Adjustment Of International Taxes Act


Published: 2014-12-23

Subscribe to a Global-Regulation Premium Membership Today!

Key Benefits:

Subscribe Now for only USD$40 per month, or Get a Day Pass for only USD$9.99.
CHAPTER I GENERAL PROVISIONS
law view
 Article 1 (Purpose)   print
The purpose of this Act is to prevent double taxation and tax evasion among the states, and to promote a smooth cooperation in tax affairs by establishing rules related to the coordination of taxation on international trades and the cooperation in tax administration among the states.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 2 (Definitions)   print
(1) The terms used in this Act shall be defined as follows: <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
1. The term "international trade" means a trade for which either or both parties to a transaction are nonresidents or foreign corporations (excluding domestic business places of nonresidents or foreign corporations), including trading or leasing tangible or intangible assets, providing services, lending or borrowing money, and all other trades related to profits or losses and assets of the parties involved;
2. The term "tax treaty" means any type of international agreements subject to international laws, such as treaty, convention, pact, note, etc. with respect to the taxes on income, capital and property or the cooperation in tax administration, which the Republic of Korea has concluded with another state;
3. The term "Contracting State" means a state which has concluded a tax treaty with the Republic of Korea;
4. The term "competent authority" means the Minister of Strategy and Finance or a person to whom the said Minister's authority is delegated in the case of the Republic of Korea, and a person who is designated as a competent authority in the tax treaty in the case of the other Contracting State;
5. The term "mutual agreement procedures" means the procedures through which matters related to interpretation of a tax treaty, unreasonable taxation or adjustment of taxable income are resolved by consultation between the competent authority of the Republic of Korea and that of the Contracting State;
6. The term "domestic business place" means a domestic business place of a nonresident as provided in Article 120 of the Income Tax Act or a domestic business place of a foreign corporation as provided in Article 94 of the Corporate Tax Act;
7. The term "tax authority" means the head of the tax office having jurisdiction over the tax payment place or the commissioner of the competent Regional Tax Office;
8. The term "special relationship" means any relationship described below, and the detailed standards thereon shall be prescribed by Presidential Decree:
(a) A relationship in which either party to a transaction owns directly or indirectly 50 percent or more of the voting shares (including the equity shares; hereinafter the same shall apply) of the other party;
(b) A relationship between both parties to a transaction, in cases where a third party owns directly or indirectly 50 percent or more of their respective voting shares;
(c) A relationship in which parties to a transaction have common interests through an investment in capital, a transaction of goods or service, a grant of loan, etc. and either party to a transaction has power to actually make a decision on the business policy of the other party;
(d) A relationship between both parties to a transaction, in cases where the parties to the transaction have common interests through an investment in capital, a transaction of goods or service, a grant of loan, etc. and a third party has power to actually make a decision on the business policies of both parties;
9. The term "foreign related party" means a nonresident or foreign corporation (excluding a domestic place of a nonresident or foreign corporation), which has a special relationship with a resident, domestic corporation or domestic business place;
10. The term "arm's length price" means a price which is applied or deemed to be applied in the ordinary trade of a resident, domestic corporation or domestic business place with persons, other than a foreign related party;
11. The term "foreign controlling shareholder" means a person who substantially controls a domestic corporation or a domestic business place of a foreign corporation and falls under any of the following items, and the detailed standards therefor shall be prescribed by Presidential Decree:
(a) In cases of a domestic corporation, a foreign shareholder or investor (hereinafter referred to as "foreign shareholder") or a foreign corporation financed by such foreign shareholder;
(b) In cases of a domestic business place of a foreign corporation, the head office or branch office of the foreign corporation, a foreign shareholder of the foreign corporation, or a foreign corporation financed by the foreign corporation or the foreign shareholder;
12. The term "limited tax rate" means the maximum tax rate at which a resident or a corporation of a Contracting State may be taxed under the tax treaty.
(2) Unless otherwise provided for in this Act, terms other than those provided for in paragraph (1) shall be governed by the examples of terms under Article 2 (1) of the Restriction of Special Taxation Act and those pursuant to the Acts as listed in Article 3 (1) 1 through 12, 18 and 19 of the same Act.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 2-2 (Actual Taxation to International Trade)   print
(1) In an international trade, tax treaties shall apply to the person to whom a certain income, earning, asset, act or transaction is actually imputed, where the nominal taxpayer in the transaction is not the person to whom the income, earning, asset, act or transaction is actually imputed.
(2) In an international trade, tax treaties shall apply to the computation of tax base according to the actual substance of the transaction, regardless of the name or form of a certain income, earning, asset, act, or transaction.
(3) In an international trade, tax treaties and this Act shall, when it is deemed that the parties have concluded a transaction by an indirect method through a third party or gone through two or more acts or transactions in order to benefit wrongfully from the tax treaties and this Act, apply according to the economic substance of the transaction, assuming that such transaction has actually been made between the relevant parties or such acts or transactions are a single continuous act or transaction in fact.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 3 (Relationship to other Acts)   print
(1) This Act shall take precedence over other Acts providing for the 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 international trades: Provided, That the same shall not apply to the gift, etc. of assets prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER II ADJUSTMENT OF TAXATION ON TRADES WITH FOREIGN RELATED PARTY
law view
 Article 4 (Tax Adjustment by Arm's Length Price)   print
(1) Where the trade price in an international trade in which either party to the trade is a foreign related party is lower or higher than the arm's length price, a tax authority may determine or modify the tax base and tax amount of a resident (including a domestic corporation and a domestic business place; hereafter the same shall apply in this Chapter) on the basis of the arm's length price: Provided, That the same method of calculating arm's length prices among those set forth in Article 5 applies to calculating an arm's length price, and the tax base and tax amount for part of taxable years are determined or modified on the base of such arm's length price, the tax base and tax amount of the remaining taxable years shall also be determined or modified on the base of the same arm's length price. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11126, Dec. 31, 2011>
(2) Paragraph (1) shall not apply where a taxpayer obviously shows the fact that he/she is not applicable to the special relationship as set forth in Article 2 (1) 8 (c) and (d).
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 5 (Method of Computing Arm's Length Price)   print
(1) The arm's length price shall be calculated by the most reasonable method among the following methods: Provided, That the method of subparagraph 6 shall be limited to cases where the arm's length price may not be computed by the methods of subparagraphs 1 through 5: <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11126, Dec. 31, 2011>
1. Method with a comparable third party's price: A method to regard a trade price between the independent unrelated parties in a trade situation similar to the relevant trade, as the arm's length price in the international trade between a resident and a foreign related party;
2. Method with a resale price: Where a resident and a foreign related party trade the asset, and then the purchaser of relevant asset, who is one party to such trade, resells it to the unrelated parties, a method to regard the amount computed by deducting the amount viewable as arm's length profits of the purchaser from such a resale price, as the arm's length price;
3. Additional cost method: A method to regard 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 service, as the arm's length price in the international trade between a resident and a foreign related party;
4. Profit sharing method: In an international trade between a resident and a foreign related party, a method of sharing a net trade profit created by both parties of the trade according to each party's relative contribution, which have been measured with a reasonable allocation standard, and regarding the trade price calculated from such shared profit as the arm's length price;
5. Net trade profit ratio method: In an international trade between a resident and a foreign related party, a method of regarding a trade price calculated on the basis of an ordinary transactional net profit ratio among similar trades to the one between residents and persons, other than foreign related parties as the arm's length price;
6. Other methods deemed reasonable as prescribed by Presidential Decree.
(2) Detailed matters concerning the arm's length price computation method under paragraph (1) shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 6 (Prior Approval, etc. of Arm's Length Price Computation Method)   print
(1) A resident may, where he/she intends to apply the arm's length price computation method to the taxable years for a specific period, file an application for approval with the Commissioner of the National Tax Service not later than the end of the first taxable year for a specific period in which he/she intends to apply the arm's length price computation method, as prescribed by Presidential Decree.
(2) The Commissioner of the National Tax Service may, where a resident applies for approval for the arm's length price computation method under paragraph (1), grant approval for such method, if agreed with the competent authority of the Contracting State through mutual agreement procedures as prescribed by Presidential Decree: Provided, That in such cases as prescribed by Presidential Decree, he/she may grant prior approval (hereinafter referred to as "unilateral prior approval" in this Article) for the arm's length price computation method without going through the mutual agreement procedures.
(3) The Commissioner of the National Tax Service may, when a resident files an application for the retroactive application of the arm's length price computation method to the taxable year before the period subject to the application for approval, grant approval for the retroactive application to no longer than five years preceding the period subject to the application for approval: Provided, That approval for the retroactive application to within three years preceding the period subject to the application for approval may be granted in cases where a unilateral prior approval has been given. <Amended by Act No. 10410, Dec. 27, 2010>
(4) The Commissioner of the National Tax Service and a resident shall, where the arm's length price computation method is approved pursuant to paragraphs (2) and (3), comply with the method approved: Provided, That the same shall not apply to cases prescribed by Presidential Decree.
