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ADJUSTMENT OF INTERNATIONAL TAXES ACT

Wholly Amended by Act No. 17651, Dec. 22, 2020

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, to promote international cooperation in tax administration, and to report foreign assets and submit related data.
 Article 2 (Definitions)
(1) The terms used in this Act are defined as follows:
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 assets, providing services, lending or borrowing money, and all other transactions involving profits or losses and property of the parties;
2. The term “domestic place of business” means the following:
(a) A domestic place of business of a nonresident under Article 120 of the Income Tax Act;
(b) A domestic place of business of a foreign corporation under Article 94 of the Corporate Tax Act;
3. The term “special relationship” means any of the following relationships, for which the detailed criteria shall be prescribed by Presidential Decree:
(a) A relationship between the parties to a transaction where 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 the parties to a transaction where a third party or a person prescribed by Presidential Decree including his or her relatives owns directly or indirectly at least 50 percent of voting stocks of both parties;
(c) A relationship between the parties to a transaction where both parties have a common interest in the adjustment of income depending on the equity investment relationship, transaction relations of goods and services, monetary lending relationship, etc. and either party to the transaction has the power to substantially determine the business policy of the other party;
(d) A relationship between the parties to a transaction where both parties have a common interest in the adjustment of income depending on the equity investment relationship, transaction relations of goods and services, monetary lending relationship, etc. and a third party has the power to substantially determine the business policies of both parties;
4. The term “foreign related party” means a 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;
5. The term “arm’s length price” means a price that is applied or deemed to be applied by a resident, domestic corporation, or domestic place of business in an ordinary transaction with a person other than a foreign related party;
6. The term “tax authority” means the head of a tax office having jurisdiction over the place for tax payment or the commissioner of a regional tax office;
7. The term “tax treaty” means any type of international agreement governed by international law, such as treaties, conventions, agreements, or notes which the Republic of Korea enters into with another State (including a region to which unique tax laws apply) with respect to taxation on income, capital, and property or cooperation in tax administration;
8. The term “Contracting State” means any country that enters into a tax treaty with the Republic of Korea;
9. The term "competent authority" means the following persons:
(a) For the Republic of Korea: The Minister of Economy and Finance or any person delegated with his or her authority;
(b) For a Contracting State: A person designated as the competent authority in a tax treaty;
10. The term “mutual agreement procedure” means a procedure by which application and interpretation of tax treaties, unreasonable taxation, or adjustment of taxable income is resolved through consultations between the competent authority of the Republic of Korea and that of the other Contracting State.
(2) Except as otherwise provided in paragraph (1) and other provisions of this Act, any term has the same meaning as the terms defined in Article 2 (1) of the Restriction of Special Taxation Act and those under statutes specified in Article 3 (1) 1 through 12, 18, and 19 of that Act.
 Article 3 (Substance over Form Principle regarding International Transactions)
(1) In an international transaction, if any ownership of the taxable income, earnings, property, act, or transaction is just nominal and there is another person to whom such income, etc., belongs, the other person shall be liable to pay taxes and governed by tax treaties.
(2) In an international transaction, tax treaties shall apply to the provisions regarding 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 (hereafter in this Article referred to as “roundabout transaction”) to benefit wrongfully from this Act and tax treaties, this Act and tax treaties 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.
(4) Where the tax burden to be paid to the Republic of Korea is significantly reduced by more than the ratio prescribed by Presidential Decree through a roundabout transaction (excluding where the amount of the relevant roundabout transaction, the reduced amount of the tax burden to be paid to the Republic of Korea, and other relevant factor meet the requirements prescribed by Presidential Decree), paragraph (3) shall apply on the presumption that such transaction is made to benefit wrongfully from this Act and tax treaties unless it is verified that the taxpayer has no intention of avoiding taxes, such as the fact that the relevant roundabout transaction has a legitimate business objective.
(5) For the purposes of paragraph (4), the calculation of the tax burden to be paid to the Republic of Korea and other necessary matters shall be prescribed by Presidential Decree.
 Article 4 (Relationship to Other Statutes)
(1) This Act shall take precedence over other statues 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 foregoing shall not apply to the donation, etc. of assets prescribed by Presidential Decree.
 Article 5 (Relationship between Tax Laws and Tax Treaties)
Terms and phrases not defined in tax treaties shall be interpreted and applied as defined or used in the tax laws specified in subparagraph 2 of Article 2 of the Framework Act on National Taxes.
CHAPTER II ADJUSTMENT OF TAX ON INTERNATIONAL TRANSACTIONS
SECTION 1 Adjustment of Taxation on Transactions with Foreign Related Parties
Sub-Section 1 Adjustment of Taxation by Arm’s Length Price
 Article 6 (Reporting and Rectification Claim by Arm’s Length Price)
In an international transaction with a foreign related party in which the transfer price is lower or higher than the arm’s length price, a resident (including a domestic corporation and a domestic place of business; hereafter in this Section the same shall apply) may file a report on, or a rectification claim for, the tax base or the amount of tax adjusted based on the arm’s length price with the head of a tax office having jurisdiction over the place for tax payment by any of the following deadlines, along with a report on adjustment of transfer price prescribed by Ordinance of the Ministry of Economy and Finance:
2. The deadline for filing a revised return under Article 45 of the Framework Act on National Taxes;
3. The deadline for filing a rectification claim under Article 45-2 (1) of the Framework Act on National Taxes.
 Article 7 (Determination and Rectification by Arm’s Length Price)
(1) In an international transaction between a resident and a foreign related party in which relevant transfer price is lower or higher than the arm's length price, the tax authority may determine or rectify the resident's tax base and tax amount on the basis of the arm's length price.
(2) For the purposes of paragraph (1), where a tax authority computes an arm's length price for at least two taxable years by applying the same arm’s length pricing method among the methods prescribed in Article 8 and determines or rectifies the tax base and tax amount for some taxable years on the basis of the arm's length price, the tax authority shall also determine or rectify the tax base and tax amount on the basis of such arm's length price for the remaining taxable years.
(3) Paragraphs (1) and (2) shall not apply where a taxpayer clearly proves that he or she is not in any of the special relationships provided in Article 2 (1) 3 (c) or (d).
 Article 8 (Arm’s Length Pricing Method)
(1) The arm’s length price shall be calculated by the most reasonable method among the following methods, 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 may not be computed by the methods provided in subparagraphs 1 through 5:
1. Comparable uncontrolled price method: A method of regarding the transfer price between the independent, unrelated parties as the arm’s length price in a transaction similar to an international transaction between a resident and a foreign related party;
2. Resale price method: In cases where a purchaser who is one party in an international transaction between a resident and a foreign related party makes resale to any unrelated person, a method of regarding the amount computed by deducting the amount viewable as arm’s length profits of the purchaser from the resale price, as the arm’s length price;
3. Cost plus method: In cases where one party in an international transaction between a resident and a foreign related party produces or sells assets or provides services, a method of regarding the price computed by adding the amount viewable as arm's length profits of the seller of assets or the service provider to the cost incurred in the course of production or sale of the assets or provision of the services, as the arm's length price;
4. Transactional net margin method: A method of regarding a transfer price calculated on the basis of an ordinary transactional net profit ratio realized in a transaction between a resident and an unrelated person among transactions similar to international transactions between a resident and a foreign related party, as the arm's length price;
5. Profit split method: A method of sharing a net trade profit created by both parties in an international transaction between a resident and a foreign related party, in proportion to each party's relative contribution which has been measured by reasonable allocation standards; and regarding the transfer price calculated on the basis of such shared profit as the arm's length price;
6. Other methods deemed reasonable as prescribed by Presidential Decree.
(2) For the purposes of paragraph (1), the tax authority shall clearly grasp the substantial content of the relevant international transaction, considering commercial or financial relations between the resident and the foreign related party and the important transactional terms and conditions in such international transaction, and shall decide on whether such international transaction is commercially rational in comparison with transactions between independent, unrelated parties in circumstances involving transactions similar to the aforesaid international transaction.
(3) Where a decision made pursuant to paragraph (2) finds that the international transaction between the resident and the foreign related party is not commercially rational and that it is significantly difficult to compute an arm’s length price based on such international transaction, the tax authority may, based on the economic substance of that transaction, consider such transaction as if it had not occurred, or apply paragraph (1) by recharacterizing it as a new transaction in a rational manner.
(4) Detailed matters regarding the arm’s length pricing method provided in paragraphs (1) through (3) shall be prescribed by Presidential Decree.
 Article 9 (Determination and Rectification by Arm’s Length Cost Sharing)
(1) Where a resident and a foreign related party conclude an agreement on the sharing of costs, expenses, and risks (hereafter in this Article referred to as “costs, etc.”) in advance and thereunder jointly develop or secure an intangible asset (hereafter in this Article referred to as "joint development”), the tax authority may determine or rectify the tax base and tax amount of the resident based on the arm’s length share of costs, if the amount of the costs, etc. allotted to the resident is less or more than the arm’s length share of costs.
(2) The arm’s length share of costs under paragraph (1) is the allotted amount applied or deemed to be applied by a resident in an agreement on arm’s length cost sharing with a person other than a foreign related party and shall be calculated by allotting the costs, etc. for jointly developing an intangible asset in proportion to the benefits expected from such intangible asset (hereafter in this Article referred to as "expected benefits”).
(3) Where a resident and a foreign related party conclude an agreement to determine shares of respective participants by reasonably allotting the costs, etc. for a jointly developed intangible asset but the expected benefits from such intangible asset are subsequently changed by not less than the rate prescribed by Presidential Decree, comparing to the expected benefits initially assessed as at the time of concluding the agreement, 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.
(4) For the purposes of paragraphs (1) through (3), the scope of intangible assets, the assessment of the arm’s length share of costs and expected benefits, the computation of the changed shares of participants, and other necessary matters shall be prescribed by Presidential Decree.
 Article 10 (Transaction Involving Third Party)
Even when a resident engages in an international transaction with a person, other than a foreign related party, if the transaction satisfies all of the following criteria, Articles 6 through 9 shall apply to the transaction assuming that such transaction is conducted with a foreign related party:
1. The relevant resident and a 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 transaction;
2. The terms and conditions of the transaction have been substantially determined between the relevant resident and a foreign related party.
