any third person or misappropriate it: Provided, That he/she may provide information on overseas financial accounts within the limits of the purposes in any of the circumstances provided in the subparagraphs of Article 81-13 (1) of the Framework Act on National Taxes.
(2) No person who has become aware of any information on overseas financial accounts under paragraph (1) shall provide or divulge it to any third person or misappropriate it.
[This Article Newly Inserted by Act No. 10410, Dec. 27, 2010]
 Article 37 (Revised and After-Deadline Reports of Overseas Financial Accounts)
(1) A person who has reported information on his/her overseas financial account by the reporting deadline prescribed in Article 34 (1) but has under-reported the amount thereof, may file a revised report on the information on his/her overseas financial account before the tax authority imposes an administrative fine pursuant to Article 35 (1). <Amended by Act No. 12164, Jan. 1, 2014>
(2) A person who has failed to report information on his/her overseas financial account by the reporting deadline prescribed in Article 34 (1) may report information on his/her overseas financial account before the tax authority imposes an administrative fine pursuant to Article 35 (1). <Amended by Act No. 12164, Jan. 1, 2014>
(3) Methods of filing revised or after-deadline reports on overseas financial accounts pursuant to paragraphs (1) and (2), and other necessary matters, shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
 Article 38 (Special Provisions on Voluntary Reporting)
(1) Notwithstanding the Framework Act on National Taxes and any other tax law, the Minister of Strategy and Finance may set a specific period on only one occasion and permit a Korean national who has failed to report the income generated from international transactions and overseas, and the overseas property (including property acquired through inheritance or donation) subject to reporting under tax law, by the statutory reporting deadline, or who has under-reported the amount thereof (excluding persons prescribed by Presidential Decree, such as those undergoing a tax audit or investigation), to report the relevant income and property and to pay the amount of tax payable under tax law, as prescribed by Presidential Decree (hereafter in this Article referred to as “voluntary reporting system”), at the request of the Commissioner of the National Tax Service.
(2) A person who has filed a voluntary report pursuant to paragraph (1) may be granted a reduction of, or an exemption from a penalty tax (excluding penalty tax for unconscientious payment provided in Article 47-4 of the Framework Act on National Taxes) or an administrative fine to be imposed under the Framework Act on National Taxes, tax law, or the Foreign Exchange Transactions Act regarding the reported income and property, as prescribed by Presidential Decree, and may be excepted from a list of delinquent taxpayers subject to publication.
(3) The Minister of Strategy and Finance and the heads of the relevant central administrative agencies may render administrative and financial support to operate the voluntary reporting system efficiently.
(4) Notwithstanding Article 81-13 of the Framework Act on National Taxes, the Commissioner of the National Tax Service may provide the heads of the relevant central administrative agencies with the information related to the reporting referred to in paragraph (1), as prescribed by Presidential Decree.
(5) Matters necessary for implementing the voluntary reporting system, including procedures and methods therefor, shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 12849, Dec. 23, 2014]
[This Article is valid until December 31, 2016 under Article 2 of the Addenda to this Act, Act No. 12849 (Dec. 23, 2014)]
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1996: Provided, That Articles 6 and 14 through 20 shall enter into force on January 1, 1997; but where a taxable year commences on January 1, 1997 for the purposes of Article 6, an application may be filed within one month after the commencement of the said taxable year.
Article 2 (Applicability concerning Computation of Income)
Income-related provisions of this Act shall begin to apply from the first income accrued on or after the date this Act enters into force.
Article 3 (Applicability concerning Deferment of Disposition for Arrears)
The provisions concerning the deferment of disposition for arrears provided in Article 24 (3) through (6) shall also apply in cases for which the mutual agreement procedure is ongoing on the date of enforcement of this Act.
Article 4 Omitted.
ADDENDA <Act No. 5193, Dec. 30, 1996>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1997.
Articles 2 through 15 Omitted.