(5) Where the arm's length price computation method is approved pursuant to paragraphs (2) and (3), a resident shall submit a report containing the arm's length price computed according to it, procedures of computation, etc. to the Commissioner of the National Tax Service as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 6-2 (Tax Adjustment by Allotted arm's length Cost, etc.)   print
(1) Where a resident makes an agreement with a foreign related party on the allotment of cost, expenses, risks (hereafter referred to as "cost, etc." in this Article) for the joint development or securing of an intangible asset (hereafter referred to as "joint development" in this Article) and carries on such joint development, the competent tax authority may adjust the cost, etc. allotted to the resident based on the allotted arm's length cost to determine or rectify the taxable base and tax amount of the resident, if the cost, etc. allotted to the resident is less or more than the allotted amount of the arm's length cost. <Amended by Act No. 11126, Dec. 31, 2011>
(2) Where a resident has determined shares of participants after reasonably allotting the cost, etc. for an intangible asset jointly developed with a foreign related party, but the benefits expected from the jointly developed intangible asset (hereinafter referred to as "expected benefits" in this Article) are subsequently changed at a rate equivalent to or more than that prescribed by Presidential Decree, the competent tax authority may determine or rectify the tax base and tax amount of the resident by adjusting the shares of the participants based on the expected benefits as changed. <Amended by Act No. 11126, Dec. 31, 2011>
(3) In applying paragraphs (1) and (2), the scope of the intangible assets, the determination of the allotted arm's length cost and the expected benefits, the computation of the changed shares of participants, and other necessary matters shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 6-3 (Pre-Adjustment of Arm's Length Prices Computation Method for National Taxes, and Method of Determining Dutiable Value)   print
(1) A resident who files an application for prior approval (limited to the cases subject to unilateral prior approval under the proviso to Article 6 (2)) for the arm's length price computation method for the national tax under Article 6 (1) may simultaneously file an application for prior examination of the method of determining dutiable value under Article 37 (1) 3 of the Customs Act (hereafter referred to as "prior examination of dutiable value" in this Article) with the Commissioner of the National Tax Service. In such cases, the Commissioner of the National Tax Service shall pre-adjust the arm's length price for the national tax and dutiable value (hereafter referred to as "pre-adjustment" in this Article) in consultation with the Commissioner of the Korea Customs Service.
(2) Cases subject to pre-adjustment under paragraph (1) shall be limited to cases prescribed by Presidential Decree in which the arm's length price computation method for the national tax and the method of determining dutiable value are similar to each other.
(3) The Commissioner of the National Tax Service who makes a pre-adjustment under paragraph (1) shall notify the Commissioner of the Korea Customs Service of the fact that he/she has received an application for pre-adjustment, along with the application for prior examination of dutiable value, and shall determine the arm's length price computation method, the method of determining dutiable value, and the scope of price to be pre-adjusted, in consultation with the Commissioner of the Korea Customs Service.
(4) The Commissioner of the National Tax Service shall notify the relevant applicant for pre-adjustment and the Minister of Strategy and Finance of the results of pre-adjustment under paragraph (3).
(5) The method and procedure for filing applications for pre-adjustment under paragraphs (1) through (4), and other necessary matters shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 12849, Dec. 23, 2014]
law view
 Article 7 (Trade Involving Third Party)   print
Even when a resident engages in an international trade with a party that is not a foreign related party, Articles 4, 5 and 6-2 shall apply to the international trade, deeming that it is made with a foreign related party, where the trade meets both of the following requirements: <Amended by Act No. 11126, Dec. 31, 2011>
1. The resident and the foreign related party shall have concluded a prior contract (including where a substantial agreement is deemed to have been reached in advance based on evidence related to the relevant trade; hereinafter the same shall apply) for the relevant trade;
2. The actual terms of trade shall be determined by the resident and the foreign related party.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 8 (Recognition, etc. of Setoff Transactions)   print
(1) Even where the price of an international trade is different from the arm's length price, the competent tax authority shall, if the resident has made an agreement with the same foreign related party in advance to set off the difference through another international trade during the same taxable year and the resident proves the details and facts of such trade, apply Articles 4 and 5, treating all international trades set off in such a manner as a single international trade. <Amended by Act No. 11126, Dec. 31, 2011>
(2) In relation to the setoff transactions proved in accordance with paragraph (1), if any of such transactions becomes subject to the taxes withheld under Articles 98, 98-2 and 98-3 of the Corporate Tax Act and Articles 156 and 156-2 of the Income Tax Act, the provisions relevant to the withholding of taxes shall apply to such transaction, assuming that there is no setoff transaction.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 9 (Income Disposition and Tax Adjustment following Income Adjustment)   print
(1) In the application of Article 4 or 6-2, where it is not verified by the evidence that the amount to be included in gains has been returned by a foreign related party to a domestic corporation as prescribed by Presidential Decree, the said amount shall be disposed of as a dividend to the foreign related party or adjusted as an investment, as prescribed by Presidential Decree, notwithstanding Article 67 of the Corporate Tax Act. <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
(2) In relation to the application of paragraph (1), the method of disposition of incomes and other necessary matters shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 10 (Special Cases of Income Computation)   print
(1) Where a Contracting State adjusts a trade price between a resident and a foreign related party by the arm's length price and the mutual agreement procedures thereon have been completed, the competent tax authority may adjust and calculate the income amount and finalized tax amount of the resident for each taxable year pursuant to the relevant agreement. <Amended by Act No. 11126, Dec. 31, 2011>
(2) Matters necessary for the application and methods, etc. for adjustment of the income amount or finalized tax amount under paragraph (1) shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 10-2 (Application for Rectification for Adjustment between Arm's Length Prices for National Taxes and Dutiable Value)   print
(1) Where any difference occurs between the taxable price for customs and the trade price which has been used for calculating the tax base and tax amount of the corporate tax or income tax returned after a taxpayer has submitted his/her corporate tax base or income tax base return to the competent tax authority, due to a disposition for rectification issued by the head of a customs office under Article 38-3 (4) of the Customs Act in connection with a trade to import goods from a foreign related party, the taxpayer may, as prescribed by Presidential Decree, file an application for rectification of the tax base and tax amount of the corporate tax or income tax with the competent tax authority within two months from the date on which he/she has become aware of such disposition for rectification (when he/she has received a notice of such disposition, referring to the receipt date).
(2) Upon receiving an application for rectification under paragraph (1), the competent tax authority may rectify the tax amount where he/she deems that the method of, and grounds for, calculation of the trade price of the relevant imported goods which has been used for calculating the tax base and tax amount of the corporate tax or income tax, in connection with the relevant trade, conform to Article 5. <Newly Inserted by Act No. 12849, Dec. 23, 2014>
(3) Within two months from the date of receiving an application for rectification under paragraph (1), the competent tax authority shall rectify the tax base or tax amount or notify the relevant applicant of the purport that there exist no reason for such rectification. <Amended by Act No. 12849, Dec. 23, 2014>
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
law view
 Article 10-3 (Adjustment of Taxation on International Trade Price)   print
(1) A taxpayer may request the Minister of Strategy and Finance of adjustment between the arm's length price for the national tax and taxable price for customs within 30 days from the date of receiving a notification under Article 10-2 (2) (where no notification is received within two months, from the date on which two months have elapsed). In such cases, the Minister of Strategy and Finance may recommend the tax authority or the head of the customs office to adjust the taxation on trade price and notify the result thereof to the taxpayer within 90 days from the date of receiving the request for adjustment after receiving the plan for fulfilling the recommendation for adjustment from the tax authority or the head of the customs office (in cases of nonfulfillment, including the reason therefor).
(2) Necessary matters concerning the request for adjustment, method of adjustment, etc. under paragraph (1) shall be prescribed by Presidential Decree.
(3) The period from the date of requesting adjustment to the date of receiving a notification shall not be included in the period for request or application provided under Articles 61, 66 and 68 of the Framework Act on National Taxes and Articles 121, 131 and 132 of the Customs Act.
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
law view
 Article 11 (Obligation to Submit Data on International Trades)   print
(1) A taxpayer engaged in international trades with a foreign related party shall submit, to the head of the tax office having jurisdiction over the tax payment place, a specification of such international trades as provided by Ordinance of the Ministry of Strategy and Finance by the deadline for filing a tax return set out in Articles 70, 70-2, 71, 73, and 74 of the Income Tax Act or Articles 60 (1) and 76-17 (1) of the Corporate Tax Act: Provided, That where the taxpayer is unable to submit a specification of international trades by the deadline for filing the tax return due to an inevitable cause prescribed by Presidential Decree, and where the taxpayer applies therefor, the head of the tax office having jurisdiction over the tax payment place may grant approval for the extension of the deadline for such a submission within one year. <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
(2) A tax authority may, as prescribed by Presidential Decree, request a taxpayer to submit related data, such as the computing method of trade prices, etc. as necessary for applying Articles 4, 5, and 6-2.
(3) Any person in receipt of a request for data submission under paragraph (2) shall submit the relevant data within 60 days from the date of receiving the request for data submission: Provided, That where an application for the extension of the deadline for submission is filed due to a justifiable ground provided by Presidential Decree, the competent tax authority may extend just for once up to 60 days.
(4) Where any person in receipt of a request for data submission under paragraph (2) fails to submit the data by the due date without justifiable grounds prescribed by Presidential Decree, and submits the data at the time of applying for appeal or of the mutual agreement procedures, the competent tax authority and related agencies may choose not to use the relevant data as those for taxation.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 11-2 (Provision of Information concerning International Trades)   print
(1) A tax authority may, if necessary for the imposition and collection of taxes and for adjustment between the arm's length price for the national tax and the taxable price for customs relating to an international trade, require the head of the customs office to submit information or data prescribed by Presidential Decree.
(2) The head of a customs office who receives a request under paragraph (1) shall comply with such request unless any justifiable ground exists.
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
law view
 Article 12 (Sanctions for Non-Fulfillment of Obligation to Submit Data)   print
(1) Where any person obligates to submit a specification of international trades under Article 11 (1), or has been requested to submit data under Article 11 (2) fails to submit such data by the due date without any justifiable grounds prescribed by Presidential Decree or submits false data, he/she shall be punished by an administrative fine not exceeding 100 million won. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 12849, Dec. 23, 2014>
(2) The competent tax authority shall levy and collect such administrative fine under paragraph (1) as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 13 (Special Cases of Application of Additional Tax)   print
(1) When applying Articles 4 through 6, 6-2, and 7 through 9, the tax authorities shall not impose additional tax for under-declaration provided for in Article 47-3 of the Framework Act on National Taxes in cases falling under any of the following subparagraphs:
1. Where it is confirmed as a result of mutual agreement procedures that the taxpayer has not made a mistake with regard to the difference between trade price reported and arm's length price (referring to cases where the Commissioner of the National Tax Service determines that the taxpayer has not made a mistake if the arm's length price computation method has been approved without mutual agreement procedures in accordance with the proviso to Article 6 (2));
2. Where the taxpayer keeps and provides data verifying the arm's length price computation method applied in declaring income tax or corporate tax and it is acknowledged that he/she has selected and applied the arm's length price computation method according to reasonable determination.