 Article 11 (Recognition of Offset Transactions)
(1) Even in an international transaction in which the transfer price is lower or higher than the arm's length price, if all of the following requirements are met, Articles 6 through 8 shall apply treating all the international transactions so offset as a single international transaction:
1. A resident shall enter 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;
2. The relevant resident shall prove the prior agreement and details of the offset transaction.
(2) Where any of the offset transactions proved in accordance with paragraph (1) 2 becomes subject to withholding tax as provided in Articles 156 and 156-2 through 156-7 of the Income Tax Act and Articles 98 and 98-2 through 98-6 of the Corporate Tax Act, the relevant provisions of withholding tax shall apply, assuming that there is no offset transaction.
 Article 12 (Countermeasures against Tax Adjustment by Contracting States)
(1) Where any Contracting State adjusts a transfer price between a resident and a foreign related party at the arm’s length price and the mutual agreement procedure thereon is completed, the tax authority may adjust and calculate the tax base and tax amount of the resident for each taxable year according to the relevant agreement.
(2) A resident who intends to have the tax base and tax amount adjusted for each taxable year pursuant to paragraph (1) shall file a revised return or a rectification claim, as prescribed by Presidential Decree.
 Article 13 (Disposal of Income and Tax Adjustment)
(1) Pursuant to Articles 6, 7, 9, 12, and 15, where it is not verified that the amount to be included in gains of a domestic corporation has been returned by a foreign related party to such corporation as prescribed by Presidential Decree, such amount shall be disposed of as a dividend to, or adjusted as an investment in, the foreign related party as prescribed by Presidential Decree, notwithstanding Article 67 of the Corporate Tax Act.
(2) The amount not returned to a foreign related party among the income of a resident, the amount of which has been reduced pursuant to Articles 6, 7, 9, 12, and 15, shall be deemed the income not included in the gross income pursuant to subparagraph 2 of Article 18 of the Corporate Tax Act, and thereby shall not be included in the gross income of a domestic corporation or shall not be deemed the income of a resident (referring to a resident other than a domestic corporation).
(3) For the purposes of paragraphs (1) and (2), the method of disposal of income and other necessary matters shall be prescribed by Presidential Decree.
Sub-Section 2 Advance Pricing Agreements
 Article 14 (Application for Advance Pricing Agreements and Approval Therefor)
(1) Where a resident intends to apply a specific arm's length pricing method for a specific period of taxable years, he or she may file an application for an advance pricing agreement with the Commissioner of the National Tax Service by the day before the start date of the first taxable year among the specific period of taxable years to which the arm’s length pricing method is to be applied, as prescribed by Presidential Decree.
(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 the Commissioner may accept such application even without undergoing the mutual agreement procedure (hereinafter referred to as “unilateral advance pricing agreement”) in cases prescribed by Presidential Decree.
(3) Where a resident files an application for the retroactive application of an arm's length pricing method to a taxable year before the proposed period of the advance pricing agreement along with an application for an advance pricing agreement under paragraph (1), the Commissioner of the National Tax Service may approve the retroactive application of the method, to the extent that the exclusion period for the imposition of national taxes under the proviso of Article 26-2 (1) of the Framework Act on National Taxes (or the time limit specified in the main clause, with the exception of the subparagraphs, of Article 45-2 (1) of that Act, in cases of a unilateral advance pricing agreement) has not elapsed.
 Article 15 (Compliance with Terms and Conditions of Advance Pricing Agreements)
(1) Where an arm's length pricing method is agreed upon pursuant to Article 14, the relevant resident and the Commissioner of the National Tax Service shall follow the agreed method: Provided, That the agreed method need not be followed in cases prescribed by Presidential Decree.
(2) Where an arm's length pricing method is agreed upon pursuant to Article 14, the relevant resident shall report the tax base and tax amount computed by the approved method to the head of a tax office having jurisdiction over the place for tax payment by the deadline specified in subparagraph 1 of Article 6 every year; and if necessary, the resident shall file a revised return or a rectification claim, as prescribed by Presidential Decree.
(3) Where an arm's length pricing method is agreed upon pursuant to Article 14, the relevant resident shall submit a report containing the arm's length price computed by the method and the process of computation, etc. to the Commissioner of the National Tax Service each year within 12 months from the end of the taxable period under Article 5 of the Income Tax Act or from the end of the month in which the end date of the business year under Article 6 of the Corporate Tax Act falls, as prescribed by Presidential Decree.
Sub-Section 3 Submission of Data on International Transactions and Special Cases on Application of Penalty Taxes
 Article 16 (Obligation to Submit Data on International Transactions)
(1) The following taxpayers shall submit a Master File, Local Files, and Country-by-Country Reports prescribed by Presidential Decree regarding their business activities, the details of transactions, etc. (hereinafter referred to as “consolidated report on international transaction information”) to the head of a tax office having jurisdiction over the place for tax payment within 12 months from the end of the month in which the end date of the business year under Article 6 of the Corporate Tax Act falls, as classified in the following:
1. A taxpayer who meets the requirements prescribed by Presidential Decree, in terms of the turnover and the volume of international transactions with a foreign related party: A Master File and Local Files;
2. A taxpayer who meets the requirements prescribed by Presidential Decree, in terms of turnover, etc.: Country-by-Country Reports.
(2) A taxpayer that conducts international transactions with a foreign related party (excluding a taxpayer required to submit a Master File and Local Files under paragraph (1) 1) shall submit the following documents to the head of a tax office having jurisdiction over the place for tax payment, within six months from the end of the taxable period under Article 5 of the Income Tax Act or from the end of the month in which the end date of the business year under Article 6 of the Corporate Tax Act falls: Provided, That where the taxpayer meets the requirements prescribed by Presidential Decree, he or she shall be exempted from the obligation to submit the documents specified in subparagraph 2 or 3:
1. A statement of international transactions in the form prescribed by Ordinance of the Ministry of Economy and Finance (hereinafter referred to as “statement of international transactions”);
2. A summary income statement of a foreign related party in the form prescribed by Ordinance of the Ministry of Economy and Finance (hereafter in this Article referred to as "summary income statement”);
3. A report on arm's length pricing method in the form prescribed by Ordinance of the Ministry of Economy and Finance (hereafter in this Article referred to as "report on arm's length pricing method”).
(3) Where a taxpayer is unable to submit a consolidated report on international transaction information, a statement of international transactions, a summary income statement, or a report on arm's length pricing method by the deadline specified in paragraph (1) or (2) due to any unavoidable cause prescribed by Presidential Decree and files an application to extend such deadline, the head of a tax office having jurisdiction over the place for tax payment may extend the deadline for submission by up to one year.
(4) For the purposes of Articles 7 through 9, the tax authority may request a taxpayer to submit related data, such as the method of computing transfer prices, as prescribed by Presidential Decree.
(5) A taxpayer in receipt of a request to submit data pursuant to paragraph (4) shall submit the relevant data within 60 days from the date of receiving such request: Provided, That where a taxpayer applies for an extension of the deadline for submission for good cause prescribed by Presidential Decree, the tax authority may approve the extension of the deadline for submission only once by up to 60 days.
(6) Where a taxpayer in receipt of a request to submit data pursuant to 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 undergoing the mutual agreement procedure, the tax authority and related agencies need not use such data for taxation.
(7) Where a taxpayer required to submit a Master File and Local Files pursuant to paragraph (1) 1 or a taxpayer in receipt of a request to submit data prescribed by Presidential Decree regarding the calculation of arm's length price, among the data referred to in paragraph (4), fails to submit the data by the deadline without good cause prescribed by Presidential Decree, the tax authority may apply Articles 7 and 9 presuming the arm’s length price and the arm’s length share of costs in a rational manner, on the basis of data available to the tax authority including data acquired from business entities engaging in similar business.
(8) Matters necessary for the detailed scope, methods, procedures, etc. of the submission of a consolidated report on international transaction information or a statement of international transactions shall be prescribed by Presidential Decree.
 Article 17 (Special Cases regarding Application of Penalty Taxes)
(1) For the purposes of this Section, the tax authority shall not assess a penalty tax for underreporting under Article 47-3 of the Framework Act on National Taxes in any of the following cases:
1. Where it is verified by the mutual agreement procedure that a taxpayer has not been negligent with regard to the difference between the transfer price reported by the taxpayer and the arm’s length price;
2. Where a taxpayer has entered into a unilateral advance pricing agreement, and the Commissioner of the National Tax Service determines that the taxpayer has not been negligent with regard to the difference between the transfer price reported and the arm’s length price;
3. Where a taxpayer keeps and provides data verifying the arm's length pricing method applied in filing his or her income tax or corporate tax return or submits Local Files pursuant to Article 16 (1) by the deadline, and is acknowledged as having selected and applied the arm's length pricing method based on rational decision-making.
(2) Whether a taxpayer has been negligent or made rational decisions under the subparagraphs of paragraph (1) shall be determined in accordance with the standards prescribed by Presidential Decree.
Sub-Section 4 Adjustment of Arm’s Length Prices for National Taxes and Customs Value
 Article 18 (Pre-Adjustment of Arm’s Length Pricing Method for National Taxes and Method for Customs Valuation)
(1) A resident who applies for an advance pricing agreement on national tax pursuant to Article 14 (1) (limited to cases subject to a unilateral advance pricing agreement) may file an application for advance agreement on the method for customs valuation under Article 37 (1) 3 of the Customs Act (hereafter in this Article referred to as “advance customs value agreement”) with the Commissioner of the National Tax Service, for pre-adjustment of the arm’s length price for national tax and the customs value (hereafter in this Article referred to as “pre-adjustment”).
(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 of such receipt, along with an application for advance customs valuation agreement, and shall consult with the Commissioner of the Korea Customs Service about the arm's length pricing method, the method for customs valuation, and the range of price to be pre-adjusted, as prescribed by Presidential Decree.
(3) The Commissioner of the National Tax Service shall make a pre-adjustment based on the results of consultation under paragraph (2).
(4) The Commissioner of the National Tax Service shall notify the applicant for pre-adjustment and the Minister of Economy and Finance of the results of processing the application under paragraph (1).
(5) Matters necessary for the methods and procedures, etc. for filing an application for pre-adjustment under paragraphs (1) through (4) shall be prescribed by Presidential Decree.
 Article 19 (Requests for Rectification of National Taxes Following Rectification of Customs Value)
(1) Where a taxpayer has submitted a return on his or her income tax base or corporate 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 customs value and the transfer price used for computing the tax base and tax amount of the income tax or corporate tax returned due to a rectification made by the head of a customs office under Article 38-3 (6) of the Customs Act, the taxpayer may file a claim for rectifying the tax base and tax amount of the income tax or corporate tax with the tax authority, as prescribed by Presidential Decree. In such cases, the taxpayer shall file a rectification claim within three months from the date he or she becomes aware of the rectification by the head of the customs office (or from the date of receipt, where he or she receives notice of such rectification).
