Current

Revised

□ Newly inserted

Article 5 (2)-(3) of the Adjustment of International Taxes Act

Article 4 (4)-(5) of the Enforcement Decree of the Adjustment of International Taxes Act

□ Clarification of criteria for determining commercial rationality when computing arm's length price

ㅇ The tax authorities shall clearly identify the actual details by taking into consideration the commercial and financial relations between a resident and overseas special related party, transaction conditions, etc.

- When identifying the actual details, the contract conditions, the functions that the transaction parties performed, the types and characteristics of goods and services, economic conditions and business strategy shall be considered.

ㅇ If a transaction significantly lacks commercial rationality compared to transactions between independent companies in similar situations, compute the arm's length price after denying the transaction or replacing it with another transaction.

□ Points to consider when determining the commercial rationality of international transactions

ㅇ If an international transaction significantly lacks commercial rationality, compute the arm's length price after denying or reconstructing the transaction