(2) Whether the taxpayer has made a mistake, or whether the determination is reasonable as provided for in the subparagraphs of paragraph (1) shall be decided by standards prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER III ADJUSTMENT OF TAXATION ON INTEREST PAID TO FOREIGN CONTROLLING SHAREHOLDERS
law view
 Article 14 (Non-Inclusion of Interest Deemed Dividend in Deductible Expenses)   print
(1) Where a domestic corporation (including the domestic business place of a foreign corporation; hereafter the same shall apply in this Chapter) borrows funds from a foreign controlling shareholder (including funds borrowed from a related party to a foreign controlling shareholder prescribed by Presidential Decree, including relatives), or from a third party under a payment guarantee (including the offer, etc. of security to guarantee payments) by the foreign controlling shareholder, and such borrowings exceed two times the amount invested by the relevant foreign controlling shareholder, the interest paid and discount fees on the excess amount shall not be included in deductible expenses of the relevant domestic corporation, but shall be deemed to have been disposed of as a dividend of or an outflow from the domestic corporation pursuant to Article 67 of the Corporate Tax Act as prescribed by Presidential Decree. In such cases, the scope of borrowings and the methods of computing the amount deemed not included in deductible expenses and the amount of investment shall be prescribed by Presidential Decree. <Amended by Act No. 11606, Jan. 1, 2013; Act No. 12849, Dec. 23, 2014>
(2) The multiplier of the borrowings against the amount of investment of the foreign controlling shareholder under paragraph (1) may be separately prescribed by Presidential Decree by business type. <Amended by Act No. 11606, Jan. 1, 2013>
(3) Where a domestic corporation attests that the size and conditions of the borrowings are identical or similar to the ordinary size and conditions of the borrowings among the persons without special relationship, as prescribed by Presidential Decree, paragraphs (1) and (2) shall not apply to the interest and discount fees on the relevant borrowings.
(4) Where a domestic corporation subject to paragraph (1) has withheld at source the income tax and corporate tax for the foreign controlling shareholder on the interest and discount fees paid in each business year, such withheld tax amount shall be offset and adjusted in calculating the income tax or corporate tax on the dividend under paragraph (1).
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 15 (Borrowing Trades Involving Third Party)   print
Where the borrowings by a domestic corporation from a person that is not a foreign controlling shareholder meet both of the following requirements, Article 14 shall apply, deeming such borrowings as those directly borrowed from a foreign controlling shareholder: Provided, That Article 14 shall apply even when it satisfies the requirement of subparagraph 2 if a domestic corporation has borrowed funds from a foreign related party that is not a foreign controlling shareholder: <Amended by Act No. 11126, Dec. 31, 2011>
1. The relevant domestic corporation and the foreign controlling shareholder shall have concluded a prior contract;
2. The actual conditions of borrowings shall be determined by the relevant domestic corporation and the foreign controlling shareholder.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 16 (Application Order of Non-Inclusion of Paid Interest in Deductible Expenses)   print
(1) Article 14 shall take precedence over Article 4 of this Act and Article 28 of the Corporate Tax Act.
(2) In the application of Article 14, if there exist different interest or discount fees whereto separate interest rates apply, the interest or discount fees shall not be included in deductible expenses in order of those subject to a higher interest rate.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER IV ACCUMULATIVE TAXATION OF RETAINED EARNINGS OF SPECIFIC FOREIGN CORPORATIONS
law view
 Article 17 (Specific Foreign Corporations’ Retained Earnings Deemed Dividends)   print
(1) Where a national has invested in a foreign corporation, the head office or principal office of which is located in a state or region in which the tax burden is 15/100 or less of the income actually earned by the corporation, the amount imputable to the national out of the retained earnings distributable as of the end of each business year of a corporation (hereinafter referred to as "specific foreign corporation") having a special relationship (in determining whether it falls under a relationship provided for in Article 2 (1) 8 (a), shares owned directly or indirectly by a related party to a national prescribed by Presidential Decree, including relatives, shall be included) with the national among said foreign corporations, shall be deemed a dividend paid to the national. <Amended by Act No. 11606, Jan. 1, 2013; Act No. 12849, Dec. 23, 2014>
(2) The scope of nationals subject to paragraph (1) shall be those who directly or indirectly own at least 10 percent of the total outstanding stocks or of the total equity investment of a specific foreign corporation as of the end of each business year. In such cases, outstanding stocks or equity investment owned directly by persons prescribed by Presidential Decree among related persons as defined in subparagraph 20 of Article 2 of the Framework Act on National Taxes shall be included in determining 10 percent of the total number of outstanding stocks or of the total equity investment. <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
(3) Paragraph (1) shall apply where the income actually earned by a specific foreign corporation as of the end of each business year is not more than the amount specified by Presidential Decree.
(4) Matters necessary for the scope of income actually earned, non-taxable income and its scope, distributable retained earnings, and computation of the amount deemed a dividend, and method of calculating the stock holding ratio in applying paragraphs (1) and (2) shall be prescribed by Presidential Decree. <Amended by Act No. 11606, Jan. 1, 2013>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 18 (Scope of Application)   print
(1) Where a specific foreign corporation owns fixed facilities required for business activities, such as an office, store, or factory, in a state or region under Article 17 (1), manages, controls or operates business for itself, and engages in its business mainly in such a state or region, Article 17 shall not apply: Provided, That the same shall not apply to either of the following specific foreign corporations: <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
1. A specific foreign corporation that engages in the business of wholesale, financing or insurance, real estate or rental, professional services, scientific and technological services (excluding business of building techniques, engineering and technological services related thereto), or the business of managing business facilities or the business of service support and that satisfies the requirements prescribed by Presidential Decree;
2. A corporation, the primary business of which is to own stocks or bonds, provide intellectual property rights, lease ships, aircraft or equipment, or invest in the investment trusts or funds.
(2) Where a foreign corporation has its place of actual business control in a state or region under Article 17 (1), the tax authority may apply Article 17 to such corporation, deeming that the place of actual business control is its head office or principal business place under Article 17 (1).
(3) In applying paragraph (1) 1, the classification of business type shall be governed by the Korean Standard Industrial Classification publicly notified by the Commissioner of the National Statistical Office under Article 22 of the Statistics Act.
(4) Where a specific foreign corporation that engages in the wholesale business under paragraph (1) 1 sells goods to a person without special relationship that is in the same state or in the same area prescribed by Ordinance of the Ministry of Strategy and Finance (hereinafter referred to as "same state, etc.") and meets the requirements prescribed by Presidential Decree, Article 17 shall not apply. <Amended by Act No. 11606, Jan. 1, 2013>
(5) Where the income earned from the following activities of a specific foreign corporation that is not subject to Article 17 pursuant to the main sentence of paragraph (1) and paragraph (4) fulfills the criteria prescribed by Presidential Decree, such income shall be deemed distributable retained earnings subject to Article 17, as prescribed by Presidential Decree: <Newly Inserted by Act No. 12164, Jan. 1, 2014>
1. Holding stocks or bonds;
2. Providing intellectual property rights;
3. Leasing ships, aircraft or equipment;
4. Investing in investment trusts or funds.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 18-2 (Special Cases of Assumption of Distribution of Dividends from Retained Earnings of Overseas Holding Companies)   print
Where a specific foreign corporation (hereafter referred to as "overseas holding company" in this Article) of which main business is to hold stocks and which owns stocks, etc. issued by any of its affiliated companies (referring to a foreign corporation, the stocks of which are owned by the relevant specific foreign corporation and which meets all the requirements prescribed by Presidential Decree; hereafter the same shall apply in this Article) meets all of the following requirements, Article 17 shall not apply, regardless of whether the corporation carries on its business with a fixed facility, such as office, store, and factory: <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
1. The overseas holding company has owned stocks issued by any of its affiliated company continuously for six months or longer as at the base date of the distribution of the dividends by the relevant affiliated company;
2. The ratio of the total amount of interest income, dividend income and other incomes prescribed by Presidential Decree received by the overseas holding company from any of its affiliated companies having its head office or principal office in the same state, etc. among affiliated companies mentioned in subparagraph 1 to the income (excluding the income generated by actually running a business other than those listed in the subparagraphs of Article 18 (1) with fixed facilities, such as office, store, and factory, and the income generated by disposing of stocks of the affiliated company) of the relevant overseas holding company is equivalent to or more than the ratio prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 19 (Timing, etc. for Imputation of Gains from Dividends)   print
(1) The amount deemed to be a dividend under Article 17 (1) (hereafter referred to as "amount deemed to be a dividend" in this Article) shall be included in a Korean national's gains or dividend income (hereafter referred to as "gains, etc." in this Chapter) for the taxable year on which the sixtieth day after the end of the pertinent business year of the specific foreign corporation falls. <Amended by Act No. 11606, Jan. 1, 2013>
(2) If any tax amount has already been paid to a foreign state when a specific foreign corporation actually distributes a dividend to a Korean national, the amount deemed to be a dividend for the taxable year, which is included in gains, etc. in accordance with paragraph (1), shall be treated as a foreign source income, while the tax amount already paid to a foreign state shall be deemed the one paid to the foreign state in the taxable year during which the amount is included in gains, etc. in accordance with paragraph (1), and Article 57 (1) and (2) of the Corporate Tax Act and Article 57 (1) and (2) of the Income Tax Act shall apply thereto. <Amended by Act No. 11606, Jan. 1, 2013>
(3) In applying Article 57 (4) of the Corporate Tax Act, the amount deemed to be a dividend included in gains, etc. in accordance with paragraph (1) shall be deemed the dividend earned during the taxable year in which it is included in gains, etc. <Amended by Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
(4) Any person who intends to have paragraph (2) applied may file an application for the rectification with the head of the tax office having jurisdiction over the tax payment place as prescribed by Presidential Decree within one year from the deadline for income tax return and corporate tax return of the taxable year in which he/she has actually received dividend.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 20 (Non-inclusion of Actual Dividend, etc. in Gains)   print
(1) Where a specific foreign corporation actually distributes dividends from the relevant retained earnings (including dividends or distribution under Article 16 of the Corporate Tax Act) subsequent to the inclusion of retained earnings of the said corporation in gains, etc. of a Korean national under Article 17 (1), it shall be deemed that such amount is a gain carried forward under subparagraph 2 of Article 18 of the Corporate Tax Act or that it does not fall within the dividend income under Article 17 (1) of the Income Tax Act. <Amended by Act No. 10410, Dec. 27, 2010>
(2) Where the retained earnings of a specific foreign corporation are included in a Korean national's gains, etc. under Article 17 (1) and the said national transfers the stocks of the relevant specific foreign corporation, it shall be deemed that the amount of subparagraph 1 less that of subparagraph 2 (if the relevant amount is below the decimal point, it shall be deemed zero) is a gain carried forward in accordance with paragraph (1) or that it does not fall within the transfer income under subparagraph 3 of Article 118-2 of the Income Tax Act. In such cases, where the amount deemed to be a gain carried forward or not falling within the transfer income exceeds the gains on transfer of the relevant stocks, such amount in excess shall be deemed nonexistent: <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013>