(2) Upon receipt of a claim for rectification under paragraph (1), the tax authority may rectify the tax amount if he or she deems that, in connection with the relevant transaction, the method of, and grounds, etc. for, computation of the transfer price of the imported goods used for calculating the tax base and tax amount of the income tax or corporate tax conform to Article 8.
(3) The tax authority shall rectify the tax base and tax amount or notify the claimant of the purport that no ground exists to make a rectification, within two months from the date of receiving the claim for rectification under paragraph (1).
 Article 20 (Adjustment of Taxation on Arm’s Length Prices for National Taxes and Customs Value)
(1) A taxpayer may file an application with the Minister of Economy and Finance for adjustment of the arm’s length price for national tax and the customs value within 30 days from the date of receiving notice under Article 19 (3) (or upon expiration of two months if he or she receives no notice within two months).
(2) Where a taxpayer files an application for adjustment pursuant to paragraph (1), the Minister of Economy and Finance may recommend the competent tax authority or the head of the relevant customs office to adjust the arm’s length price for national tax and the customs value. In such cases, the Minister of Economy and Finance shall request an implementation plan for the recommendation for adjustment (in cases of nonimplementation, including the grounds therefor) from the tax authority or the head of the customs office and shall notify the taxpayer thereof within 90 days from the date of receiving such application for adjustment.
(3) Matters necessary for filing an application for adjustment, the methods of adjustment, etc. under paragraphs (1) and (2) shall be prescribed by Presidential Decree.
(4) The period from the date of filing an application for adjustment to the date of receiving notice under paragraphs (1) and (2) shall be excluded from the period for making requests or filing applications under Articles 61, 66, and 68 of the Framework Act on National Taxes and Articles 121, 131, and 132 of the Customs Act.
 Article 21 (Provision of Information on Taxation of Customs Value)
(1) The tax authority may request information or data prescribed by Presidential Decree from the head of a customs office where necessary to impose and collect taxes in relation of an international transaction and to adjust the arm’s length price for national tax and the customs value.
(2) The head of a customs office in receipt of a request under paragraph (1) shall comply therewith unless there is a good reason not to do so.
SECTION 2 ADJUSTMENT OF TAX ON INTEREST PAID TO FOREIGN CONTROLLING STOCKHOLDERS
 Article 22 (Exclusion of Interest Paid on Excessive Borrowings Compared to Amount of Investment from Deductible Expenses)
(1) For the purposes of this Section, the term "foreign controlling stockholder" means a person classified in the following who substantially controls either a domestic corporation or a domestic place of business of a foreign corporation, for which the specific criteria shall be prescribed by Presidential Decree:
1. In cases of a domestic corporation: Any of the following persons:
(a) A foreign stockholder or investor (hereinafter referred to as "foreign stockholder");
(b) A foreign corporation financed by a foreign stockholder under item (a);
2. In cases of a domestic place of business of a foreign corporation: Any of the following persons:
(a) The head office or a branch office of the foreign corporation;
(b) A foreign stockholder of the foreign corporation;
(c) Another foreign corporation financed by the foreign corporation and by a foreign stockholder under item (b).
(2) Where the sum of the following amounts among the borrowings of a domestic corporation (including a domestic place of business of a foreign corporation; hereafter in this Section the same shall apply) exceeds twice the amount invested by the relevant foreign controlling stockholder, the interest and discount fees paid in relation to the excess amount (hereafter in this Section referred to as “interest, etc.”) 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 of investment and the amount excluded from deductible expense shall be prescribed by Presidential Decree:
1. Funds borrowed from a foreign controlling stockholder;
2. Funds borrowed from a related person specified in subparagraph 20 (a) or (b) of Article 2 of the Framework Act on National Taxes, of a foreign controlling stockholder;
3. Funds borrowed from a third party under a payment guarantee (including de facto payment guarantees, such as provision of security) by a foreign controlling stockholder.
(3) The multiplier of the borrowings against the amount of investment by a foreign controlling stockholder provided in paragraph (2) may be separately prescribed by Presidential Decree for each type of business, if necessary, in consideration of characteristics, etc. of the business type.
(4) Where a domestic corporation attests that the amount borrowed pursuant to the subparagraphs of paragraph (2) and conditions of borrowings are identical or similar to the amount and conditions of ordinary borrowings between unrelated parties, as prescribed by Presidential Decree, paragraphs (2) and (3) shall not apply to the interest, etc. paid in relation to such borrowings.
(5) Where a domestic corporation subject to paragraph (2) has withheld income tax or corporate tax on the interest, etc. that 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 (2).
(6) For the purposes of paragraphs (2) through (5), if there exist different interest, etc. whereto separate interest rates apply, the interest, etc. shall be excluded from deductible expenses in order of those subject to a higher interest rate.
 Article 23 (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 requirements, Article 22 shall apply to the funds, assuming that such funds are borrowed directly from a foreign controlling stockholder: Provided, That Article 22 shall apply even when only the requirement provided in subparagraph 2 is satisfied if the domestic corporation has borrowed funds from a foreign related party other than a foreign controlling stockholder:
1. The domestic corporation and the foreign controlling stockholder have made prior agreements for the borrowing (including where a substantial agreement is deemed to have been reached in advance based on evidence related to the borrowing);
2. The conditions for the borrowing shall be substantially determined between the domestic corporation and the foreign controlling stockholder.
 Article 24 (Exclusion of Interest Overpaid Compared to Income from Deductible Expenses)
(1) The terms used in this Article are defined as follows:
1. The term "net interest expense" means an amount calculated by subtracting the amount of interest income received from a foreign related party from the interest, etc. paid to the foreign related party;
2. The term "adjusted gross income" means the amount of income before subtracting both the depreciation cost and the net interest expense.
(2) If the net interest expense on funds borrowed by a domestic corporation from its foreign related parties exceeds 30 percent of the adjusted gross income, 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.
(3) Paragraph (2) shall not apply to any domestic corporation prescribed by Presidential Decree that engages in financial business or other similar business.
(4) For the purposes of paragraph (2), if there exist different interest, etc. whereto separate interest rates apply, the interest, etc. shall be excluded from deductible expenses in order of those subject to a higher interest rate.
(5) The method of computing the net interest expense and adjusted gross income and other necessary matters shall be prescribed by Presidential Decree.
 Article 25 (Exclusion of Interest Paid on Hybrid Financial Instrument Transactions from Deductible Expenses)
(1) The term "hybrid financial instrument" in this Article means a financial instrument prescribed by Presidential Decree that has the nature of both capital and liabilities.
(2) The interest, etc. paid by a domestic corporation in relation to transactions in hybrid financial instruments 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 prescribed by Presidential Decree (hereafter in this Article referred to as “reasonable period”), 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 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 in accordance with Presidential Decree, plus the corporate tax for the business year in which the end date of the reasonable period falls.
(3) The scope of hybrid financial instrument transactions, the scope of non-taxable amounts, and other necessary matters shall be prescribed by Presidential Decree.
 Article 26 (Order of Applying Exclusion of Paid Interest from Deductible Expenses)
(1) Where Articles 22 and 24 are concurrently applicable, the Article that precludes the inclusion of larger amount in deductible expenses shall apply. In such cases, if the amounts calculated according to both Articles are the same, Article 22 shall apply.
(2) Article 22 or 24 shall take precedence over Articles 6, 7, and 25 of this Act and Article 28 of the Corporate Tax Act.
(3) Article 25 shall take precedence over Articles 6 and 7 of this Act and Article 28 of the Corporate Tax Act.
SECTION III ACCUMULATIVE TAXATION OF RETAINED EARNINGS OF SPECIFIC FOREIGN CORPORATIONS
 Article 27 (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 (hereafter in this Section referred to as “specific country, etc.”) in which the actual tax burden does not exceed 15 percent 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) 3 (a), stocks held directly or indirectly by a related person of the Korean national prescribed by Presidential Decree, including his or her relatives, shall be included) with the Korean national.
(2) Korean nationals to whom paragraph (1) is applicable 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 the related persons of a Korean national specified in subparagraph 20 (a) or (b) 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.
(3) Where a foreign corporation has the place of its actual business management in a specific country, etc., the tax authority may apply paragraphs (1) and (2) to the foreign corporation, considering the place of its actual business management as the head office or principal office prescribed in paragraph (1).
(4) The scope of the income actually earned under paragraph (1) and detailed criteria for judging specific countries, etc. shall be prescribed by Presidential Decree.
 Article 28 (Exclusion of Application of Specific Foreign Corporations’ Retained Earnings Deemed Dividends)
Article 27 shall not apply to a specific foreign corporation falling under any of the following cases:
1. Where the income actually earned by a specific foreign corporation as of the end of each business year does not exceed the amount prescribed by Presidential Decree;
2. Where a specific foreign corporation owns a permanent establishment, such as an office, a store, or a factory, that is required for business activities in a specific country, etc.; and engages in business activities mainly in such country, etc. by managing, controlling, or operating the business for itself;
3. Where a specific foreign corporation, whose primary business is to hold stocks in compliance with requirements prescribed by Presidential Decree (hereafter in this subparagraph referred to as “foreign holding company”), holds stocks issued by its affiliate (referring to a foreign corporation that meets all the requirements prescribed by Presidential Decree; hereafter in this subparagraph the same shall apply) in compliance with all of the following requirements as of the end of each business year:
(a) The foreign holding company shall have held stocks issued by all of its affiliates for at least six consecutive months as of the date of record for dividends by the affiliates;
(b) The rate of amount of income calculated by the following formula, considering the interest income, dividend income, etc. received by the foreign holding company that holds stocks issued by its affiliates in compliance with the requirements specified in item (a), from its affiliates, shall be equal to or exceed the rate prescribed by Presidential Decree: The rate of income = A / B-C-DA: The total amount of interest income, dividend income, and other income prescribed by Presidential Decree that the foreign holding company has received from any of its affiliates having its head office or principal office in the same country as the foreign holding company or the same region prescribed by Ordinance of the Ministry of Economy and Finance (hereafter in Article 29 referred to as “same country, etc.”) among the affiliates whose stocks are held by the foreign holding company in compliance with the requirements specified in item (a);B: The income amount of the foreign holding company;C: The income amount that the foreign holding company generates by actually engaging in any business other than those provided in the subparagraphs of Article 29 (1) at its permanent establishment, such as an office, a store, or a factory;D: The income amount generated as the foreign holding company disposes of the stocks issued by its affiliates that it has held in compliance with the requirements specified in item (a).