ADDENDA <Act No. 5581, Dec. 28, 1998>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1999. (Proviso Omitted.)
Articles 2 through 15 Omitted.
ADDENDA <Act No. 5584, Dec. 28, 1998>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1999. (Proviso Omitted.)
Articles 2 through 19 Omitted.
ADDENDA <Act No. 6299, Dec. 29, 2000>
Article 1 (Enforcement Date)
This Act shall enter into force on September 1, 2001.
Articles 2 and 3 Omitted.
ADDENDA <Act No. 6304, Dec. 29, 2000>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2001.
Article 2 (Applicability concerning Advance Pricing Agreements)
The amended provisions of Article 6 shall begin to apply from the first application for advance pricing agreement filed on or after the date this Act enters into force.
Article 3 (Applicability concerning Obligation to Submit Data on International Transactions)
The amended provisions of the proviso to Article 11 (1) shall begin to apply from the first taxable year on which a tax return is filed on or after the date this Act enters into force.
Article 4 (Applicability concerning Computation of Gains from Transfer of Stocks, etc. by Specific Foreign Corporations)
The amended provisions of Article 20 (2) shall begin to apply from the first transfer of stocks, etc. made on or after the date this Act enters into force.
Article 5 (Applicability concerning Special Provisions on Assessment of Gift Tax on Overseas Donation)
The amended provisions of Article 21 (1) shall begin to apply from the first donation made on or after the date this Act enters into force.
Article 6 (Applicability concerning Special Provisions on Application of Appeal Period Following Mutual Agreement Procedure)
The amended provisions of Article 24 (1) and (7) shall begin to apply from the first application for commencement of the mutual agreement procedure, which is filed on or after the date this Act enters into force.
ADDENDA <Act No. 6779, Dec. 18, 2002>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2003.
Article 2 (Applicability concerning Scope, etc. of Special Relationship)
The amended provisions of Articles 2 (1) 8 (d) and 4 (2) shall begin to apply from the first transaction made on or after the date this Act enters into force.
Article 3 (Applicability concerning Scope of Foreign Controlling Stockholders)
The amended provisions of Article 2 (1) 11 shall begin to apply from the first funds borrowed from a foreign controlling stockholder on or after the date this Act enters into force.
Article 4 (Applicability concerning Relationship with Other Acts)
The amended provisions of Article 3 (2) shall begin to apply from the first transaction made on or after the date this Act enters into force.
Article 5 (Applicability concerning Transaction Involving Third Party)
The amended provisions of Article 7 shall begin to apply from the first transaction made on or after the date this Act enters into force.
Article 6 (Applicability concerning Exclusion, etc. of Interest Deemed Dividends from Deductible Expenses)
The amended provisions of Articles 14 (1) and 16 shall begin to apply from the first funds borrowed on or after the date this Act enters into force.
Article 7 (Applicability concerning Applicable Scope of Tax Haven)
The amended provisions of Article 18 (1) 1 shall begin to apply from the first taxable year that begins on or after the date this Act enters into force.
Article 8 (Applicability concerning Closing Date of Mutual Agreement Procedure)
The amended provisions of Article 23 (3) shall begin to apply from the first-arriving close date of the mutual agreement procedure on or after the date this Act enters into force: Provided, That the amended provisions shall also apply where the competent authorities agree to continue the mutual agreement procedure even though the closing date of the mutual agreement procedure has arrived prior to this Act entering into force.
Article 9 (Applicability concerning Exchange of Tax and Financial Information)
The amended provisions of Articles 31 and 31-2 shall begin to apply from the first request for exchange of information made on or after the date this Act enters into force.
ADDENDA <Act No. 7956, May 24, 2006>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation: Provided, That the amended provisions of Article 29 (1) shall enter into force on July 1, 2006.
Article 2 (General Applicability)
This Act shall apply as of the taxable year in which this Act enters into force.