1. The amount equivalent to the total sum of the amounts treated as the dividends on the relevant transferred stocks;
2. The amount of actually distributed dividends on the relevant transferred stocks.
(3) The account books and evidencing documents necessary for calculating the gains, etc. carried forward in accordance with paragraphs (1) and (2) shall be preserved until the lapse of the statutory deadline set for filing a return for the taxable period to which the date of dividend or transfer belongs, notwithstanding Article 85-3 (2) of the Framework Act on National Taxes. <Amended by Act No. 10410, Dec. 27, 2010>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 20-2 (Submission of Materials on Specific Foreign Corporation)   print
A national subject to Article 17, 18, 18-2, 19, or 20 shall submit the following documents to the head of the tax office having jurisdiction over the tax payment place by the deadline for filing a tax return prescribed in Articles 70 and 70-2 of the Income Tax Act or Article 60 of the Corporate Tax Act, as prescribed by Presidential Decree:
1. Financial statements of a specific foreign corporation;
2. A report of corporate tax and supplementary documents of a specific foreign corporation;
3. A detailed statement on calculation of retained earnings of a specific foreign corporation;
4. Other documents prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 12164, Jan. 1, 2014]
CHAPTER V SPECIAL CASE OF GIFT TAX ON OVERSEAS GIFT
law view
 Article 21 (Special Cases of Gift Tax on Overseas Gift)   print
(1) Where a resident donates any piece of overseas property (excluding overseas property among the property referred to in Article 2 (1) 2 of the Inheritance Tax and Gift Tax Act) to a nonresident (excluding a donation that takes effect by death of a donor), the donor shall be obligated to pay the gift tax pursuant to this Act: Provided, That where the donee is not a related person defined in subparagraph 20 of Article 2 of the Framework Act on National Taxes and gift tax (including any tax having the nature substantially identical thereto) is levied on the relevant property (including tax exemptions) pursuant to the statues of a foreign state, such donor is exempt from the obligation to pay gift tax. <Amended by Act No. 11606, Jan. 1, 2013; Act No. 12849, Dec. 23, 2014>
(2) For the purpose of the main body of paragraph (1), the value of donated property shall be based on its market price reflecting the current situations at the time of such donation in the state wherein the donated property is located, but the matters concerning the computation of such market price shall be prescribed by Presidential Decree: Provided, That where it is impracticable to compute a market price, it shall be computed by the method specified by Presidential Decree, considering the type, scale, and trade situations of the relevant property. <Amended by Act No. 12849, Dec. 23, 2014>
(3) For the purpose of the main body of paragraph (1) and paragraph (2), where gift tax has been paid pursuant to the statutes of a foreign state, the amount equivalent to the gift tax so paid shall be deducted from the calculated amount of gift tax, as prescribed by Presidential Decree. <Newly Inserted by Act No. 12849, Dec. 23, 2014>
(4) Articles 2, 47, 53, 56 through 58, 68, 69 (2), 70 through 72, and 76 of the Inheritance Tax and Gift Tax Act shall apply mutatis mutandis where gift tax is levied pursuant to paragraph (1). <Amended by Act No. 11126, Dec. 31, 2011>
(5) The resident referred to in paragraph (1) includes a non-profit corporation which has its head office or principal office in the Republic of Korea, and the nonresident includes a non-profit corporation which has no head office or principal office in the Republic of Korea. <Newly Inserted by Act No. 11606, Jan. 1, 2013>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER VI MUTUAL AGREEMENT PROCEDURES
law view
 Article 22 (Conditions for Commencing Mutual Agreement Procedures)   print
(1) Any national, resident, or domestic corporation of the Republic of Korea, any nonresident or any foreign corporation (limited to a nonresident or a foreign corporation having the business place in Korea) may apply for commencing the mutual agreement procedures as prescribed by Presidential Decree, to a person falling under any of the following subparagraphs:
1. The Minister of Strategy and Finance where it is necessary to consult with a Contracting State on the application and interpretation of a tax treaty;
2. The Commissioner of the National Tax Service where any taxation has been or is likely to be assessed by the tax authorities of a Contracting State, that is not coinciding with the provisions of a tax treaty;
3. The Commissioner of the National Tax Service where a tax adjustment is needed under a tax treaty between the Republic of Korea and a Contracting State.
(2) The Minister of Strategy and Finance or the Commissioner of the National Tax Service shall, upon receipt of an application for commencing the mutual agreement procedures under paragraph (1), request the competent authorities of the Contracting State to commence the mutual agreement procedures, and notify the applicant of the fact of such re- quest, except for the cases falling under any of the following subparagraphs:
1. Where the final decision has been made by a domestic or foreign court;
2. Where the application has been filed by an ineligible person under the tax treaty;
3. Where it is recognized that the taxpayer intends to utilize the mutual agreement procedures for the purpose of tax evasion;
4. Where the application has been filed after the lapse of three years from the date on which the taxation became known to the applicant.
(3) The Commissioner of the National Tax Service shall, upon receipt of the application under paragraph (1), report to the Minister of Strategy and Finance, and the said Minister may, if necessary, give an instruction as to the mutual agreement procedures.
(4) The Minister of Strategy and Finance may, where falling under paragraph (1) 1, request ex officio the competent authorities of the Contracting State to commence the mutual agreement procedures.
(5) The Commissioner of the National Tax Service may, where falling under paragraph (1) 2 and 3, request ex officio the competent authorities of the Contracting State to commence the mutual agreement procedures. In such cases, paragraph (3) shall apply mutatis mutandis.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 23 (Commencing and Closing Dates of Mutual Agreement Procedures)   print
(1) The commencing date of the mutual agreement procedures shall be the date falling under one of the following subparagraphs:
1. Where a request for commencing the mutual agreement procedures is filed by the competent authorities of a Contracting State, the date on which an intent to accept such request is notified to the competent authorities of the Contracting State;
2. Where a request for commencing the mutual agreement procedures is forwarded to the competent authorities of a Contracting State, the date on which an intent to accept such request is received from the competent authorities of the Contracting State.
(2) The closing date of the mutual agreement procedures shall be the date on which an agreement is reached in writing between the competent authorities of the Republic of Korea and a Contracting State: Provided, That where no mutual agreement is reached, the closing date of the mutual agreement procedures shall be the date on which five years elapse from the date next to that of commencing them.
(3) Where an agreement is reached on the maintenance of the mutual agreement procedures between the competent authorities of the Re- public of Korea and a Contracting State, the mutual agreement procedures shall not be closed notwithstanding the proviso to paragraph (2). In such cases, the closing date of the mutual agreement procedures shall be fixed within eighty ears beginning with the date following the commencing date thereof.
(4) Where the final decision is made by a court in the course of progressing the mutual agreement procedures, the date of the relevant final decision shall be the closing date of the mutual agreement procedures.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 24 (Special Cases of Application of Appeal Period and Deferment of Collection, etc.)   print
(1) Where the mutual agreement procedures have commenced, the period from the commencing date to the closing date of the mutual agreement procedures shall not be included in the period for request provided under Articles 56 (3), 61, and 68 of the Framework Act on National Taxes and Article 119 of the Framework Act on Local Taxes, and in the period for making a decision provided under Articles 65 and 81 of the Framework Act on National Taxes and Article 123 of the Framework Act on Local Taxes. <Amended by Act No. 10219, Mar. 31, 2010>
(2) The head of the tax office having jurisdiction over the tax payment place or the head of the local government may, where the mutual agreement procedures have commenced before a notice of the payable tax amount, either defer a notice of the tax amount or notify an installment payment of final tax amount, no later than the end of the mutual agreement procedures. In such cases, the head of the tax office having jurisdiction over the tax payment place or the head of the local government shall notify the payable tax amount within 30 days from the date next to the closing date of the mutual agreement procedures.
(3) The head of the tax office having jurisdiction over the tax payment place or the head of the local government may, where the mutual agreement procedures have commenced after the tax payment notice or the urge thereof is served, either defer the collection of tax amount or defer the seizure of properties due to the disposition for arrears or the sales of seized properties. In such cases, the head of the tax office having jurisdiction over the tax payment place or the head of the local government shall set a new payment term, and collect the deferred tax amount, within 30 days from the date next to the closing date of the mutual agreement procedures.
(4) Paragraphs (2) and (3) shall apply only where a Contracting State also allows the deferment of tax collection and of disposition for arrears, in the course of progressing the mutual agreement procedures.