 Article 29 (Exceptional Application of Specific Foreign Corporations’ Retained Earnings Deemed Dividends)
(1) Even in cases of a specific foreign corporation to which Article 27 is not applicable pursuant to subparagraph 2 of Article 28, where such corporation falls under any of the following, Article 27 shall apply: Provided, That Article 27 shall not apply where a specific foreign corporation that engages in wholesale trade referred to in subparagraph 1 (a), makes a sale to an unrelated person in the same country, etc., and such sale satisfies the requirements prescribed by Presidential Decree:
1. A specific foreign corporation satisfying the requirements prescribed by Presidential Decree that engages in the following types of business under the Korean Standard Industrial Classification prepared and publicly notified by the Commissioner of the Statistics Korea pursuant to Article 22 of the Statistics Act:
(a) Wholesale trade;
(b) Financial and insurance activities;
(c) Real estate activities;
(d) Professional, scientific, and technical activities (excluding architectural, engineering, and related technical services);
(e) Business facilities management, business support, and leasing services;
2. A corporation whose primary business is to engage in the following activities, for which the criteria for determining the primary business shall be prescribed by Presidential Decree:
(a) Holding stocks or bonds;
(b) Provision of intellectual property rights;
(c) Lease of ships, aircraft, or equipment;
(d) Investing in investment trusts or funds.
(2) Even in cases of a specific foreign corporation to which Article 27 is not applicable pursuant to subparagraph 2 of Article 28 and the proviso, with the exception of the subparagraphs, of paragraph (1) of this Article, where the following income (hereafter in this Section referred to as "passive income”) meets the standards prescribed by Presidential Decree, Article 27 shall apply to the relevant income:
1. Income generated from the activities specified in the items of paragraph (1) 2;
2. Profits and losses from the sale of assets related to income generated from the activities specified in the items of paragraph (1) 2 (excluding where the assets related to income generated from the activities specified in paragraph (1) 2 (c) are directly used for the business of a specific foreign corporation).
 Article 30 (Computation of Distributable Retained Earnings and Amounts Deemed Dividends)
(1) The amount deemed a dividend to be distributed to a Korean national pursuant to Article 27 (1) (hereafter in this Section referred to as "amount deemed a dividend”) shall be computed according to the following formula: The distributable retained earnings of a specific foreign corporation as of the end of each business year X the stockholding ratio of the relevant Korean national in the specific foreign corporation.
(2) Notwithstanding paragraph (1), where Article 29 (2) is applied, the amount deemed a dividend shall be computed according to the following formula: The distributable retained earnings of a specific foreign corporation as of the end of each business year X the stockholding ratio of the relevant Korean national in the specific foreign corporation X {(the sum of passive income - the amount prescribed by Presidential Decree) / the total income of the specific foreign corporation}.
(3) Matters necessary for calculating the amount deemed a dividend, such as the method of calculating the distributable retained earnings and the ratio of holding stocks under paragraphs (1) and (2), shall be prescribed by Presidential Decree.
 Article 31 (Timing of Treating Dividends as Taxable Gains)
The amount deemed a dividend shall be included in a Korean national’s gains or dividend income (hereafter in this Section referred to as “gains, etc.”) for the taxable year in which the 60th day falls from the date following the end of the pertinent business year of the specific foreign corporation.
 Article 32 (Exclusion of Actual Dividends from Taxable Gains)
(1) Where the amount deemed a dividend is included in the gains, etc. of a Korean national under Article 31 and the relevant specific foreign corporation actually distributes its retained earnings as dividends (including the amount deemed dividends or distributions pursuant to Article 16 of the Corporate Tax Act), the distributed amount shall be deemed the income not included in the gains, etc. pursuant to subparagraph 2 of Article 18 of the Corporate Tax Act or deemed not to fall within the dividend income under Article 17 (1) of the Income Tax Act.
(2) Where the amount deemed a dividend is included in the gains, etc. of a Korean national under Article 31 and the Korean national transfers stocks of the relevant specific foreign corporation, the amount calculated according to the following formula (if the amount so calculated is not more than zero, it shall be deemed zero) shall be deemed the income not included in the gains pursuant to subparagraph 2 of Article 18 of the Corporate Tax Act or deemed not to fall within the income generated from the transfer of stocks, as provided in Article 94 (1) 3 (c) of the Income Tax Act, up to the amount of the gains on transfer: (The amount equivalent to the sum of the amounts deemed the dividends on the transferred stocks) - (the amount of actually distributed dividends on the transferred stocks).
(3) The books of account and evidentiary documents necessary for calculating the amount 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.
 Article 33 (Deduction of Taxes Paid to Foreign Countries and Rectification Claims Therefor)
(1) Where a specific foreign corporation actually distributes a dividend to a Korean national, if such corporation has paid taxes to a foreign country, a deemed dividend for the taxable year, which is included in gains, etc. pursuant to Article 31, shall be deemed an income generated in a foreign country, 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, etc. pursuant to Article 31, and therefore Article 57 (1) and (2) of the Income Tax Act and Article 57 (1) and (2) of the Corporate Tax Act shall apply thereto.
(2) A person who seeks application of paragraph (1) shall file a rectification claim with the head of a tax office having jurisdiction over the place for tax payment, as prescribed by Presidential Decree, within one year from the deadline for filing the income tax or corporate tax return of the taxable year in which he or she has actually received a dividend.
(3) For the purposes of Article 57 (4) of the Corporate Tax Act, a deemed dividend included in gains, etc. pursuant to Article 31 shall be deemed a dividend earned during the taxable year in which it is included in gains, etc.
 Article 34 (Submission of Data on Specific Foreign Corporations)
A Korean national subject to Articles 27 through 33 shall submit the following documents to the head of a 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:
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.
SECTION 4 Special Cases regarding Imposition of Gift Tax on Overseas Donation
 Article 35 (Special Cases regarding Imposition of Gift Tax on Overseas Donation)
(1) The terms used in this Section are defined as follows:
1. The term "resident" means a resident defined in subparagraph 8 of Article 2 of the Inheritance Tax and Gift Tax Act, including a non-profit corporation that has its head office or principal office in the Republic of Korea;
2. The term "nonresident" means a nonresident defined in subparagraph 8 of Article 2 of the Inheritance Tax and Gift Tax Act, including a non-profit corporation that has no head office or principal office in the Republic of Korea.
(2) Where a resident donates his or her foreign property (excluding a donation that takes effect upon the death of a donor) to a nonresident, the donor is liable to pay gift tax pursuant to this Act.
(3) Notwithstanding paragraph (2), where all of the following requirements are met, the gift tax shall be exempted:
1. The donee shall not be a related person defined in subparagraph 20 of Article 2 of the Framework Act on National Taxes, to the donor;
2. The relevant donated property shall be subject to gift tax (including taxes of a substantially similar thereto) imposed pursuant to statutes and regulations of the relevant foreign country, which includes exemption of the tax amount.
(4) For the purposes of paragraph (2), the value of donated property shall be based on its assessed value reflecting the situations as at the time of such donation in the foreign country wherein the donated property is located, but the matters regarding the computation of such assessed value shall be prescribed by Presidential Decree: Provided, That when it is impracticable to compute the assessed value, the methods specified by Presidential Decree shall apply, taking account of the type, scale, and circumstances of the transaction of the relevant property.
(5) For the purposes of paragraph (2), where gift tax has been paid pursuant to statutes and regulations of the relevant foreign country, the amount equivalent to the gift tax paid shall be deducted from the amount of the gift tax computed, as prescribed by Presidential Decree.
(6) Articles 4-2 (3), 47, 53 through 58, 68, 69 (2), 70 through 72, and 76 of the Inheritance Tax and Gift Tax Act shall apply mutatis mutandis to the imposition of gift tax under paragraph (2).
CHAPTER III INTERNATIONAL COOPERATION IN TAX ADMINISTRATION
SECTION 1 International Cooperation in Tax Affairs
 Article 36 (Exchange of Tax and Financial Information)
(1) The competent authority of the Republic of Korea may obtain tax information [including information on an individual who ultimately controls or exercises power over a taxpayer (hereinafter referred to as “actual owner”); hereinafter the same shall apply)] necessary for the imposition and collection of taxes, review of tax appeals, and criminal prosecution, etc., as well as tax information generalized by international practices to the extent not in contravention of other statutes, and may exchange such information with the other Contracting State.
(2) Where it is necessary to exchange tax information under paragraph (1), the tax authority may request a taxpayer to provide information on the actual owner of the taxpayer; and the scope of information on the actual owner that the tax authority may request from the taxpayer and matters necessary for requesting and submitting information on the actual owner shall be prescribed by Presidential Decree.
(3) 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 and domestic corporations or nonresidents and foreign corporations under the tax treaty, the competent authority of the Republic of Korea may request a specific branch of a financial company, etc. (referring to a financial company, etc. defined in subparagraph 1 of Article 2 of the aforesaid Act; hereinafter the same shall apply) to provide any of the following financial information, notwithstanding Article 4 of the aforesaid Act; and an employee of the financial company, etc. shall provide the financial information requested:
1. Financial information that constitutes data for taxation that shall be submitted under tax-related statutes;
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 evasion;
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 9 (1) of the National Tax Collection Act.
(4) Where any information requested by the competent authority of the other Contracting State pursuant to paragraph (3) falls under the following cases, the competent authority of the Republic of Korea may request the head of the relevant financial company, etc. to provide such financial information, in which case an employee of the financial company, etc. shall provide the financial information requested:
1. Where the relevant information is related to a group that is unable to specify the personal information of a title holder related to the specific financial transaction;
2. Where the relevant information can be obtained through a general inquiry about financial property under Article 83 (1) of the Inheritance Tax and Gift Tax Act.
(5) Notwithstanding paragraphs (3) and (4), the competent authority of the Republic of Korea may restrict the provision of financial information to the other Contracting State on the principle of reciprocity.
(6) The competent authority of the Republic of Korea may request the head of a financial company, etc. to provide financial information on residents and domestic corporations or nonresidents and foreign corporations, necessary for the imposition and collection of taxes and management of tax payment 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 financial company, etc. shall provide such financial information, as prescribed by Presidential Decree.
(7) Although no request is made pursuant to paragraph (6), a financial company, etc. may verify and maintain beforehand personal information, including taxpayer identification numbers (referring to unique numbers 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; hereinafter the same shall apply) of the financial company, etc. to the minimum extent necessary for the purpose of using such information to support the exchange of financial information among countries.
