Consolidated report on international transaction information

Date: July 31, 2020

I. Introduction

The consolidated report on international transaction information, one of the recommendations of OECD BEPS (Base Erosion and Profit Shifting) projects, was first introduce in 2015 and came into effect in 2017.

 

II. Types of Reports

(1) Individual business report (Local file)

The report should include organizational structure, details of business, itemization of transactions with his/her foreign related party, information on calculation of the price, and financial status;

 

(2) Consolidated business report (Master file)

The report should include organizational structure, details of business, details of intangible assets, financing activities, and financial status.

 

(3) Country-by-country report (CRBC)

The report should include itemization of profitby country, pre-tax profit or loss by country, amount of tax payment bycountry, capital by country, major business activities by country.

 

III. Submission of Consolidated Reports on International Transaction Information

(1) Individual business report & consolidated business report

A domestic corporation or a foreign corporation having a domestic place of business which meet all of the following criteria:

☞ The total volume of transactions of goods shall exceed 50 billion won

☞ The turnover in the relevant taxable year shall exceed 100 billion won

 

(2) Country-by-country report

A taxpayer classified as follows: He/she shall meet the criteria specified in the relevant item:

☞ A taxpayer determined and publicly notified by the Minister of Strategy and Finance. The turnover on the consolidated financial statements for the immediately preceding taxable year shall exceed one trillion won;

☞ He/she shall not have an obligation to submit a report by country in accordance with the statutes of thecountry in which the foreign controlling stockholder is located;

☞ It shall be impossible to exchange reports by country, due to reasons such as that no tax treaty is concluded with the state in which the foreign controlling stockholder is located.

 

IV. Report Submission

☞ Individual business reports and a consolidated business report: in Korean;

☞Reports by country: in Koreanand English.

 

(1) A consolidated business report may be prepared and submitted in English. In such cases, a Korean version of the consolidated business report shall be additionally submitted within one month after the submission of the English version.

 

(2) A domestic controlling enterprise and a taxpayer who has a foreign controlling stockholder determined and publicly notified by the Minister of Strategy and Finance shall submit the data as those pertaining to the person obligated to submit reports by country to the head of the tax office having jurisdiction over the place for tax within six months from the last day of the month in which the end date of each business year falls.

 

(3) Where a taxpayer who has a foreigncontrolling stockholder fails to submit the data before the expiration of the deadline prescribed in the same paragraph, he/she shall submit reports bycountry within 12 months from the last day of the month in which the end date of the business year falls.

 

 

V. Guidelines, etc. for Assessing Administrative Fines

Any of the following persons who fails to submit data by the deadline without good cause or submits false data shall be subject to an administrative fine not exceeding 100 million won:

1) A person obligated to submit a statement of international transactions or a consolidated report on international transaction information

2) A person in receipt of a request to submit data

 

 

VI. Laws and Regulations

Article 11 (Obligation to Submit Data onInternational Transactions)

(1)      A taxpayer that conducts international transactions with a foreign related partyshall submit a statement of international transactions in the form prescribedby Ordinance of the Ministry of Strategy and Finance (hereinafter referred toas “statement of international transactions”) to the head of the tax office having jurisdiction over the place for tax payment by the deadline for filing a tax return set under Articles 70, 70-2, 71, 73, and 74 of the Income Tax Act orArticles 60 (1) and 76-17 (1) of the Corporate Tax Act.

(2)      A taxpayer, if he/she meets the requirements prescribed by Presidential Decree inthe volume of international transactions with a foreign related party and the turnover there from, shall submit a consolidated business report, individualbusiness reports, and reports by country prescribed by Presidential Decree regarding his/her business activities, the details of transactions, etc.(hereinafter referred to as “consolidated report on international transaction information”) to the head of the tax office having jurisdiction over the place for tax payment within 12 months from the last day of the month in which the end date of the business year under Article 6 of the Corporate Tax Act falls.

(3)      Where a taxpayer is unable to submit a statement of international transactions or a consolidated report on international transaction information by the deadline referred to in paragraph (1) or (2) in extenuating circumstances prescribed by Presidential Decree and files an application to extend such deadline, the head of the tax office having jurisdiction over the place for tax payment may extendthe deadline for submission by up to 1 year.

(4)      For the purposes of Articles 4, 5, and 6-2, the tax authority may request a taxpayer to submit related data, such as the method of computing transaction prices, as prescribed by Presidential Decree.

(5)      A person in receipt of a request to submit data under paragraph (4) shall submit the relevant data within 60 days of receipt of the request: Provided, That where the person files an application to extend the deadline for submission for good cause prescribed by Presidential Decree, the tax authority may extend the deadline by up to 60 days on one occasion only.

(6)      Wherea person in receipt of a request to submit data under paragraph (4) fails to submit data by the deadline without good cause prescribed by Presidential Decree and submits the data at the time of applying for appeal, or of the mutual agreement procedure, the tax authority and related agencies need not use such data for assessing taxes.

(7)      The detailed scope of information to be contained in the statements of international transactions or consolidated reports on international transaction information, the methods and procedures for submitting the same, and other necessary matters, shall be prescribed by Presidential Decree.