(5) The head of the tax office having jurisdiction over the tax payment place or the head of the local government shall, where he/she allows the deferment of tax collection or of disposition for arrears under paragraph (3), additionally collect the amount equivalent to the interest for the said period as calculated, as prescribed by Presidential Decree.
(6) Any person who intends to have paragraphs (2) and (3) applied shall file an application for applying the special case of deferment of tax collection or of disposition for arrears with the head of the tax office having jurisdiction over the tax payment place or the head of the local government as prescribed by Presidential Decree.
(7) Where any of the deferment of notification, notice of installment payment, deferment of tax collection, or deferment of disposition for arrears (hereafter referred to as "deferment, etc. of notice" in this paragraph), is applied to the income tax amount or corporate tax amount under para- graph (2) or (3), the relevant deferment, etc. of notice shall also be applied, as it stands, to the local tax amount to be levied to the relevant income tax amount or corporate tax amount without going through any separate procedure as provided in this Article. In such cases, the Commissioner of the National Tax Service shall, as prescribed by Presidential Decree, notify the head of the local government of the fact of deferment, etc. of notice.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 25 (Special Cases of Exclusion Period for Imposition)   print
(1) Where the mutual agreement procedures agreed upon with a Contracting State are commenced, no national taxes shall be imposed after the end of the period of one year from the date following the closing date of the mutual agreement procedures and of the period provided under Article 26-2 (1) of the Framework Act on National Taxes, whichever comes later.
(2) Where the mutual agreement procedures agreed upon with a Contracting State are commenced, no local taxes shall be imposed after the end of the period of one year from the date following the closing date of the mutual agreement procedures and of the period provided under Article 38 (1) of the Framework Act on Local Taxes, whichever comes later. <Amended by Act No. 10219, Mar. 31, 2010>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 26 (Taxpayer's Obligation to Cooperate)   print
(1) The Minister of Strategy and Finance or the Commissioner of the National Tax Service may request the taxpayer who has applied for a commencement of the mutual agreement procedures to submit the documents necessary for proceeding the mutual agreement procedures.
(2) The Minister of Strategy and Finance or the Commissioner of the National Tax Service may terminate ex officio the mutual agreement procedures where the taxpayer fails to cooperate faithfully for a request for submission of documents under paragraph (1). In such cases, the closing date of the mutual agreement procedures shall be the date on which the applicant is notified of the termination of such procedures.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 27 (Enforcement of Terms and Conditions Mutually Agreed Upon)   print
(1) The Commissioner of the National Tax Service shall, where the mutual agreement procedures are closed, report the terms and conditions mutually agreed upon to the Minister of Strategy and Finance.
(2) The Minister of Strategy and Finance or the Commissioner of the National Tax Service shall, where the mutual agreement procedures are closed, notify the tax authorities, heads of the local governments, Director of the Tax Tribunal, other relevant agencies, and the applicant for the commencement of the mutual agreement procedures of the terms and conditions mutually agreed upon within 15 days from the day next to the closing date of the mutual agreement procedures. In such cases, the Minister of Strategy and Finance may publicly notify the contents of such agreement reached. <Amended by Act No. 11126, Dec. 31, 2011>
(3) A tax authority or the head of a local government shall make a levying disposition, revised decision, or other necessary actions under the tax laws, pursuant to the terms and conditions mutually agreed upon.
(4) Where a final decision has been made by a court after the conclusion of the mutual agreement procedures, and the contents of such final decision are different from the terms and conditions mutually agreed upon, the said mutual agreement shall be deemed nonexistent from the beginning.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 27-2 (Extended Application, etc. of Terms and Conditions Mutually Agreed Upon)   print
(1) Upon receiving an application from a person who had filed an application for the commencement of the mutual agreement procedures after the mutual agreement was concluded, for applying the terms and conditions mutually agreed upon to transactions between the applicant and a related party who resides in any country, other than the country bound by the mutual agreement, within three years from the date when the notice of conclusion of the mutual agreement is delivered, as prescribed by Presidential Decree, the head of a tax authority or a local government may apply the terms and conditions mutually agreed upon to the transactions with the related party who resides in any country, other than the country bound by the mutual agreement, if all the following requirements are met: <Amended by Act No. 11126, Dec. 31, 2011>
1. The transactions are of the same type as the one upon which the terms and conditions were mutually agreed;
2. Taxes have been levied in the same manner as stipulated in the terms and conditions mutually agreed upon;
3. Other requirements prescribed by Presidential Decree shall be met.
(2) Article 27 shall apply mutatis mutandis to the extended application of the terms and conditions mutually agreed upon in accordance with paragraph (1) to a related party who resides in any country, other than the country bound by the mutual agreement. <Amended by Act No. 11126, Dec. 31, 2011>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER VII INTERNATIONAL COOPERATION IN TAX AFFAIRS
law view
 Article 28 (Preferential Application of Income Classification under Tax Treaty)   print
In the classification of a domestic source income of a nonresident or a foreign corporation, the provisions of tax treaty shall be preferentially applied, notwithstanding Article 119 of the Income Tax Act and Article 93 of the Corporate Tax Act.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 29 (Special Cases to Application of Tax Rates on Interest, Dividends and Royalties)   print
(1) With respect to interest, dividends or royalties on intellectual property, etc. (where any income generated from the rental of machinery, facility, equipment, etc. for industry, commerce or science provided for in subparagraph 4 of Article 119 of the Income Tax Act and subparagraph 4 of Article 93 of the Corporate Tax Act is classified as royalty on intellectual property under a tax treaty, including such royalty) which is a domestic source income of a nonresident or foreign corporation under a tax treaty, the limited tax rate provided under the tax treaty or any tax rate specified below, whichever is lower, shall apply: Provided, That where Article 156-4 (1) of the Income Tax Act or Article 98-5 (1) of the Corporate Tax Act is applicable, the tax shall be withheld in accordance with Article 156-4 (1) of the Income Tax Act or Article 98-5 (1) of the Corporate Tax Act. In such cases, the limited tax rate provided under the tax treaty or any tax rate specified below, whichever is lower, shall apply when the tax base and tax amount are modified pursuant to Article 156-4 (3) of the Income Tax Act or Article 98-5 (3) of the Corporate Tax Act: <Amended by Act No. 9924, Jan. 1, 2010; Act No. 10221, Mar. 31, 2010; Act No. 11606, Jan. 1, 2013; Act No. 12153, Jan. 1, 2014>
1. Where local income tax is not included in taxes subject to the tax treaty, the tax rate prescribed in Article 156 (1) 3 of the Income Tax Act or Article 98 (1) 3 of the Corporate Tax Act;
2. Where local income tax is included in taxes subject to the tax treaty, the tax rate computed by reflecting ten percent of the income tax withheld under Article 103-18 (1) of the Local Tax Act or ten percent of the corporate tax withheld under Article 103-52 (1) of the same Act in the tax rate prescribed in Article 156 (1) 3 of the Income Tax Act or Article 98 (1) 3 of the Corporate Tax Act.
(2) Where a Contracting State requests residents or domestic corporations to furnish resident certificates for the application of the limited tax rates, the tax authorities may issue the relevant certificates, as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 30 (Entrustment of Tax Collection)   print
(1) The head of a tax office having jurisdiction over the tax payment place or the head of a local government may request that the Commissioner of the National Tax Service to ask a Contracting State to take measures necessary for the tax collection when it is deemed inevitable that the Contracting State collects the payable taxes due to the difficulty of tax collection in Korea.
(2) The Commissioner of the National Tax Service may, upon receipt of a request under paragraph (1), entrust the competent authority of the Contracting State with the collection of the relevant taxes, as prescribed by Presidential Decree.
(3) The Minister of Strategy and Finance or the Commissioner of the National Tax Service may, where he/she is entrusted by the competent authority of a Contracting State under tax treaties with the collection, in the Republic of Korea, of the taxes payable to the Contracting State, have the head of a tax office having jurisdiction over the tax payment place collect such taxes by referring to the practices of collection of national taxes, as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 31 (Exchange of Tax and Financial Information)   print
(1) The competent authority may obtain tax information required for the imposition and collection of taxes, review of tax appeals, and criminal prosecution as well as tax information generalized in terms of international practices to the extent that it does not conflict with other Acts and may exchange such information with a Contracting State. <Amended by Act No. 10410, Dec. 27, 2010>
(2) Where the competent authority of a Contracting State demands financial information (referring to information or data relating to the details of financial transactions as defined in subparagraph 3 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality; hereafter the same shall apply in this Article) on a nonresident or domestic corporation, or nonresident or foreign corporation under a tax treaty, the competent authority may request a specific branch (referring to the head of a financial company, etc. in cases of an en bloc inquiry under Article 83 (1) of the Inheritance Tax and Gift Tax Act and where the information requested by the competent authority of a Contracting State is a group that is unable to specify the personal information of a title holder related to the specific financial transaction) of a financial company, etc. (referring to a financial company, etc. as defined in subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality; hereinafter the same shall apply) to offer any financial information described below, notwithstanding Article 4 of the Act on Real Name Financial Transactions and Confidentiality, and a staff member of the financial company, etc. so requested shall not reject such request: <Amended by Act No. 10410, Dec. 27, 2010; Act No. 10854, Jul. 14, 2011; Act No. 11606, Jan. 1, 2013; Act No. 12164, Jan. 1, 2014>
1. Financial information falling under taxation materials to be submitted in accordance with tax-related Acts;
2. Financial information necessary to verify inheritance or gift property;
3. Financial information necessary for the competent authority of a Contracting State to verify any data sufficient to prove suspicion of tax dodging;
4. Financial information necessary to make inquiries into the property of a delinquent taxpayer of a Contracting State;
5. Financial information required by the competent authority of a Contracting State due to a cause falling under any subparagraph of Article 14 (1) of the National Tax Collection Act.