Article 3 (Applicability concerning Scope of Special Relationship)
The amended provisions of Article 2 (1) 8 (c) and (d) shall begin to apply from the first transaction made on or after the date this Act enters into force.
Article 4 (Applicability concerning Advance Pricing Agreements)
The amended provisions of Article 6 (3) shall begin to apply from the first application filed on or after the date this Act enters into force.
Article 5 (Applicability concerning Tax Adjustment by Arm’s Length Cost Sharing)
The amended provisions of Article 6-2 shall begin to apply from the first agreement on cost sharing made on or after the date this Act enters into force.
Article 6 (Applicability concerning Recognition of Setoff Transactions)
The amended provisions of Article 8 (2) shall begin to apply from the first transaction made on or after the date this Act enters into force.
Article 7 (Applicability concerning Secondary Income Adjustment and Tax Adjustment after Income Adjustment)
The amended provisions of Article 9 shall begin to apply from the first income adjustment or tax adjustment made on or after the date this Act enters into force.
Article 8 (Applicability concerning Conditions for Commencing Mutual Agreement Procedure)
The amended provisions of Article 22 (1) shall begin to apply from the first application filed on or after the date this Act enters into force.
Article 9 (Applicability concerning Extended Application of Terms and Conditions Mutually Agreed Upon)
The amended provisions of Article 27-2 shall begin to apply from the first application filed on or after the date this Act enters into force.
Article 10 (Applicability concerning Special Rule for Application of Tax Rates to Interest, Dividends and Royalties)
The amended provisions of Article 29 (1) shall begin to apply from the first tax withheld on or after the date this Act enters into force.
ADDENDA <Act No. 8139, Dec. 30, 2006>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2007. (Proviso Omitted.)
Articles 2 through 15 Omitted.
Article 16 (Transitional Measures Following Amendment of Other Acts)
A penalty that has been assessed or to be assessed pursuant to the provisions of any of the following tax laws, before this Act enters into force, shall be governed by the former provisions of such tax laws, notwithstanding the amended provisions of the following tax laws pursuant to Article 15 (1) through (7) of the Addenda:
4. The Stamp Tax Act: Article 8-2 of the Stamp Tax Act;
5. The Liquor Tax Act: Article 27 of the Liquor Tax Act;
7. The Special Consumption Tax Act: Article 13 and Article 24 (1) 1 of the Special Consumption Tax Act.
ADDENDA <Act No. 8387, Apr. 27, 2007>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Articles 2 through 9 Omitted.
ADDENDA <Act No. 8852, Feb. 29, 2008>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation: Provided, That … <Omitted> … any amendment of the Acts made under Article 6 of this Addenda, which were promulgated before this Act comes into force, but the enforcement date of which has yet to arrive, shall enter into force on the date the corresponding Act takes effect.
Articles 2 through 7 Omitted.
ADDENDA <Act No. 8860, Feb. 29, 2008>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Articles 2 through 6 Omitted.
ADDENDA <Act No. 9266, Dec. 26, 2008>
(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.
(2) (General Applicability) This Act shall begin to apply from the first taxable year that starts after the date this Act enters into force.
(3) (Applicability concerning Special Provisions on Application of Penalty Taxes) The amended provisions of Article 13 shall begin to apply from the first rectification of a tax base or tax amount made on or after the date this Act enters into force.
(4) (Applicability concerning Request for Rectification of Tax Amounts Paid to Foreign Countries) The amended provisions of Article 19 (4) shall begin to apply from the first request for rectification of a tax base or tax amount filed on or after the date this Act enters into force.
ADDENDA <Act No. 9914, Jan. 1, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Article 2 (Applicability)
This Act shall begin to apply from the first taxable year that starts after the date this Act enters into force.
ADDENDA <Act No. 9924, Jan. 1, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2010.
Articles 2 through 7 Omitted.
ADDENDA <Act No. 10219, Mar. 31, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2011.
Articles 2 through 12 Omitted.