(8) The head of a financial company, etc. who intends to provide financial information under paragraph (6) or to verify financial information under paragraph (7) may request the counter-party to a financial transaction to submit data necessary to verify the party's personal information, etc.
(9) Where it is impracticable to provide the financial information referred to in paragraph (6) to the competent authority of the Republic of Korea or it is impossible to verify the personal information, etc. as provided in paragraph (7) because the counter-party to financial transactions requested to submit data pursuant to paragraph (8) fails to submit the requested data, the head of the relevant financial company, etc. may refuse to open an account of the counter-party to the financial transaction.
(10) Detailed matters regarding the exchange of tax information under paragraph (1); exchange and provision of financial information under paragraphs (3), (4), and (6); and verification of personal information, etc. under paragraph (8) shall be prescribed by Presidential Decree.
 Article 37 (Inquiry and Verification)
(1) Where it is deemed necessary for the provision of financial information under Article 36 (6), a tax official may inquire an employee of a financial company, etc. for the verification of personal information, etc. of the counter-party to a financial transaction under Article 36 (8) and may verify documents, etc.
(2) In cases of an inquiry or verification under paragraph (1), a tax official shall not abuse his or her authority for purposes other than those necessary for performing his or her duties.
 Article 38 (Confidentiality)
(1) None of the following persons shall unreasonably interfere with or delay the acquisition, exchange, or provision of any tax or financial information under Article 36:
1. A person related to the tax or financial information under Article 36 (1), (3), (4), or (6);
2. A counter-party to financial transactions under Article 36 (7).
(2) Where the provision of financial information is requested in violation of Article 36 (3), (4), or (6), an employee of a financial company, etc. shall refuse such request.
(3) No person who has become aware of financial information under Article 36 (3), (4), (6), or (7) 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.
(4) No person who has obtained financial information provided or divulged in violation of paragraph (3) or Article 36 (3), (4), or (6) shall provide or divulge such financial information to any third person if he or she becomes aware of the violation.
 Article 39 (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 of the Republic of Korea may conduct the following acts on the transaction:
1. Conducting a tax audit on the transaction at the same time as the other Contracting State;
2. Dispatching a tax official to the other Contracting State to directly conduct a tax audit or to participate in a tax audit by the other Contracting State.
(2) Where the other Contracting State requests cooperation in a tax audit under the tax treaty, the competent authority of the Republic of Korea may accept such request.
 Article 40 (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 the Commissioner of the National Tax Service to take measures necessary to collect taxes in the other Contracting State, 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 entrusts the collection of taxes payable to the other Contracting State to the Republic of Korea under the tax treaty, the Minister of Economy and Finance or the Commissioner of the National Tax Service may have the head of a 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.
 Article 41 (Issuance of Resident Certificates)
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 (referring to the maximum tax rate at which the other Contracting State is entitled to tax a resident or corporation under the tax treaty), the tax authority may issue such certificate, as prescribed by Presidential Decree.
SECTION 2 Mutual Agreement Procedure
 Article 42 (Conditions for Commencing Mutual Agreement Procedure)
(1) A resident or domestic corporation or a nonresident or foreign corporation may apply for commencing a mutual agreement procedure to the relevant person specified in the following, as prescribed by Presidential Decree:
1. Where it is necessary to consult with the other Contracting State on the application and interpretation of the tax treaty: The Minister of Economy and Finance;
2. Where such person or corporation has been or is likely to be subject to taxation by the tax authority of the other Contracting State, not complying with the provisions of the tax treaty: The Commissioner of the National Tax Service;
3. Where a tax adjustment is required under the tax treaty between the Republic of Korea and the other Contracting State: The Commissioner of the National Tax Service.
(2) Upon receipt of an application for commencing a mutual agreement procedure under paragraph (1), the Minister of Economy and Finance or the Commissioner of the National Tax Service shall request the competent authority of the other Contracting State to commence a mutual agreement procedure and shall notify the resident or domestic corporation and the nonresident or foreign corporation who has applied for commencing a mutual agreement procedure (hereafter in this Section referred to as "applicant”) of such request, except in any of the following cases:
1. Where the final ruling has been made by a domestic or foreign court: Provided, That cases prescribed by Presidential Decree shall be excluded, such as where a response to the tax adjustment by the other Contracting State is required;
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 exploit a mutual agreement procedure for tax avoidance;
4. Where the application has been filed three years after the applicant became aware of the taxation.
(3) In the case of paragraph (1) 1, the Minister of Economy and Finance may ex officio request the competent authority of the other Contracting State to commence the mutual agreement procedure.
(4) In the case of 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.
(5) Upon receiving an application under paragraph (1) or ex officio requesting the commencement of the mutual agreement procedure pursuant to paragraph (4), the Commissioner of the National Tax Service shall report thereon to the Minister of Economy and Finance; and the Minister of Economy and Finance may give an instruction as to the mutual agreement procedure, if necessary.
 Article 43 (Arbitration for Mutual Agreement)
(1) Where no agreement is reached between the competent authorities of the Republic of Korea and the other Contracting State after the commencement of the mutual agreement procedure and within the period specified in the tax treaty, the applicant may request the Minister of Economy and Finance or the Commissioner of the National Tax Service to commence the procedures for resolving disputes (hereinafter referred to as "arbitration") through the group of arbitrators, appointed by the competent authorities, respectively, as prescribed by the tax treaty.
(2) Detailed matters regarding arbitration, including persons eligible to file an application for arbitration, the timing for filing an application, the scope of applicable cases, the formation of the arbitrators group, the methods of making a decision, and the validity of the arbitration decision, shall be governed by the tax treaty.
(3) Detailed procedures for implementing the tax treaty stipulating specific matters regarding arbitration, including the procedure for filing an arbitration application, the appointment of arbitrators, and the burden of expenses, shall be prescribed by Presidential Decree.
 Article 44 (Applicants’ Obligations to Cooperate)
(1) The Minister of Economy and Finance or the Commissioner of the National Tax Service may request an applicant to submit data necessary for proceeding with the mutual agreement procedure.
(2) The Minister of Economy and Finance or the Commissioner of the National Tax Service may terminate ex officio the mutual agreement procedure if the applicant fails to comply conscientiously with a request to submit data under paragraph (1).
 Article 45 (Start Date of Mutual Agreement Procedure)
The start 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 the 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 the intent to accept the request from the competent authority of the other Contracting State.
 Article 46 (End Date of Mutual Agreement Procedure)
(1) The end date of the mutual agreement procedure shall be the date 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 end date of the mutual agreement procedure shall be the date five years elapse from the date following the start date.
(2) Where the competent authorities of the Republic of Korea and the other Contracting State agree to continue the mutual agreement procedure, such procedure shall continue to be in force, notwithstanding the proviso of paragraph (1). In such cases, the end date of the mutual agreement procedure shall not exceed eight years from the date following the start date.
(3) In any of the following cases, a date classified accordingly shall be the end date of the mutual agreement procedure, notwithstanding paragraphs (1) and (2): Provided, That subparagraph 1 shall not apply to cases prescribed by Presidential Decree, such as where a response to the tax adjustment by the other Contracting State is required:
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 or her application for commencing the mutual agreement procedure in the course of such procedure: The date the application is withdrawn;
3. Where the Minister of Economy and Finance or the Commissioner of the National Tax Service terminates ex officio the mutual agreement procedure under Article 44 (2): The date the applicant is notified of the termination of such procedure.
 Article 47 (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 Economy and Finance at the end of the mutual agreement procedure.
(2) After the end of the mutual agreement procedure, the Minister of Economy 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, of the terms and conditions mutually agreed upon within 15 days from the date following the end date of the mutual agreement procedure. In such cases, the Minister of Economy and Finance shall immediately give public notice of the contents of the agreement under Article 42 (1) 1.
(3) Where the Minister of Economy and Finance or the Commissioner of the National Tax Service has commenced the mutual agreement procedure and reaches an agreement in writing and all of the following requirements are met, he or she shall implement the agreement without delay:
1. Where the applicant accepts the terms and conditions mutually agreed upon;
2. Where the mutual agreement procedure and the appeal are proceeding at the same time, and the applicant withdraws the appeal against the terms and conditions mutually agreed upon.
(4) 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.
 Article 48 (Extended Application of Terms and Conditions Mutually Agreed Upon)
(1) An applicant may file an application with the tax authority or the head of a local government for applying the terms and conditions mutually agreed upon to transactions between the applicant and a foreign related party in a country other than the country bound by the mutual agreement, within three years from the date the notice of the end of the mutual agreement procedure is delivered pursuant to Article 47 (2), as prescribed by Presidential Decree.
(2) Where the application under paragraph (1) meets all of the following requirements, the tax authority or the head of the relevant local government may apply the terms and conditions mutually agreed upon to the transactions with a foreign related party in a country other than the country bound by the mutual agreement:
1. The transactions are of the same type as that upon which the terms and conditions were mutually agreed;
2. Taxes have been imposed in the same manner as stipulated in the terms and conditions mutually agreed upon;
3. Other requirements prescribed by Presidential Decree are met.
(3) Article 47 shall apply mutatis mutandis to the extended application of the terms and conditions mutually agreed upon to a foreign related party in a country other than the country bound by the mutual agreement, as provided in paragraphs (1) and (2).
 Article 49 (Special Cases on Application of Extension of Deadline for Payment)
(1) An applicant may file an application with the head of a tax office having jurisdiction over the place for tax payment or the head of a local government, for special application of extension of the payment deadline, etc. under Article 13 of the National Tax Collection Act (including the deferment of collection under Article 25 of the Local Tax Collection Act; hereafter in this Article referred to as "extension of the payment deadline, etc.”) or suspension of attachment or sale under Article 105 of the National Tax Collection Act (including the deferment of collecting delinquent local taxes under Article 105 of the Local Tax Collection Act; hereafter in this Article referred to as "suspension of attachment or sale”), as prescribed by Presidential Decree.
(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 in receipt of an application under paragraph (1) may defer payment notice under Article 14 of the National Tax Collection Act (including the deferment of notice and the notice to make payments in installments under Article 25 of the Local Tax Collection Act; hereafter in this Article referred to as “deferment of payment notice”) until the end 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 notify the amount of tax payable within 30 days from the date following the end 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 in receipt of application under paragraph (1) may either extend the payment deadline, etc. or defer the seizure or the sale from the start date to the end 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 tax amount with the extended payment deadline or the deferred tax amount, within 30 days from the date following the end date of the mutual agreement procedure.