(3) If necessary for the regular exchange of financial information with a Contracting State on the principle of reciprocity under a tax treaty, a competent authority may request the head of a financial company, etc. to provide financial information, such as details of financial transactions of residents, domestic corporations, nonresidents, foreign corporations, etc. necessary for the imposition and collection of taxes and tax management by the Contracting State, notwithstanding Article 4 of the Act on Real Name Financial Transactions and Confidentiality. In such cases, a staff member of the financial company, etc. shall provide such financial information, as prescribed by Presidential Decree. <Newly Inserted by Act No. 11606, Jan. 1, 2013; Act No. 12164, Jan. 1, 2014>
(4) No tax payer that is related to the information subject to exchange with a Contracting State under paragraphs (1) through (3) shall unreasonably obstruct or delay the exchange of tax or financial information. <Newly Inserted by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013>
(5) Any person that works for a financial company, etc. shall refuse to offer financial information, if he/she is requested so, in violation of paragraph (2) or (3). <Amended by Act No. 10410, Dec. 27, 2010; Act No. 10854, Jul. 14, 2011; Act No. 11606, Jan. 1, 2013>
(6) No person that has learned of financial information in accordance with paragraph (2) or (3) shall offer or divulge such information to any person other than the competent authority of a Contracting State or use such information for purposes other than the prescribed ones, and no person shall request any person that has learned of financial information to offer such financial information. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013>
(7) No person that has obtained the financial information offered or divulged, in violation of paragraph (2), (3) or (6), shall offer or divulge such financial information to any other person, where he/she becomes aware of the violation. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013>
(8) Notwithstanding paragraph (2), the competent authority may place limitation on the offer of financial information to a Contracting State on the principle of reciprocity. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013>
(9) The head of a financial company, etc. that is responsible for providing financial information under paragraph (3) may request the counter-party to a financial transaction to submit data necessary to confirm personal information, etc. pursuant to the tax treaty. <Newly Inserted by Act No. 12164, Jan. 1, 2014>
(10) Detailed matters concerning the exchange of tax information under paragraph (1) and the exchange of financial information under paragraphs (2) and (3), and the confirmation of personal information under paragraph (9) shall be prescribed by Presidential Decree. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013; Act No. 12164, Jan. 1, 2014>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 31-2 (Penalty Provisions)   print
(1) Any person who violates Article 31 (5) through (7) or 36 shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding thirty million won. <Amended by Act No. 10410, Dec. 27, 2010; Act No. 11606, Jan. 1, 2013>
(2) The penalty of imprisonment with labor and of a fine under paragraph (1) may be imposed concurrently.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 31-3 (Administrative Fines)   print
(1) Where any financial company, etc. requested to provide financial information under Article 31 (2) or (3) fails to provide it without justifiable grounds or provides false financial information, the financial company, etc. shall be punished by an administrative fine not exceeding 30 million won. <Amended by Act No. 12164, Jan. 1, 2014>
(2) An administrative fine under paragraph (1) shall be imposed and collected by the competent authority, as prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
law view
 Article 32 (Cooperation in Tax Audit)   print
(1) The competent authority may, where a tax audit is deemed required on a transaction with a person to whom a tax treaty shall apply, conduct a tax audit on such transaction concurrently with a Contracting State, or dispatch tax officials to a Contracting State in order to directly conduct a tax audit or to participate in the tax audit by the Contracting State. <Amended by Act No. 11126, Dec. 31, 2011>
(2) Where a Contracting State requests his/her cooperation in a tax audit under a tax treaty, the competent authority may accept such request. <Amended by Act No. 11126, Dec. 31, 2011>
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
law view
 Article 33 (Enforcement of Tax Treaty)   print
Matters necessary for the enforcement of a tax treaty shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 9914, Jan. 1, 2010]
CHAPTER VIII REPORT ON OVERSEAS FINANCIAL ACCOUNT
law view
 Article 34 (Report on Overseas Financial Account)   print
(1) Any person or corporation, among residents and domestic corporations holding an overseas financial account opened at an overseas financial company, whose remaining balance of account (referring to the total of remaining balance of each account, if he/she or it holds a plural number of accounts) on any last day of a month of the relevant year exceeds the amount prescribed by Presidential Decree during the concerned year (hereafter referred to as "person liable to report" in this Chapter) shall file a report on each of the following information (hereafter referred to as "information on overseas financial account" in this Chapter) with the head of the tax office having jurisdiction over the tax payment place from June 1 to 30 of the following year: <Amended by Act No. 11606, Jan. 1, 2013>
1. Information on the identity of the account holder, such as name, address, etc.;
2. Information on the account held, such as account number, name of the financial company, the highest amount of the remaining balance of the account on the last day of each month;
3. Information on a person related to the overseas financial account under paragraph 4.
(2) "Overseas financial company" in paragraph (1) means a financial company prescribed by Presidential Decree, which is located in an overseas country (including an overseas business place of a domestic corporation, but excluding a domestic business place of a foreign corporation) and engages in the business of finance, insurance, pension, or service related to the financial or insurance business or any other business similar thereto. <Amended by Act No. 11606, Jan. 1, 2013>
(3) "Overseas financial account" in paragraph (1) means any of the following accounts, which is opened for financial transactions with an overseas financial company (including financial transactions as defined in subparagraph 3 of Article 2 of the Act on Real Name Financial Transactions and Confidentiality and transactions similar thereto): <Amended by Act No. 11606, Jan. 1, 2013>
1. An account opened in connection with banking services under Article 27 of the Banking Act;
2. An account opened for transaction of securities as defined in Article 4 of the Financial Investment Services and Capital Markets Act and overseas securities similar thereto;
3. An account opened for transaction of derivatives as defined in Article 5 of the Financial Investment Services and Capital Markets Act and overseas derivatives similar thereto;
4. An account, other than those prescribed in subparagraph 1 through 3, which is opened in the name of an overseas financial company for other financial transactions.
(4) Any person related to an overseas financial account under Article 1 (referring to the nominal and actual owner of an account in cases of an account, etc. among the overseas financial accounts whose nominal holder and actual owner are different, and each of respective persons under a joint name in cases of a joint checking account) shall be deemed to hold a relevant account, respectively.
(5) Where a person liable to report falls under any of the following subparagraphs, he/she shall be exempted from the reporting obligation: <Amended by Act No. 10854, Jul. 14, 2011; Act No. 11126, Dec. 31, 2011; Act No. 11606, Jan. 1, 2013>
1. A foreign resident under the proviso to Article 3 (1) of the Income Tax Act or a Korean national residing abroad as defined in subparagraph 1 of Article 2 of the Act on the Immigration and Legal Status of Overseas Koreans in whose case the total period of having a residence in the Republic of Korea from two years before the end of the relevant year subject to report is not more than one year (in such cases, the method of calculating the period having a residence in the Republic of Korea shall be as prescribed by Presidential Decree);
2. The State, a local government, or public institution under the Act on the Management of Public Institutions;
3. A financial company, etc.;
4. A person who meets the requirements prescribed by Presidential Decree, including a case where the confirmation of information on his/her overseas financial account becomes available through a report by another person under a joint name, etc. among the persons related to overseas financial accounts pursuant to paragraph (4);
5. An institution prescribed by Presidential Decree, subject to the management and supervision by the State under other statues.
(6) Matters necessary for a report on overseas financial account, such as standards for determining a person liable to report, calculating the remaining balance of the account held, method of report, etc. shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 10410, Dec. 27, 2010]
law view
 Article 34-2 (Penalty Provisions Applicable to Non-Fulfillment of Obligation to Report on Overseas Financial Accounts)   print
(1) Where the amount on which a person liable to report on information on his/her overseas financial account under Article 34 (1) fails to report within the reporting deadline, or the under-reported amount (hereafter referred to as "amount in violation of the liability to report" in this Chapter) exceeds five billion won, he/she shall be punished by imprisonment with labor for up to two years, or by a fine not exceeding 20 percent of the amount in violation of the liability to report: Provided, That the same shall not apply where justifiable grounds exist. <Amended by Act No. 12164, Jan. 1, 2014; Act No. 12849, Dec. 23, 2014>
(2) Imprisonment with labor and a fine referred to in paragraph (1) may be imposed concurrently.
(3) Where a person is punished under paragraph (1), no administrative fine under Article 35 (1) shall be imposed. <Amended by Act No. 12164, Jan. 1, 2014>
(4) Where a representative of a domestic corporation, or an agent, employee or other servant of a domestic corporation or resident commits a violation under this Article in connection with the duties of the domestic corporation or resident, not only shall such violator be punished, but also the domestic corporation or resident shall be punished by a fine prescribed in this Article: Provided, That same shall not apply where such domestic corporation or resident has not been negligent in giving due attention and supervision concerning the relevant duties to prevent such violation.
[This Article Newly Inserted by Act No. 11606, Jan. 1, 2013]
law view
 Article 34-3 (Explanation about Source of Amount in Violation of Obligation to Report on Overseas Financial Accounts)   print
(1) If a resident that has obligation to report on the information on his/her overseas financial account under Article 34 (1) fails report thereon within the period for report or under-reports it, the head of head of a tax office having jurisdiction over the tax payment place may request him/her to explain the source of amount in violation of the obligation to report.
(2) Upon receipt of a request to submit the explanation under paragraph (1), the relevant person that has obligation to report shall submit in a manner prescribed by Presidential Decree within 90 days after receipt of the notification (hereafter referred to as "period for explanation" in this paragraph): Provided, That where a person that has obligation to report requests an extension of the period for explanation due to any extenuating circumstances prescribed by Presidential Decree, such as the collection and preparation of data requires considerable time, the head of a tax office having jurisdiction over the tax payment place may extend the period up to 60 days only on one occasion.
(3) Paragraphs (1) and (2) shall not apply where a person that has obligation to report files a report on a modification or files a report after the time limit under Article 37 (excluding where he/she files a report, foreknowing the intent of the tax authorities to impose an administrative fine).
