Submission of Statement of International Transactions

Date: December 12,2019

I. Introduction

A taxpayer that conducts internationaltransactions with a foreign related party shall submit the materials which willallow tax authorities to review whether the applied tax base is reasonable. Ifthere is need for evidential documents which will demonstrates whether the taxamount falls into arm's length prices the tax payer shall submit the materialswith details. Otherwise, it is the subject to fines.

II. Submission of Materials of Arm's length Prices

1. Reportson Methods of Computing Arm's Length Prices

(1) Exemption from submission obligation

Submission shall be exempted where the amountof international transactions during the pertinent business year falls under any of the following cases.

1. Where the total amount of transactions of goods does not exceed five billion won andthe total amount of intra-group service transactions does not exceed one billion won.

2. Where the total amount of transactions of goods for each foreign related party doesnot exceed one billion won and the total amount of transactions of services does not exceed 200 million won.

(2) Tips for preparing reports

1. Brieflydescribe what and why the methods of computing arm's length prices on thereport were decided.

2. Wherethe methods of computing arm's length prices were calculated differently basedon foreign related party and goods and services each calculation should be documentedon a separate sheet.

3. Evidential documents for the methods of computing arm's length prices should be archived and where there is a request from the tax authority the documents shall be submitted.

2. Statementof International Transactions

(1) A person who is liable for submission

A taxpayer that conducts international transactions with a foreign related party. (Domestic place of business of domestic corporations & foreign corporations)

1. Where the total amount of transactions of goods with the foreign related party does not exceed one billion won and the total amount of intra-group service transactions does not exceed two hundred million won in the relevant business year;

2. Wheret he total amount of transactions of goods with the foreign related party does not exceed one billion won and the total amount of intra-group service transactions does not exceed two hundred million won in the relevant business year;

3.Submission of Statement of Appointment Adjustment

(1) A person who is liable for submission

A corporation which enters into an agreementwith a foreign related party on a sharing of the cost, expenses, risks tojointly develop or secure intangible property and performs such jointdevelopment in accordance with the agreement.

(2) Tips for preparing the statement

1. The arm's length cost apportionment means an allocated amount applicable or deemed applicable to an agreement that a resident makes with a foreign unrelated party on the apportionment of ordinary cost, expenses, and risks, and the cost, etc. for developing an intangible property, which shall be allocated in proportion to the benefits expected from the intangible property.

2.  Provided, that consideration for using anyi ntangible property owned by the party to the agreement on the sharing of cost,etc. and the interest paid for loans to pay such shared amount shall be excluded from the arm's length cost share.

4. Submissionof a condensed income statement of the foreign related party

(1) A person who is liable for submission

A taxpayer that conducts international transactions with a foreign related party. (Domestic place of business ofdomestic corporations & foreign corporations)

(2) The exemption of submission

1. Where the total amount of transactions of goods with the foreign related party does not exceed one billion won and the total amount of intra-group service transactions does not exceed two hundred million won in the relevant business year;

2. Where a statement of overseas subsidiary and a statement of financial position ofoverseas subsidiary are submitted.

(3) Tips for preparing the statement

The date of the business year in the statementshall be the latest date from when a foreign related party confirmed the settlement of accounts during the pertinent business year and the unit of money shall be “KRW”.

5.Submission of a written report on trade price adjustment.

(1) A person who is liable for submission

Where an actual trade price differs from the arm's length price computed by an arm's length price method, the resident may file a return on the tax base and tax amount adjusted by deeming the arm's length price to be the trade price, and make a request for rectification thereof within any of the following deadlines, along with a written report on trade price adjustment.

(2) Due date

- The deadline for filing a return for corporate tax

- The deadline for filing a revised return pursuant to Article 45 of the framework Act on National Taxes

- The deadline for filing a request for correction pursuant to Article 45-2 (1) of the framework Act on National Taxes

III. Fines

1. Fines for Non-compliance with Obligation ofsubmitting Statement of International Transactions

Where a person fails to submit all or any of the statements of international transactions or submits a false statement of international transactions: 5 million won per each foreign related party.

☞Extension of the deadline

Where a taxpayer is unable to submit a statement of international transactions or a consolidated report on international transaction information by the deadline in extenuating circumstances belong the any of the following, the head of the tax office having jurisdiction over the place for tax payment may extend the deadline for submission by up to 1 year.

1. Where a taxpayer is unable to submit the relevant data due to a fire, disaster,robbery, etc.;

2. Where it is extremely impracticable for a taxpayer to submit the relevant data due toa serious business crisis;

3. Where the relevant books and documents are seized or held provisionally by a competent authority;

4. Where the closing date of the taxable year of a foreign related party has not yet arrived;

5. Where it is impossible for a taxpayer to submit the relevant data by the deadline, as it will take a substantial time to collect and compile such data;

6. Where it is deemed impossible to submit the data by the deadline, on any grounds corresponding to subparagraphs 1 through 5.

2. Fines on a person in receipt of a request tos ubmit data

Tax authorities request tax payers to submitrelated data including omitted documents or items. Where the person in receiptof the request fails to submit all or any of the statements of internationaltransactions or submits a false statement of international transactions he or she is subject to the fine up to KRW 100 million.

 

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