 

Article 51 (Guidelines, etc. for Assessing Administrative Fines)

(1)      The guidelines for imposition of administrative fines under Article 12 (1) of the Act shall be as follows:

1.       Wherea person fails to submit all or any of the statements of international transactions under Article 11 (1) of the Act or submits a false statement of international transactions: 5 million won per each foreign related party;

1-2.    Where a person fails to submit all or any of a consolidated business report,individual business reports, and reports by country pursuant to Article 11 (2) of the Act or submits a false individual business report: 30 million won per report;

2.       Where a person fails to submit all or some of the data referred to in Article 19 (1)1 through 5, 7 through 9, 13, and 14 or submits any false data: 50 million won;

3.       Where a person fails to submit all or some of the data referred to in Article 19 (1)6, 10, and 11 or submits any false data: 30 million won;

4.       Where a person fails to submit all or some of the data referred to in Article 19 (1)12 or submits any false data: 70 million won.

(2)      The guidelines for assessing administrative fines under Article 31-4 (1) of the Actare as follows: Provided, That where the head of a finance company, etc. makes a correction by a deadline in accordance with the request for correction made by the competent authority under Article 47 (8), the finance company, etc. maybe exempted from the relevant administrative fine:

1.       Wherea finance company, etc. fails to provide all of the financial information requested by the competent authority or provides any false financial information: 20 million won;

2.       Where a finance company, etc. fails to provide part of the financial information requested by the competent authority: 10 million won.

(3)      The guidelines for assessing administrative fines under Article 35 (1) of the Actare as follows:

1.       Where the amount unreported or under-reported does not exceed 2 billion won: 10/100of the relevant amount;

2.       Where the amount unreported or under-reported is more than 2 billion won but not morethan 5 billion won: 200 million won + 15/100 of an amount exceeding 2 billion won out of the relevant amount;

3.       Where the amount unreported or under-reported exceeds 5 billion won: 650 million won+ 20/100 of the amount exceeding 5 billion won out of the relevant amount.

(4)      An administrative fine computed under paragraphs (1) and (3) and Article 35 (2) ofthe Act may be reduced or increased by up to half thereof, based on theseverity; frequency; motive and consequence; etc. of the relevant violation:Provided, That where increased, the administrative fine shall not exceed themaximum limit on administrative fine under Articles 12 (1), 31-4 (1), and 35(1) and (2) of the Act.

(5)      Wherean administrative fine computed pursuant to paragraphs (3) and (4) falls underany of the following, the amount thereof shall be determined by applying themitigation ratio prescribed in each subparagraph:

1.       Wherea revised report is filed pursuant to Article 37 (1) of the Act after thefiling deadline (hereafter referred to as “filing deadline” in this Article)prescribed in Article 34 (1) of the Act (excluding where a person files suchreport knowing in advance that an administrative fine will be imposed by thetax authority), the ratios in each of the following:

(a)      Where a revised report is filed within six months after its filing deadline: 70/100of the amount of the relevant administrative fine;

(b)      Where a revised report was filed within a period of more than six months but not morethan one year after its filing deadline: 50/100 of the amount of the relevant administrative fine;

(c)      Where a revised report is filed within a period of more than two years but not morethan four years after its filing deadline: 20/100 of the amount of the relevant administrative fine;

(d)      Where a revised report is filed within a period of more than two years but not more than four years after its filing deadline: 10/100 of the amount of the relevant administrative fine;

2.       Where a later report is filed pursuant to Article 37 (2) of the Act after the filing deadline (excluding where a person files such report knowing in advance that an administrative fine will be imposed by the tax authority), the ratios in each of the following:

(a)      Where a later report is filed within one month after its filing deadline: 70/100 ofthe amount of the relevant administrative fine;

(b)      Where a later report is filed within a period of more than one month but not more than six months after its filing deadline: 50/100 of the amount of the relevantadministrative fine;

(c)      Where a later report is filed within a period of more than six months but not more than one year after its filing deadline: 20/100 of the amount of the relevantadministrative fine;

(d)      Where a later report is filed within a period of more than six months but not more than two years after its filing deadline: 10/100 of the amount of the relevant administrative fine.

(6)      When assessing an administrative fine under paragraph (1), a person submitting datafails to submit some of the data due to a minor mistake or makes negligible errors in certain items, the tax authority may decide not to assess the administrative fine after receiving supple mentary materials, and if he/shefails to submit the data referred to in Article 19 (1) 15, it shall not assess the administrative fine.

(7)      When assessing an administrative fine under paragraph (3), if there exists a reasonto believe that a failure of reporting occurs due to a minor mistake, including an error in aggregating the balance of the accounts held, the relevant personmay be exempted from the administrative fine, and an administrative fine to beassessed when an additional account unreported or under-reported has been foundshall be an amount obtained by deducting the administrative fine already assessed from the administrative fine to be assessed on the basis of the total amount unreported or under-reported.

(8)      "Where there exists good cause prescribed by Presidential Decree, such as a natural disaster" referred toin Article 35 (2) of the Act means where it is impossible for a person requiredto report to explain the source of the amount unreported due to an act of God,such as a natural disaster, or situation of the country where the overseas financialaccount is located.

 

 

 

 

 

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