[This Article Newly Inserted by Act No. 12164, Jan. 1, 2014]
law view
 Article 35 (Administrative Fines for Non-Fulfillment, etc. of Liability to Report on Overseas Financial Accounts)   print
(1) Where a person liable to report under Article 34 (1) fails to report on his/her overseas financial account or under-reports within the reporting deadline, an administrative fine equivalent to the amount not exceeding 20 percent of the amount calculated in accordance with the following subparagraphs shall be imposed: <Amended by Act No. 12849, Dec. 23, 2014>
1. Where a person fails to report: The amount not reported;
2. Where a person under-reports; The difference between the amount actually reported and the amount that should have been reported.
(2) If a person liable to report fails to submit an explanation or submits a false explanation as prescribed in Article 34-3 (2), he/she shall be punished by an administrative fine equivalent to 20 percent of the amount which has not been explained or falsely explained: Provided, That no administrative fine shall be imposed where any justifiable ground prescribed by Presidential Decree, such as a natural disaster, exists. <Newly Inserted by Act No. 12164, Jan. 1, 2014; Act No. 12849, Dec. 23, 2014>
(3) Administrative fines under paragraphs (1) and (2) shall be levied and collected by the tax authorities, as prescribed by Presidential Decree. <Amended by Act No. 11126, Dec. 31, 2011; Act No. 12164, Jan. 1, 2014>
[This Article Newly Inserted by Act No. 10410, Dec. 27, 2010]
law view
 Article 36 (Confidentiality of Information on Overseas Financial Account)   print
(1) No tax official shall offer or divulge the information on overseas financial accounts to other persons or use it for purposes other than the intended use: Provided, That he/she may provide the information on overseas financial accounts within the limit of the purpose of use in cases falling under any of the subparagraphs of Article 81-13 (1) of the Framework Act on National Taxes.
(2) No person who learned the information on overseas financial accounts under paragraph (1) shall offer or divulge it to other persons or use it for purposes other than the intended use.
[This Article Newly Inserted by Act No. 10410, Dec. 27, 2010]
law view
 Article 37 (Report on Modification of Overseas Financial Accounts and Report after Time Limit)   print
(1) A person who has filed a report on information on overseas financial account within the time limit for report prescribed in Article 34 (1) but has under-reported the amount thereof may file a report on the modification of the information on overseas financial account before a tax authority imposes an administrative fine under Article 35 (1). <Amended by Act No. 12164, Jan. 1, 2014>
(2) A person who has failed to report information on overseas financial account within the time limit for report prescribed in Article 34 (1) may file a report on information on overseas financial account before a tax authority imposes an administrative fine under Article 35 (1). <Amended by Act No. 12164, Jan. 1, 2014>
(3) Matters necessary for the methods of filing a report on modification of overseas financial account and filing a report after the time limit pursuant to paragraphs (1) and (2) shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 11126, Dec. 31, 2011]
law view
 Article 38 (Special Case of Voluntary Reporting)   print
(1) Notwithstanding the Framework Act on National Taxes and tax law, the Minister of Strategy and Finance may, at the request of the Commissioner of the National Tax Service, set a specific period only on one occasion, and require the nationals who have failed to report the income generated from international trades and overseas and the overseas property (including property acquired through inheritance and donation) to be reported under tax law, within the statutory reporting deadline, or who have under-reported the amount thereof (excluding persons prescribed by Presidential Decree, such as those against whom the relevant tax audit or investigation is being conducted), to report the relevant income and property, and to pay tax amount payable under tax law, as prescribed by Presidential Decree (hereafter referred to as "voluntary reporting system" in this Article).
(2) Persons who have filed voluntary reports under paragraph (1) may be granted a reduction of, or exemption from the additional tax to be imposed under the Framework Act on National Taxes, tax law, or the Foreign Exchange Transactions Act (excluding penalty taxes for insincere payment under Article 47-4 of the Framework Act on National Taxes), as prescribed by Presidential Decree, and may be exempted from the public disclosure of the names.
(3) The Minister of Strategy and Finance and the heads of the relevant central administrative agencies may provide administrative and financial support for the efficient operation of the voluntary report system.
(4) Notwithstanding Article 81-13 of the Framework Act on National Taxes, the Commissioner of the National Tax Service may provide the heads of the relevant central administrative agencies with the information related to the reporting referred to in paragraph (1), as prescribed by Presidential Decree.
(5) Matters necessary for implementing the voluntary reporting system, including procedures and methods therefor, shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 12849, Dec. 23, 2014]
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1996: Provided, That Articles 6, and 14 through 20 shall enter into force on January 1, 1997, but where the taxable year commences on January 1, 1997 in applying Article 6, the application may be filed within one month after the commencement of the said taxable year.
Article 2 (Applicability concerning Computation of Income)
The provisions concerning income in this Act shall be applied to the portion of income first accrued after the enforcement of this Act.
Article 3 (Applicability concerning Deferment of Disposition for Arrears)
The provisions concerning the deferment of disposition for arrears under Article 24 (3) through (6) shall also apply to the cases for which the mutual agreement procedures are in progress as of the enforcement date of this Act.
Article 4 Omitted.
ADDENDA <Act No. 5193, Dec. 30, 1996>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1997.
Articles 2 through 15 Omitted.
ADDENDA <Act No. 5581, Dec. 28, 1998>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1999. (Proviso Omitted.)
Articles 2 through 15 Omitted.
ADDENDA <Act No. 5584, Dec. 28, 1998>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1999. (Proviso Omitted.)
Articles 2 through 19 Omitted.
ADDENDA <Act No. 6299, Dec. 29, 2000>
Article 1 (Enforcement Date)
This Act shall enter into force on September 1, 2001.
Articles 2 and 3 Omitted.
ADDENDA <Act No. 6304, Dec. 29, 2000>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2001.
Article 2 (Applicability concerning Prior Approval, etc. for arm's length Price Computation Method)
The amended provisions of Article 6 shall apply to the portion of applications for approval for an arm's length price computation method first filed after the enforcement of this Act.
Article 3 (Applicability concerning Obligation to Submit Data on International Trades)
The amended provisions of the proviso to Article 11 (1) shall apply to the portion of a taxable year first reported after the enforcement of this Act.
Article 4 (Applicability concerning Computation of Gain from Transfer of Shares,etc. by Specific Foreign Corporation)
The amended provisions of Article 20 (2) shall apply to the portion of first transfer of shares, etc. after the enforcement of this Act.
Article 5 (Applicability concerning Special Taxation of Gift Tax on Over- seas Gift)
The amended provisions of Article 21 (1) shall apply to the portion of first donation after the enforcement of this Act.
Article 6 (Applicability concerning Special Application, etc. of Appeal Period following Mutual Agreement Procedures)
The amended provisions of Article 24 (1) and (7) shall apply to the portion of applications for commencement of the mutual agreement procedures first filed after the enforcement of this Act.
ADDENDA <Act No. 6779, Dec. 18, 2002>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2003.
Article 2 (Applicability concerning Scope, etc. of Special Relationship)
The amended provisions of Articles 2 (1) 8 (d) and 4 (2) shall apply to the trade which is made on or after the enforcement date of this Act.
Article 3 (Applicability concerning Scope of Foreign Controlling Shareholders)
The amended provisions of Article 2 (1) 11 shall apply with respect to the borrowings which are obtained from a foreign controlling shareholder on or after the enforcement date of this Act.
Article 4 (Applicability concerning Relationship with Other Acts)
The amended provisions of Article 3 (2) shall apply to the trade which is made on or after the enforcement date of this Act.
Article 5 (Applicability concerning Trade Involving Third Party)
The amended provisions of Article 7 shall apply to the trade which is made on or after the enforcement date of this Act.
Article 6 (Applicability concerning Non-Deduction, etc. of Interest Deemed Dividend)
The amended provisions of Articles 14 (1) and 16 shall apply to the borrowings which are obtained on or after the enforcement date of this Act.
Article 7 (Applicability concerning Applicable Scope of Tax Haven)
The amended provisions of Article 18 (1) 1 shall apply to the taxable year which begins on or after the enforcement date of this Act.
Article 8 (Applicability concerning Closing Date of Mutual Agreement Procedures)
The amended provisions of Article 23 (3) shall apply to mutual agreement procedures the closing date of which arrives on or after the enforcement date of this Act: Provided, That the amended provisions shall also apply where the competent authorities agree to maintain their mutual agreement though the closing date of the mutual agreement procedures arrives prior to the enforcement date of this Act.
Article 9 (Applicability concerning Exchange of Tax and Financial Information)
The amended provisions of Articles 31 and 31-2 shall apply to the ex- change of information for which a request is made on or after the enforcement date of this Act.
ADDENDA <Act No. 7956, May 24, 2006>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation: Provided, That the amended provisions of Article 29 (1) shall enter into force on July 1, 2006.
Article 2 (General Applicability)
This Act shall be enforceable to the taxable year on which the enforcement date of this Act falls and thereafter.
Article 3 (Applicability concerning Scope of Special Relationships)
The amended provisions of Article 2 (1) 8 (c) and (d) shall be enforceable to the transactions made on or after the enforcement date of this Act.
Article 4 (Applicability concerning Prior Approval on arm's length Price Computation Method)
The amended provisions of Article 6 (3) shall be enforceable to the applications filed after this Act enters into force.
Article 5 (Applicability concerning Tax Adjustment according to Alloted Amount of Arm's Length Cost)
The amended provisions of Article 6-2 shall be enforceable to the agreements made on the cost allotment after this Act enters into force.
Article 6 (Applicability concerning Recognition of Setoff Transactions)
The amended provisions of Article 8 (2) shall be enforceable to the transactions made after this Act enters into force.
Article 7 (Applicability concerning Income Disposition and Tax Adjustment Following Income Adjustment)
The amended provisions of Article 9 shall be enforceable to the income disposition and tax adjustment conducted after this Act enters into force.
Article 8 (Applicability concerning Prerequisites to Mutual Agreement Procedure)
The amended provisions of Article 22 (1) shall be enforceable to the applications filed after this Act enters into force.