ADDENDA <Act No. 10221, Mar. 31, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2011.
Articles 2 through 8 Omitted.
ADDENDA <Act No. 10410, Dec 27, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Article 2 (General Applicability)
This Act shall begin to apply from the first taxable year that starts after the date this Act enters into force.
Article 3 (Applicability concerning Tax Adjustment by Arm’s Length Price)
The amended provisions of the proviso to Article 4 (1) shall begin to apply from the first determination or rectification of a tax base or tax amount made on or after the date this Act enters into force.
Article 4 (Applicability concerning Methods of Computing Arm’s Length Prices)
The amended provisions of Article 5 (1) shall begin to apply from the first taxable year on which a tax return is filed on or after the date this Act enters into force.
Article 5 (Applicability concerning Advance Pricing Agreements)
The amended provisions of Article 6 (3) shall begin to apply from the first advance pricing agreement made on or after the date this Act enters into force.
Article 6 (Applicability concerning Sanctions against Non-Compliance with Obligation to Submit Data)
The amended provisions of Article 12 (1) shall begin to apply from the first request to submit documents made on or after the date this Act enters into force.
Article 7 (Applicability concerning Exclusion of Actually Distributed Dividends, etc. from Taxable Gains)
The amended provisions of Article 20 shall begin to apply from the first distribution of dividends or the first transfer of stocks made on or after the date this Act enters into force.
Article 8 (Applicability concerning Exchange of Tax and Financial Information)
The amended provisions of Articles 31 and 31-2 shall begin to apply from the first tax or financial information exchanged on or after the date this Act enters into force.
Article 9 (Applicability concerning Reporting on Overseas Financial Accounts and Administrative Fines)
The amended provisions of Articles 34 and 35 shall begin apply from the overseas financial accounts held in 2010 and thereafter: Provided, That for the purposes of the amended provisions of Article 35, an administrative fine not exceed five percent of an amount calculated as provided in each of the subparagraphs thereof an overseas shall be imposed in relation to the financial accounts held in 2010.
ADDENDA <Act No. 10854, Jul. 14, 2011>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)
Articles 2 and 3 Omitted.
ADDENDA <Act No. 11126, Dec. 31, 2011>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation: Provided, That the amended provisions of Articles 10-2 and 10-3 shall enter into force on July 1, 2012.
Article 2 (General Applicability)
This Act shall begin to apply from the first taxable year that begins on or after this Act enters into force.
Article 3 (Applicability concerning Rectification Claim for Adjustment of Arm’s Length Transfer Prices for National Taxes and Customs Duties)
The amended provisions of Article 10-2 shall begin to apply from the first rectification of customs duties made on or after the date the amended provisions of Article 10-2 enter into force as provided in the proviso to Article 1 of the Addenda.
Article 4 (Applicability concerning Provision of Information on International Transactions)
The amended provisions of Article 11-2 shall begin to apply from the first request to provide information filed on or after the date this Act enters into force.
Article 5 (Applicability concerning Scope, etc. of Application of Accumulative Taxation of Retained Earnings of Specific Foreign Corporations)
The amended provisions of Articles 18 (1) and 18-2 shall begin to apply from the business year in which the date this Act enters into force falls.
Article 6 (Applicability concerning Public Notification of Terms and Conditions Mutually Agreed Upon)
The amended provisions of Article 27 (2) shall begin to apply from the first mutual agreement reached on or after the date this Act enters into force.
Article 7 (Applicability concerning Administrative Fines)
The amended provisions of Article 31-3 shall begin to apply from the first request for financial information filed on or after the date this Act enters into force.
Article 8 (Applicability concerning Exemption from Obligation to Report Overseas Financial Accounts)
The amended provisions of Article 34 (5) shall begin to apply from the overseas financial account held in 2011 and thereafter.
Article 9 (Applicability concerning Revised and After-Deadline Reports of Overseas Financial Accounts)
The amended provisions of Article 37 shall begin to apply from the overseas financial account held in 2010 and thereafter.