(4) Paragraphs (2) and (3) shall apply only where the other Contracting State allows the extension of the payment deadline, etc. or the deferment of the seizure or the sale, 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 extension of the payment deadline, etc. or the deferment of the seizure or the sale pursuant to paragraph (3), he or she shall additionally collect the amount equivalent to the interest for the relevant period as calculated in accordance with Presidential Decree.
(6) Where any of the deferred notice of payment, the extension of the payment deadline, etc., or the deferment of the seizure or the sale (hereafter in this paragraph referred to as “deferred notice, etc.”) is applied to the amount of income tax or corporate tax under paragraph (2) or (3), the deferred notice, etc. 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 relevant local government of the deferred notice, etc., as prescribed by Presidential Decree.
 Article 50 (Special Cases on Application of Period of Appeal and Period of Decision on Appeal)
Where the mutual agreement procedure commences, the period from the start date to the end date of such procedure shall not be counted in the following periods:
 Article 51 (Special Cases regarding Statute of Limitations Period for Tax Assessment)
(1) Where the mutual agreement procedure commences, no national taxes shall be assessed after the expiration of the period coming later between the following periods:
1. The one-year period beginning on the date following the end date of the mutual agreement procedure;
2. The statute of limitations period for tax assessment under Article 26-2 (1) through (4) of the Framework Act on National Taxes.
(2) Where the mutual agreement procedure commences, no local taxes shall be assessed after the expiration of the period coming later between the following periods:
1. The one-year period beginning on the date following the end date of the mutual agreement procedure;
2. The statute of limitations period for tax assessment under Article 38 (1) of the Framework Act on Local Taxes.
CHAPTER IV REPORTING ON FOREIGN ASSETS AND SUBMISSION OF DATA
SECTION 1 Reporting on Foreign Financial Accounts
 Article 52 (Definitions)
The terms used in this Chapter are defined as follows:
1. The term "foreign financial company, etc." means the following entities located in a foreign country and prescribed by Presidential Decree, which include a domestic corporation’s places of business in foreign countries but exclude a foreign corporation’s places of business in the Republic of Korea:
(a) A financial company that engages in the finance and insurance business and similar types of business;
(b) A virtual asset service provider defined in subparagraph 1 (n) of Article 2 of the Act on Reporting and Using Specified Financial Transaction Information and any similar business entity;
2. The term "foreign financial account" means any of the following accounts opened with a foreign financial company, etc. for financial transactions with a foreign financial company, etc. (including financial transactions defined in subparagraph 3 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality and similar transactions) and for virtual asset transactions (including virtual asset transactions defined in subparagraph 2 (d) of Article 2 of the Act on Reporting and Using Specified Financial Transaction Information and similar transactions):
(a) An account opened in connection with banking services pursuant to Article 27 of the Banking Act;
(b) An account opened for trading securities defined in Article 4 of the Financial Investment Services and Capital Markets Act and similar foreign securities;
(c) An account opened for trading derivatives defined in Article 5 of the Financial Investment Services and Capital Markets Act and similar foreign derivatives;
(d) An account opened with a virtual asset service provider defined in subparagraph 1 (n) of Article 2 of the Act on Reporting and Using Specified Financial Transaction Information or any similar business entity in a foreign country for transactions of virtual assets defined in subparagraph 3 of that Article 2 and similar assets;
(e) An account, other than those prescribed in items (a) through (d), which is opened with a foreign financial company, etc. for other financial transactions or virtual asset transactions;
3. The term "foreign financial account information" means the following:
(a) Information on the identity of the account holder, such as the name and address;
(b) Information on the account held, such as the account number, the name of the foreign financial company, etc., and the largest balance of the account as at the end of each month;
(c) Information on persons related to foreign financial accounts referred to in Article 53 (2).
[Enforcement Date: Jan. 1, 2022] Limited to the provisions regarding virtual asset service providers, virtual assets, and virtual asset transactions in the amended provisions of subparagraphs 1 and 2 of Article 52.
 Article 53 (Reporting on Foreign Financial Accounts)
(1) A resident or domestic corporation holding a foreign financial account, the balance of which (or the aggregate balance of all foreign financial 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 (hereinafter referred to as “person required to report his or her account”), shall report the foreign financial account information to the head of a tax office having jurisdiction over the place for tax payment from June 1 to 30 of the following year.
(2) For the purposes of paragraph (1), each of the following persons (hereafter in this Chapter referred to as “person related to a foreign financial account”) shall be deemed to hold the relevant foreign financial account:
1. Where the actual holder of a foreign financial account is different from the nominal account holder, such as an account not under a real name: The nominal holder and the actual holder;
2. Where a foreign financial account is an account in joint names: Each joint holder.
(3) Matters necessary for reporting foreign financial accounts under paragraphs (1) and (2), such as standards for determining persons required to report their accounts, methods of computing the balance of foreign financial accounts, methods of reporting, and standards for determining actual holders, shall be prescribed by Presidential Decree.
 Article 54 (Exemption from Obligation to Report Foreign Financial Accounts)
A person required to report his or her account shall be exempt from the obligation to report under Article 53 in any of the following cases:
1. A foreign resident referred to in the proviso of Article 3 (1) of the Income Tax Act or a Korean national residing abroad defined in subparagraph 1 of Article 2 of the Act on the Immigration and Legal Status of Overseas Koreans, who has his or her residence in the Republic of Korea for a total period not exceeding 183 days within the one-year period before the end of the relevant year subject to reporting and for whom the methods of computing the total period of residency in the Republic of Korea shall be 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 financial company, etc.;
4. A person related to a foreign financial account who meets the requirements prescribed by Presidential Decree, including where the information on his her foreign financial account is verifiable through a report by another joint holder, etc. of the account;
5. An institution prescribed by Presidential Decree, which is subject to management and supervision by the State under other statutes or regulations.
 Article 55 (Revised and Overdue Reports of Foreign Financial Accounts)
(1) A person who has reported information on his or her foreign financial account by the reporting deadline prescribed in Article 53 (1) but has under-reported the amount thereof, may file a revised report on such information before the tax authority imposes an administrative fine under Article 62 (1).
(2) A person who has failed to report information on his or her foreign financial account by the reporting deadline prescribed in Article 53 (1) may report such information before the tax authority imposes an administrative fine under Article 62 (1).
(3) Methods of filing revised or overdue reports on foreign financial accounts pursuant to paragraphs (1) and (2) and other necessary matters shall be prescribed by Presidential Decree.
 Article 56 (Explanation about Source of Noncompliance Amounts in Relation to Obligation to Report Foreign Financial Accounts)
(1) Where a person required to report his or her account under Article 53 (1) fails to report the relevant foreign financial account information by the reporting deadline or has under-reported the relevant amount, the relevant tax authority may request the person to explain the source of the amount that remains unreported by the reporting deadline or has been under-reported (hereinafter referred to as “noncompliance amount”).
(2) Upon receipt of a request for explanation under paragraph (1), the person required to report his or her account shall give an explanation in a manner prescribed by Presidential Decree within 90 days from the date of receiving such request (hereafter in this paragraph referred to as “period for explanation”): Provided, That where the person requests an extension of the period for explanation on account of unavoidable circumstances prescribed by Presidential Decree, such as where collecting and preparing data requires considerable time, the tax authority may extend the period for explanation by up to 60 days only once.
(3) Paragraphs (1) and (2) shall not apply where a person required to report his or her account files a revised or overdue report pursuant to Article 55: Provided, That paragraphs (1) and (2) shall apply where the person files such report, knowing beforehand the intent of the tax authority to impose an administrative fine.
 Article 57 (Confidentiality of Foreign Financial Account Information)
(1) No tax official shall offer or divulge any foreign financial account information to any third person or misappropriate such information: Provided, That a tax official may provide foreign financial account information within the limits of the purposes in the circumstances provided in any subparagraph of Article 81-13 (1) of the Framework Act on National Taxes.
(2) No person who has become aware of foreign financial account information under paragraph (1) shall provide or divulge such information to any third person or misappropriate it.
SECTION 2 Submission of Data on Overseas Subsidiaries
 Article 58 (Obligation to Submit Data on Overseas Subsidiaries)
(1) A resident (excluding a foreign resident under the proviso of Article 3 (1) of the Income Tax Act) or domestic corporation that makes an overseas direct investment under Article 3 (1) 18 of the Foreign Exchange Transactions Act or that acquires or disposes of (limited to where the acquisition value or disposal value of each item of overseas real estate, etc. is 200 million won or more) real estate in a foreign country or any rights in such real estate (hereinafter referred to as "overseas real estate, etc.") through a capital transaction under subparagraph 19 of the aforementioned paragraph, shall submit the following data (hereinafter referred to as "business profiles of overseas subsidiaries, etc.") to the head of a tax office having jurisdiction over the place for tax payment within the taxable period under the Income Tax Act or within six months from the end of the month in which the end date of the business year under the Corporate Tax Act falls, as prescribed by Presidential Decree:
1. A statement of overseas direct investments;
2. The financial position of the foreign corporation that has attracted overseas direct investments (including the financial position of other foreign corporations in which the foreign corporation that has attracted overseas direct investments has made investments);
3. Losses on transactions of the resident or domestic corporation that has made overseas direct investments (limited to the loss on transactions with the foreign corporation that has attracted overseas direct investments);
4. Losses on transactions of the foreign corporation that has attracted overseas direct investments (excluding the loss on transactions with the domestic corporation that has made overseas direct investments);
5. Current status of establishment of overseas business offices;
6. A statement of investments in overseas real estate, etc.;
7. Other data relevant to overseas direct investments or investment operation and disposal of overseas real estate, etc., as prescribed by Presidential Decree.
(2) Where a resident or domestic corporation under paragraph (1) fails to submit business profiles of overseas subsidiaries, etc. or submits a false business profiles of overseas subsidiaries, etc., the tax authority may request the submission or supplementation of the business profiles of overseas subsidiaries, etc.: Provided, That no request for the submission or supplementation of the business profiles of overseas subsidiaries, etc. may be made if two years have already passed since the day following the deadline specified in the provision, with the exception of the subparagraphs, of paragraph (1).
(3) A person in receipt of a request to submit or supplement data under paragraph (2) shall submit the data within 60 days from the date of receiving such request.