Article 9 (Applicability concerning Extended Application of Terms and Conditions Mutually Agreed Upon)
The amended provisions of Article 27-2 shall be enforceable to the applications filed after this Act enters into force.
Article 10 (Applicability concerning Special Exception to Application of Tax Rate on Interest, Dividends, and Royalty)
The amended provisions of Article 29 (1) shall be enforceable to the taxes withheld after this Act enters into force.
ADDENDA <Act No. 8139, Dec. 30, 2006>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2007. (Proviso Omitted.)
Articles 2 through 15 Omitted.
Article 16 (Transitional Measures concerning Amendment of other Acts)
Additional taxes that have been levied or to be levied in accordance with the provisions of tax Acts that fall under any one of the following subparagraphs, before this Act enters into force, shall be governed by the previous provisions of the relevant tax Acts, notwithstanding the relevant provisions of the tax Acts falling under each subparagraph amended pursuant to Article 15 (1) through (7) of the Addenda.
2. through 7. Omitted.
ADDENDA <Act No. 8387, Apr. 27, 2007>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Articles 2 through 9 Omitted.
ADDENDA <Act No. 8852, Feb. 29, 2008>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)
Articles 2 through 7 Omitted.
ADDENDA <Act No. 8860, Feb. 29, 2008>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Articles 2 through 6 Omitted.
ADDENDA <Act No. 9266, Dec. 26, 2008>
(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.
(2) (General Applicability) This Act shall apply beginning from the first taxable year that begins after this Act enters into force.
(3) (Applicability concerning Special Exceptions to Application of Additional Tax) The amended provisions of Article 13 shall apply beginning from the first portion for which tax base and tax amount are rectified after this Act enters into force.
(4) (Applicability concerning Application for Rectification of Tax Amount Paid to Foreign State) The amended provisions of Article 19 (4) shall apply beginning from the first portion for which the rectification of tax base and tax amount is applied after this Act enters into force.
ADDENDA <Act No. 9914, Jan. 1, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Article 2 (Applicability)
This Act shall apply beginning from the first taxable year that begins after this Act enters into force.
ADDENDA <Act No. 9924, Jan. 1, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2010.
Articles 2 through 7 Omitted.
ADDENDA <Act No. 10219, Mar. 31, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2011.
Articles 2 through 11 Omitted.
ADDENDA <Act No. 10221, Mar. 31, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2011.
Articles 2 through 8 Omitted.
ADDENDA <Act No. 10410, Dec 27, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Article 2 (General Applicability)
This Act shall apply to the taxable years commencing on and after this Act enters into force.
Article 3 (Applicability concerning Tax Adjustment according to Arm's Length Price)
The amended provisions of the proviso to Article 4 (1) shall apply to cases where a tax base and tax amount are determined or rectified on and after this Act enters into force.
Article 4 (Applicability concerning Computation of Arm's Length Price)
The amended provisions of Article 5 (1) shall apply to the taxable years in which reports are filed on and after this Act enters into force.
Article 5 (Applicability concerning Prior Approval of Arm's Length Price Computation Method)
The amended provisions of Article 6 (3) shall apply to cases where an approval for computation of arm's length prices is granted on and after this Act enters into force.
Article 6 (Applicability concerning Sanction on Failure of Performing Obligation for Document Submission)
The amended provisions of Article 12 (1) shall apply to cases where a submission of documents is requested on and after this Act enters into force.
Article 7 (Applicability concerning Non-inclusion of Actual Dividend, etc. in Gains)
The amended provisions of Article 20 shall apply to cases where dividends are distributed or stocks are transferred on and after this Act enters into force.
Article 8 (Applicability concerning Exchange of Information on Tax and Finance)
The amended provisions of Article 31 and 31-2 shall apply to information on taxed and fiance exchanged on and after this Act enters into force.
Article 9 (Applicability concerning Report on Overseas Financial Account and Administrative Fines, etc.)
The amended provisions of Articles 34 and 35 shall apply from an overseas financial accounts held in 2010: Provided, That when applying the amended provisions of Article 35, administrative fines equivalent to an amount not exceeding five percent of the amount calculated under each subparagraph are imposed on the overseas financial accounts held in 2010.
ADDENDA <Act No. 10854, Jul. 14, 2011>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)
Articles 2 and 3 Omitted.
ADDENDA <Act No. 11126, Dec. 31, 2011>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation: Provided, That the amended provisions of Articles 10-2 and 10-3 shall enter into force on July 1, 2012.
Article 2 (General Applicability)
This Act shall apply to a taxable year that comes on or after the date this Act enters into force.
Article 3 (Applicability concerning Request for Modification for Adjustment between Arm's Length Price for National Tax and Taxable Price for Customs)
The amended provisions of Article 10-2 shall apply to any modification of customs made on or after the date the amended provisions of Article 10-2 enter into force under the proviso to Article 1 of the Addenda.
Article 4 (Applicability concerning Provision of Information on International Trades)
The amended provisions of Article 11-2 shall apply to the time when a request for provision of information is filed on or after the date this Act enters into force.
Article 5 (Applicability concerning Scope, etc. of Application of Accumulative Taxation of Retained Earnings of Specific Foreign Corporations)
The amended provisions of Articles 18 (1) and 18-2 shall apply beginning with the business year in which the date this Act enters into force falls.
Article 6 (Applicability concerning Public Notification of Results of Mutual Agreement)
The amended provisions of Article 27 (2) shall apply to any mutual agreement reached on or after the date this Act enters into force.
Article 7 (Applicability concerning Administrative Fines)
The amended provisions of Article 31-3 shall apply to any request for financial information on or after the date this Act enters into force.
Article 8 (Applicability concerning Exemption from Obligation to Report Overseas Financial Account)
The amended provisions of Article 34 (5) shall apply to overseas financial accounts held in the year 2011 and afterwards.
Article 9 (Applicability concerning Report on Modification of Overseas Financial Accounts and Report after Time Limit)
The amended provisions of Article 37 shall apply to overseas financial accounts held in the year 2010 and afterwards.
ADDENDA <Act No. 11606, Jan. 1, 2013>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2013.
Article 2 (General Applicability)
This Act shall apply to a taxable year that comes on or after the date this Act enters into force.
Article 3 (Applicability concerning Obligation to Submit Data on International Trades)
The amended provisions of Article 11 (1) shall apply beginning with the taxable year in which the date this Act enters into force falls.
Article 4 (Applicability concerning Scope of Application of Accumulative Taxation of Retained Earnings of Specific Foreign Corporations)
The amended provisions of Articles 18 (1) 1 shall apply beginning with the business year in which the date this Act enters into force falls.
Article 5 (Applicability concerning Special Case of Gift Tax on Overseas Gift)
The amended provisions of Article 21 (1) and (4) shall apply to any donation made on or after the date this Act enters into force.
Article 6 (Applicability concerning Special Exception to Tax Rates on Interest, Dividends and Royalties)
The amended provisions of Article 29 (1) shall apply to the portion of income paid on or after the date this Act enters into force.
Article 7 (Applicability concerning Exchange of Financial Information with Foreign Countries)
The amended provisions of Article 31 (3) through (9) shall apply to the exchange of financial information with a Contracting State on or after the date this Act enters into force.
Article 8 (Applicability concerning Report on Overseas Financial Account)
The amended provisions of Article 34 (1) and (3) shall apply beginning with cases where an overseas financial account held as of the year 2013 is to be reported in the year 2014.
Article 9 (Applicability concerning Penalty Provisions against Nonfulfillment of Obligation to Report Overseas Financial Account)
The amended provisions of Article 34-2 shall apply beginning with cases where an overseas financial account held as of the year 2013 is to be reported in the year 2014.
ADDENDA <Act No. 12153, Jan. 1, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2014. (Proviso Omitted.)
Articles 2 through 19 Omitted.
ADDENDA <Act No. 12164, Jan. 1, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2014: Provided, That the amended provisions of Article 18 (5) shall enter into force on January 1, 2015.
Article 2 (General Applicability)
This Act shall apply from the taxable year under which the enforcement date of this Decree falls.
Article 3 (Applicability to Exchange of Financial Information with Foreign Countries)
The amended provisions of Articles 31 (2) and (3), and 31-3 (1) shall apply from the financial information exchanged with a Contracting State after this Act enters into force.
Article 4 (Applicability to Request for Submission of Data Made by Financial Companies, etc. to Counter-Party to Financial Transactions)
The amended provisions of Article 31 (9) and (10) shall apply beginning with a request made by the head of a financial company, etc. to the counter-party to a financial transaction to submit data necessary to confirm personal information, etc. after this Act enters into force.
Article 5 (Applicability to Explanation about Source of Amount in Violation of Obligation to Report on Overseas Financial Accounts)
The amended provisions of Articles 34-3 and 35 (2) and (3) shall apply beginning with an overseas financial account held as of 2014 year that becomes subject to reporting in 2015 under Article 34.
ADDENDA <Act No. 12849, Dec. 23, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2015.
Article 2 (Period of Validity)
Article 38 will remain in effect until December 31, 2016.
Article 3 (General Applicability)
This Act shall apply starting from the taxable year commencing after this Act enters into force.
Article 4 (Applicability to Sanctions for Non-Fulfillment of Obligation to Submit Data)
The amended provisions of Article 12 (1) shall apply from the first obligation to submit a specification of international trades accruing for the taxable year commencing after this Act enters into force.
Article 5 (Applicability to Special Case of Gift Tax on Overseas Gift)
The amended provisions of Article 21 (1) shall apply from the first donation made after this Act enters into force.
Article 6 (Applicability to Penalty Provisions and Administrative Fines Applicable to Non-Fulfillment of Obligation to Report on Overseas Financial Accounts)
The amended provisions of Articles 34-2 (1), and 35 (1) and (2) shall apply from the first where overseas financial accounts held in the year in which the enforcement date of this Act falls should be reported.