ADDENDA <Act No. 11606, Jan. 1, 2013>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2013.
Article 2 (General Applicability)
This Act shall begin to apply from the taxable year that begins on after this Act enters into force.
Article 3 (Applicability concerning Obligation to Submit Data on International Transactions)
The amended provisions of Article 11 (1) shall begin to apply from the taxable year in which the date this Act enters into force falls.
Article 4 (Applicability concerning Scope of Application of Specific Foreign Corporations’ Retained Earnings Deemed Dividends)
The amended provisions of Article 18 (1) 1 shall begin to apply from the taxable year in which the date this Act enters into force falls.
Article 5 (Applicability concerning Special Provisions on Assessment of Gift Tax on Overseas Donation)
The amended provisions of Article 21 (1) and (4) shall begin to apply from donations made after this Act enters into force.
Article 6 (Applicability concerning Special Provisions on Application of Tax Rates to Interest, Dividends, and Royalties)
The amended provisions of Article 29 (1) shall begin to apply from the income paid after this Act enters into force.
Article 7 (Applicability concerning Exchange of Financial Information with Foreign Countries)
The amended provisions of Article 31 (3) through (9) shall begin to apply from the exchange of financial information with the other Contracting State made after this Act enters into force.
Article 8 (Applicability concerning Reporting on Overseas Financial Accounts)
The amended provisions of Article 34 (1) and (3) shall begin to apply from the overseas financial account held as of 2013 that shall be reported in 2014.
Article 9 (Applicability concerning Penalty Provisions for Non-Fulfillment of Obligation to Report Overseas Financial Accounts)
The amended provisions of Article 34-2 shall apply begin to apply from the overseas financial account held as of 2013 that shall be reported in 2014.
ADDENDA <Act No. 12153, Jan. 1, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2014. (Proviso Omitted.)
Articles 2 through 19 Omitted.
ADDENDA <Act No. 12164, Jan. 1, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2014: Provided, That the amended provisions of Article 18 (5) shall enter into force on January 1, 2015.
Article 2 (General Applicability)
This Act shall begin to apply from the taxable year that begins on after this Act enters into force.
Article 3 (Applicability concerning Exchange of Financial Information with Foreign Countries)
The amended provisions of Articles 31 (2) and (3) and 31-3 (1) shall begin to apply from the exchange of financial information with the other Contracting State made after this Act enters into force.
Article 4 (Applicability concerning Request for Submission of Data Made by Finance Companies, etc. to Counter-Parties to Financial Transactions)
The amended provisions of Article 31 (9) and (10) shall apply where the head of a finance company, etc. requests the counter-party to a financial transaction to submit data necessary to verify its personal information, etc. on or after the date this Act enters into force.
Article 5 (Applicability concerning Explanation about Source of Amount Unreported)
The amended provisions of Articles 34-3 and 35 (2) and (3) shall begin to apply from the overseas financial account held as of 2014 that shall be reported in 2015 pursuant to Article 34.
ADDENDA <Act No. 12849, Dec. 23, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2015.
Article 2 (Period of Validity)
Article 38 shall remain in effect until December 31, 2016.
Article 3 (General Applicability)
This Act shall begin to apply from the taxable year that begins on or after this Act enters into force.
Article 4 (Applicability concerning Sanctions against Non-Compliance with Obligation to Submit Data)
The amended provisions of Article 12 (1) shall begin to apply from the obligation to submit a statement of international transactions that arises in relation to a taxable year that begins on or after this Act enters into force.
Article 5 (Applicability concerning Special Provisions on Assessment of Gift Tax on Overseas Donation)
The amended provisions of Article 21 (1) shall begin to apply from donations made after this Act enters into force.