(4) For the purposes of paragraph (1), an acquisition value and a disposal value shall be calculated as follows, in which cases, the conversion of a foreign currency into the won currency is calculated by applying a basic exchange rate or an arbitrage exchange rate under the Foreign Exchange Transactions Act as of the day of receiving or paying the foreign currency:
1. An acquisition value: The amount classified as follows:
(a) Residents: An acquisition value under Article 118-4 (1) 1 of the Income Tax Act;
(b) Domestic corporations: An acquisition value under Article 41 of the Corporate Tax Act;
2. A disposal value: A transfer value in Article 118-3 of the Income Tax Act.
 Article 59 (Explanation about Source of Funds for Acquisition in Cases of Noncompliance with Obligation to Submit Data on Overseas Subsidiaries)
(1) Where a resident or domestic corporation that has acquired, within 10 years before the date of requesting the explanation, any overseas real estate, etc., or the stocks or investment shares of a foreign corporation which has attracted overseas direct investment, fails to submit data under Article 58 (1) 1 (limited to where a resident or domestic corporation that has made overseas direct investment under Article 3 (1) 18 (a) of the Foreign Exchange Transactions Act directly or indirectly owns at least 10 percent of the total number of issued stocks or the total amount of investment of a corporation that has attracted overseas direct investment; hereafter in this paragraph the same shall apply) and under Article 58 (1) 6 and 7 (limited to data related to overseas real estate, etc.; hereafter in this paragraph the same shall apply) or submits false data by the deadline under the provision, with the exception of the subparagraphs, of Article 58 (1); the tax authority may request such resident or domestic corporation to explain the source of the following amounts (excluding the amount reported pursuant to Article 18 of the Foreign Exchange Transaction Act; hereinafter referred as “amount subject to explanation about the source of funds for acquisition”):
1. In cases of failing to submit the data under Article 58 (1) 1 or submitting false data: The amount paid to acquire the stocks or investment shares of a foreign corporation that has attracted overseas direct investment under Article 3 (1) 18 (a) of the Foreign Exchange Transactions Act;
2. In cases of failing to submit the data under Article 58 (1) 6 and 7 or submitting false data: The amount paid to acquire overseas real estate, etc.
(2) A resident or domestic corporation requested to give an explanation under paragraph (1) shall give an explanation in a manner prescribed by Presidential Decree within 90 days (hereafter in this Article referred to as “period for explanation”) from the date of receiving the notice for explanation. In such cases, if the resident or domestic corporation requested to give an explanation explains the source of at least 80 percent of the amount requested to be explained, the source of the whole amount requested shall be deemed explained.
(3) Notwithstanding paragraph (2), where a resident or domestic corporation requests an extension of the period for explanation on account of unavoidable circumstances prescribed by Presidential Decree, such as where collecting and preparing data requires considerable time, the tax authority may extend the period for explanation up to 60 days only once.
CHAPTER V PENALTY PROVISIONS
 Article 60 (Administrative Fines for Noncompliance with Obligation to Submit Data on International Transactions)
(1) Any of the following persons who fails to submit data by the deadline without any unavoidable cause prescribed by Presidential Decree or submits false data shall be subject to an administrative fine not exceeding 100 million won:
1. A person obligated to submit a consolidated report on international transaction information under Article 16 (1) or a statement of international transactions under paragraph (2) 1 of that Article;
2. A person in receipt of a request to submit data under Article 16 (4).
(2) The tax authority may require a person on whom an administrative fine is imposed pursuant to paragraph (1) to submit data or correct false data within a specified period for compliance of 30 days; and where the person fails to submit data or to comply with the request for correction within such period, the authority may additionally impose an administrative fine not exceeding 200 million won in proportion to the period of delay.
(3) An administrative fine under paragraphs (1) and (2) shall be imposed and collected by the tax authority, as prescribed by Presidential Decree.
 Article 61 (Administrative Fines for Noncompliance with Obligation to Report Financial Information)
(1) Any of the following persons who fails to provide the requested information without good reason or provides false information shall be subject to an administrative fine not exceeding 30 million won:
1. A person requested to provide information on the actual owner under Article 36 (2);
2. A financial company, etc. requested to provide financial information under Article 36 (3), (4), or (6).
(2) An administrative fine under paragraph (1) shall be imposed and collected by the tax authority, as prescribed by Presidential Decree.
 Article 62 (Administrative Fines for Noncompliance with Obligation to Report Foreign Financial Accounts)
(1) Where a person required to report his or her account under Article 53 (1) fails to report such account by the reporting deadline or has under-reported the relevant amount, an administrative fine not exceeding 20 percent of the amount calculated as follows shall be imposed:
1. Where the person fails to report the information: The amount not reported;
2. Where the person has under-reported the amount: The difference between the amount actually reported and the amount that should have been reported.
(2) Where a person required to report his or her account fails to explain the source of the noncompliance amounts pursuant to Article 56 (2) or gives a false explanation, 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 any unavoidable cause prescribed by Presidential Decree, such as a natural disaster.
(3) Administrative fines under paragraphs (1) and (2) shall be imposed and collected by the tax authority, as prescribed by Presidential Decree.
(4) Where any person is punished pursuant to Article 16 (1) of the Punishment of Tax Offenses Act or where any person is subject to a disposition of notification under Article 15 (1) of the Procedure for the Punishment of Tax Offenses Act and complies with such notification, the person shall not be subject to an administrative fine under paragraph (1).
 Article 63 (Administrative Fines for Noncompliance with Obligation to Submit Data on Overseas Subsidiaries)
(1) Where a resident or domestic corporation required to submit data, including business profiles of overseas subsidiaries, etc., pursuant to Article 58 (excluding a statement of investments in overseas real estate, etc. under Article 58 (1) 6 and data related to overseas real estate, etc. under Article 58 (1) 7; hereafter in this paragraph the same shall apply) falls under any of the following cases (requiring the submission of data under Article 58 (1) 1 through 4, only where a resident or domestic corporation that has made overseas direct investments under Article 3 (1) 18 of the Foreign Exchange Transactions Act directly or indirectly owns at least 10 percent of the total number of issued stocks or the total amount of investment of a corporation that has attracted such overseas direct investment), the resident or domestic corporation shall be subject to an administrative fine not exceeding 50 million won: Provided, That no administrative fine shall be imposed where there exists any unavoidable cause prescribed by Presidential Decree, such as where it is deemed impracticable for such resident or domestic corporation to submit data by the deadline under Article 58 (1) or (3):
1. Where the resident or domestic corporation fails to submit business profiles of overseas subsidiaries, etc. by the deadline under Article 58 (1) or submits false business profiles of overseas subsidiaries, etc.;
2. Where the resident or domestic corporation in receipt of a request to submit or supplement any data pursuant to Article 58 (2) fails to submit relevant data by the deadline under Article 58 (3) or submits any false data.
(2) Where a resident or domestic corporation required to submit a statement of investments in overseas real estate, etc. under Article 58 (1) 6 and data related to overseas real estate, etc. under Article 58 (1) 7 (hereafter in this paragraph referred to as "statement of investments in overseas real estate, etc. and related data”) pursuant to Article 58 falls under any of the following cases, the resident or domestic corporation shall be subject to an administrative fine not exceeding 10 percent of the acquisition value, disposal value, and income from investment operations of the overseas real estate, etc. prescribed by Presidential Decree (the maximum amount of 100 million won): Provided, That no administrative fine shall be imposed where there exists any unavoidable cause prescribed by Presidential Decree, such as where it is deemed impracticable for such resident or domestic corporation to submit data by the deadline under Article 58 (1) or (3):
1. Where the resident or domestic corporation fails to submit a statement of investment in overseas real estate, etc. and related data by the deadline under the provision, with the exception of the subparagraphs, of Article 58 (1) or submits a false statement of investment in overseas real estate, etc. and related data;
2. Where the resident or domestic corporation, in receipt of a request for submission or supplementation of data under Article 58 (2), fails to submit such data by the deadline under 58 (3) or submits any false data.
(3) Where a resident or domestic corporation fails to explain the source of the amount subject to explanation about the source of funds for acquisition or gives a false explanation in violation of Article 59 (2) and (3), the resident or domestic corporation shall be subject to an administrative fine equivalent to 20 percent of the unexplained or falsely explained amount: Provided, That no administrative fine shall be imposed where there exists any act of God or any unavoidable cause prescribed by Presidential Decree.
(4) Administrative fines under paragraphs (1) through (3) shall be imposed and collected by the tax authority, as prescribed by Presidential Decree.
ADDENDA <Act No. 17651, Dec. 22, 2020>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2021: Provided, That the amended provisions of subparagraphs 1 and 2 of Article 52 (limited to virtual asset service providers, virtual assets, and virtual asset transactions) shall enter into force on January 1, 2022.
Article 2 (General Applicability)
This Act shall begin to apply from the taxable year that commences after this Act enters into force.
Article 3 (Applicability to Scope of Special Relationship)
(1) The amended provisions of Article 2 (1) 8 (d) of the Adjustment of International Taxes Act (Act No. 6779) shall begin to apply to the first transaction made after January 1, 2003.
(2) The amended provisions of Article 2 (1) 8 (c) and (d) of the Adjustment of International Taxes Act (Act No. 7956) shall begin to apply to the first transaction made after May 24, 2006.
Article 4 (Applicability to Arm's Length Pricing Methods)
The amended provisions of Article 5 (1) of the Adjustment of International Taxes Act (Act No. 10410) shall apply from the first taxable year for which a tax return is filed after December 27, 2010.
Article 5 (Applicability to Submission of Consolidated Reports on International Transaction Information)
(1) The amended provisions of the main clause, with the exception of the subparagraphs, of Article 16 (2) (limited to the provisions regarding the deadline for submission of data) shall also apply where the obligation to submit the data under the subparagraphs of Article 16 (2) for the taxable period or business year commencing before this Act enters into force has arisen and the deadline for submission has not expired under the main clause of Article 11 (1) of the previous Adjustment of International Taxes Act (referring to the Act before wholly amended by Act No. 17651; hereinafter referred to as “previous Act").
(2) The amended provisions of the main clause, with the exception of the subparagraphs, of Article 16 (2) (limited to the provisions regarding a taxpayer required to submit a Master File and Local Files) shall also apply where the obligation to submit a Master File and Local Files has arisen before this Act enters into force and the deadline for submission of the statement of international transactions has not expired under the main clause of Article 11 (1) of the previous Act.
(3) The amended provisions of Articles 11 (1), (2), and (6) and 12 (1) of the Adjustment of International Taxes Act (Act No. 13553) shall begin to apply to the obligation to submit a consolidated report on international transaction information for the taxable year commencing on or after January 1, 2016.