Article 6 (Applicability concerning Penalty Provisions and Administrative Fines for Non-Fulfillment, etc. of Obligation to Report Overseas Financial Accounts)
The amended provisions of Articles 34-2 (1) and 35 (1) and (2) shall begin to apply from the overseas financial accounts held in the year, in which the enforcement date of this Act falls, that shall be reported.
ADDENDA <Act No. 13553, Dec. 15, 2015>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2016.
Article 2 (General Applicability)
This Act shall begin to apply from the taxable year that begins after this Act enters into force.
Article 3 (Applicability concerning Submission of Consolidated Reports on International Transaction Information)
The amended provisions of Articles 11 (1), (2), and (6) and 12 (1) shall begin to apply from the obligation to submit a consolidated report on international transaction information that arises in relation to a taxable year that begins after this Act enters into force.
Article 4 (Applicability concerning Submission of Data on Specific Foreign Corporations)
The amended provisions of Article 20-2 shall begin to apply from the submission of the documents referred to in the subparagraphs of the same Article in relation to the taxable year immediately preceding the taxable year in which the deadline for filing a tax return by a corporation subject to consolidated tax return falls after this Act enters into force.
Article 5 (Applicability concerning Verification, etc. of Personal Information of Counter-Parties to Financial Transactions by Finance Companies, etc.)
The amended provisions of Article 31 (4), (5), and (10) shall also apply to the counter-party to a financial transaction of a finance company, etc. existing as at the time this Act enters into force.
Article 6 (Transitional Measures concerning Reporting on Overseas Financial Accounts)
An overseas financial account held before this Act enters into force, reported in the year in which the enforcement date of this Act falls, shall be subject to the former provisions, notwithstanding the amended provisions of Article 34 (5) 1.
ADDENDA <Act No. 14384, Dec. 20, 2016>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2017.
Article 2 (Applicability concerning Submission of Consolidated Reports on International Transaction Information)
The amended provisions of Article 11 (1) and (2) shall begin to apply from a consolidated report on international transaction information submitted after this Act enters into force.
Article 3 (Applicability concerning Special Provisions on Assessment of Gift Tax on Overseas Donation)
The amended provisions of Article 21 (1) shall begin to apply from a case in where a resident donates his/her overseas property to a nonresident after this Act enters into force.
Article 4 (Applicability concerning Closing Date of Mutual Agreement Procedure)
The amended provisions of Article 23 (4) 2 shall also apply where an applicant for the mutual agreement procedure, which is ongoing as at the time this Act enters into force, withdraws his/her application after this Act enters into force.
ADDENDA <Act No. 14474, Dec. 27, 2016>
Article 1 (Enforcement Date)
This Act shall enter into force three months after the date of its promulgation.
Articles 2 through 14 Omitted.
ADDENDA <Act No. 15221, Dec. 19, 2017>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2018: Provided, That the amended provisions of Article 6-3 shall enter into force on July 1, 2018, and the amended provisions of Articles 15-2 and 16 (applicable only in relation to Article 15-2) on January 1, 2019.
Article 2 (General Applicability)
This Act shall apply from the taxable year that begins after this Act enters into force.
Article 3 (Applicability concerning Advance Pricing Agreements)
The amended provisions of Article 6 (1) shall apply to an application for an advance pricing agreement for a specific period of taxable years that begins on or after January 1, 2019 when a method of computing an arm’s length price will apply.
Article 4 (Applicability concerning Pre-Adjustment of Arm’s Length Transfer Prices for National Taxes and Customs Duties)
The amended provisions of Article 6-3 shall apply to applications for pre-adjustment filed on or after July 1, 2018.
Article 5 (Applicability concerning Rectification Claim for Adjustment of Arm’s Length Transfer Prices for National Taxes and Customs Duties)
(1) The amended provisions of Article 10-2 (1) shall apply to a claim for rectification filed after this Act enters into force.
(2) Notwithstanding paragraph (1), the previous provisions shall apply with respect to a claim for which the deadline has expired pursuant to the previous provisions of Article 10-2 (1) before this Act enters into force.