(4) The amended provisions of Article 11 (1) and (2) of the Adjustment of International Taxes Act (Act No. 14384) shall begin to apply to a consolidated report on international transaction information submitted on or after January 1, 2017.
Article 6 (Applicability to Exclusion of Interest Overpaid Compared to Income from Deductible Expenses)
The amended provisions of Articles 15-2 and 16 (limited to the provisions regarding Article 15-2) of the Adjustment of International Taxes Act (Act No. 15221) shall begin to apply to the taxable year commencing on or after January 1, 2019.
Article 7 (Applicability to Scope of Application of Accumulative Taxation of Retained Earnings of Specific Foreign Corporations)
The amended provisions of Articles 18 (1) and 18-2 of the Adjustment of International Taxes Act (Act No. 11126) shall begin to apply to the business year in which December 31, 2011 falls.
Article 8 (Applicability to Exceptional Application of Specific Foreign Corporations’ Retained Earnings Deemed Dividends)
(1) The amended provisions of Article 18 (1) 1 of the Adjustment of International Taxes Act (Act No. 6779) shall apply from the first taxable year commencing after January 1, 2003.
(2) The amended provisions of Article 18 (1) 1 of the Adjustment of International Taxes Act (Act No. 11606) shall apply from the taxable year in which January 1, 2013 falls.
(3) The amended provisions of Article 18 (5) of the Adjustment of International Taxes Act (Act No. 12164) shall apply from the taxable year commencing on or after January 1, 2015.
Article 9 (Applicability to Submission of Data on Specific Foreign Corporations)
The amended provisions of Article 20-2 of the Adjustment of International Taxes Act (Act No. 13553) shall begin to apply to the first submission of data for the taxable year immediately preceding the taxable year in which the filing deadline of a consolidated corporation falls on or after January 1, 2016.
Article 10 (Applicability to Special Cases regarding Imposition of Gift Tax on Overseas Donation)
(1) The amended provisions of Article 21 (1) of the Adjustment of International Taxes Act (Act No. 12849) shall begin to apply to the first donation made on or after January 1, 2015.
(2) The amended provisions of Article 21 (1) of the Adjustment of International Taxes Act (Act No. 14384) shall begin to apply to the donation of foreign property that a resident makes to a nonresident on or after January 1, 2017.
Article 11 (Applicability to Verification of Personal Information of Counter-Parties to Financial Transactions by Financial Companies)
The amended provisions of Article 31 (4), (5), and (10) of the Adjustment of International Taxes Act (Act No. 13553) shall also apply to the counter-party to a financial transaction of a financial company, etc. as of January 1, 2016.
Article 12 (Applicability to Conditions for Commencing Mutual Agreement Procedure)
The amended provisions of the proviso of Article 42 (2) 1 shall begin to apply to the request for commencing the mutual agreement procedure on or after the date this Act enters into force.
Article 13 (Applicability to End Date of Mutual Agreement Procedure)
(1) The amended provisions of the proviso, with the exception of the subparagraphs, of Article 46 (3) shall also apply where the mutual agreement procedure is in progress as at the time this Act enters into force and a final judgment is rendered by a court on or after the date this Act enters into force.
(2) The amended provisions of Article 23 (4) 2 of the Adjustment of International Taxes Act (Act No. 14384) shall also apply where the mutual agreement procedure is in progress as of January 1, 2017 and the applicant withdraws his or her application to commence the mutual agreement procedure on or after January 1, 2017.
Article 14 (Applicability to Enforcement of Terms and Conditions Mutually Agreed Upon)
The amended provisions of Article 47 (3) shall begin to apply to cases where an agreement is reached in writing between the Republic of Korea and the other Contracting State on or after the date this Act enters into force.
Article 15 (Applicability to Scope of Foreign Financial Accounts)
The amended provisions of subparagraphs 1 and 2 of Article 52 (limited to the provisions regarding virtual asset service providers, virtual assets, and virtual asset transactions) shall begin to apply to cases where the obligation to report foreign financial accounts arises on or after the enforcement date under the proviso of Article 1 of the Addenda.
Article 16 (Applicability to Explanation about Source of Noncompliance Amounts in Relation to Obligation to Report Foreign Financial Accounts)
The amended provisions of Article 56 (limited to the provisions regarding the tax authority) shall begin to apply to a request for an explanation made on or after the date this Act enters into force.
Article 17 (Applicability to Obligation to Submit Data on Overseas Subsidiaries)
The amended provisions of Article 58 (1) and (2) (limited to the provisions regarding the deadline for submission and the tax authority) shall also apply where the data under the subparagraphs of Article 58 (1) is submitted for the taxable period or business year that commences before this Act enters into force and the deadline for submission has not expired under the previous provisions [referring to Article 165-2 (1) of the Income Tax Act (referring to the Act before partially amended by Act No. 17757) and Article 121-2 (1) of the Corporate Tax Act (referring to the Act before partially amended by Act No. 17652)].
Article 18 (Applicability to Explanation about Source of Funds for Acquisition in Cases of Noncompliance with Obligation to Submit Data on Overseas Subsidiaries)
The amended provisions of Article 59 (1) and (3) (limited to the provisions regarding the tax authority) shall begin to apply to a request for an explanation made on or after the date this Act enters into force.
Article 19 (Applicability to Sanctions for Noncompliance with Obligation to Submit Data)
The amended provisions of Article 12 (2) and (3) of the Adjustment of International Taxes Act (Act No. 16843) shall begin to apply to a person on whom an administrative fine under Article 12 (1) is imposed on or after January 1, 2020.
Article 20 (Applicability to Administrative Fines for Noncompliance with Obligation to Report Foreign Financial Accounts)
The amended provisions of Article 35 (4) of the Adjustment of International Taxes Act (Act No. 16843) shall begin to apply to a disposition of notification taken pursuant to Article 15 (1) of the Procedure for the Punishment of Tax Offenses Act on or after January 1, 2019.
Article 21 (General Transitional Measures)
Notwithstanding the amended provisions of this Act, the previous provisions shall apply to income tax and corporate tax imposed or to be imposed pursuant to the previous provisions as at the time this Act enters into force.
Article 22 (Transitional Measures regarding Application for Advance Pricing Agreements and Approval Therefor)
Notwithstanding the amended provisions of Article 14 (3), Article 6 (3) of the previous Act shall apply to an application for an advance pricing agreement filed before this Act enters into force.
Article 23 (Transitional Measures regarding Submission of Consolidated Reports on International Transaction Information)
(1) Notwithstanding the amended provisions of the main clause, with the exception of the subparagraphs, of Article 16 (2) (limited to the provisions regarding the deadline for submission of data), the main clause of Article 11 (1) of the previous Act shall apply to the data for the taxable year or business year that commences before this Act enters into force, for which the deadline for submission has already expired under the main clause of Article 11 (1) of the previous Act as at the time this Act enters into force.
(2) Notwithstanding the amended provisions of the main clause, with the exception of the subparagraphs, of Article 16 (2) (limited to the provisions regarding taxpayers required to submit a Master File and Local Files), the proviso of Article 11 (1) of the previous Act shall apply where the obligation to submit a Master File and Local Files has arisen before this Act enters into force and the deadline for submission of the statement of international transactions has already expired under the main clause of Article 11 (1) of the previous Act as at the time this Act enters into force.
Article 24 (Transitional Measure regarding Exclusion of Interest Paid on Hybrid Financial Instrument Transactions from Deductible Expenses)
Notwithstanding the amended provisions of Article 25 (2), Article 15-3 of the previous Act shall apply to the interest paid before this Act enters into force.
Article 25 (Transitional Measure regarding Exceptional Application of Specific Foreign Corporations’ Retained Earnings Deemed Dividends)
Notwithstanding the amended provisions of Article 29 (2) 2, Article 17-3 (2) of the previous Act shall apply to the business year that commences before this Act enters into force.
Article 26 (Transitional Measure regarding Exemption from Obligation to Report Foreign Financial Accounts)
(1) Notwithstanding the amended provisions of subparagraph 1 of Article 54, Article 34 (5) 1 of the previous Adjustment of International Taxes Act (referring to the Act before partially amended by Act No. 13553) shall apply where a report on a foreign financial account held before January 1, 2016 is filed after January 1, 2016.
(2) Notwithstanding the amended provisions of subparagraph 1 of Article 54, Article 34 (5) 1 of the previous Adjustment of International Taxes Act (referring to the Act before partially amended by Act No. 16099) shall apply where a report on a foreign financial account held before January 1, 2019 is filed on or after January 1, 2019.
Article 27 (Transitional Measures regarding Explanation about Source of Noncompliance Amounts in Relation to Obligation to Report Foreign Financial Accounts)
Notwithstanding the amended provisions of Article 56 (1), Article 34-3 (1) of the previous Adjustment of International Taxes Act (referring to the Act before partially amended by Act No. 16099) shall apply where a report is filed on a foreign financial account held before January 1, 2019.
Article 28 (Transitional Measures regarding Obligation to Submit Data on Overseas Subsidiaries)
Notwithstanding the amended provisions of Article 58 (1) and (2) (limited to the provisions regarding the deadline for submission and the tax authority), the previous provisions shall apply to the data for the taxable period or business year that commences before this Act enters into force, for which the deadline for submission has already expired under the previous provisions [referring to Article 165-2 (1) of the Income Tax Act (referring to the Act before partially amended by Act No. 17757) and Article 121-2 (1) of the Corporate Tax Act (referring to the Act before partially amended by Act No. 17652); hereafter in this Article the same shall apply] as at the time this Act enters into force.
Article 29 (Transitional Measures regarding Penalty Provisions)
In applying penalty provisions to violations committed before January 1, 2019, Articles 31-2, 31-3, and 34-2 of the previous Adjustment of International Taxes Act (referring to the Act before partially amended by Act No. 16099) shall apply.
Article 30 (Transitional Measures regarding Scope of Application of Previous Addenda)
The previous addenda provided by the amendments to the previous Adjustment of International Taxes Act shall remain effective even on or after the date this Act enters into force, except the addenda that became ineffective before this Act enters into force.
Article 31 Omitted.
Article 32 (Relationship to Other Statutes or Regulations)
A citation of the previous Adjustment of International Taxes Act or any provision thereof by other statutes or regulations in force as at the time this Act enters into force shall be deemed a citation of the relevant provision of this Act, if any, in lieu of such previous provision.