Pillar 2 Dashboard: South Korea

Koreas 2025 Tax Reform Proposal (announced on July 31, 2025), provides that a QDMTT will be applied from January 1, 2026.

Decree of the Ministry of Economy and Finance No. 1114 of March 21, 2025 amending the Enforcement Regulations to the International Tax Adjustment Act.

Presidential Decree 35348 of February 28, 2025 amending the Enforcement Decree to the International Tax Adjustment Act.

On December 31, 2024, Law No. 20612, was published to amend the Global Minimum Tax Act for the 2025 Tax Reform provisions.

On July 25, 2024, the Ministry of Economy and Finance issued the 2024 Tax Law Amendment Bill. This includes a number of amendments to the South Korean global minimum tax law to reflect aspects of the OECD Administrative Guidance.

On March 22, 2024, the Enforcement Regulations to the International Tax Adjustment Act were amended for GloBE adjustments. This includes attachments for the GIR (in English and Korean) and the GloBE Tax Return.

On February 29, 2024, the Enforcement Decree to the International Tax Adjustment Act was amended to reflect aspects of the GloBE rules.

On December 31, 2023, Law 19928 was issued to amend the International Tax Adjustment Act. 

On November 9, 2023, South Korea issued the Preliminary Legislative Notice of Partial Amendment to the Enforcement Decree of the International Tax Mediation Act.

On December 31, 2022, South Korea passed Law 19191 to amend the International Tax Adjustment Act to provide for the Pillar Two Global Minimum Tax from January 1, 2024.

On July 28, 2023, the South Korean government published the Partial Amendment Proposal for the International Tax Adjustment Act, to amend their Pillar Two law to (1) take account of a number of OECD amendments issued in their Administrative Guidance, and (2) delay the implementation of the UTPR until January 1, 2025.

On July 22, 2022, South Korea released a draft law to implement Pillar Two.

South Korea has taken a similar approach to the UK and the EU and has redrafted the OECD Model Rules into its domestic tax legislation. This is different to the approach taken by certain other jurisdictions such as Switzerland, New Zealand and Liechtenstein which propose to transpose the OECD Model GloBE Rules by way of a direct reference.

South Koreas 2025 Tax Reform Proposal (announced on July 31, 2025), provides that a QDMTT will be applied from January 1, 2026.

GLOBE APPLICATION

General

South Korea’s GloBE Law includes an Income Inclusion Rule (which applies the same way as the OECD Model Rules) and an Under-taxed Profits Rule (UTPR). The UTPR (which is called the ‘supplementary income inclusion rule’ in the South Korean law) is included in Article 70 of the revised law.

The UTPR in South Korea was planned to apply from January 1, 2024, however, Law 19928 of December 31, 2023 delayed this until January 1, 2025.

Whilst much of the detail was left outstanding in South Korea’s enacted GloBE Law, Law 19928 expanded on a number of areas and provided for:

– The QDMTT Safe Harbour (Article 70(5) with the details left to a Presidential Decree);

– Excess negative tax expense carry-forwards (Article 69(4));

– Regulation of the transition period for the CbCR Safe Harbour (Article 80);

– Excluding Insurance Investment Entities from the definition of Intermediate Parent Entity and Partially-Owned Parent Entity (Article 61(1));

– Excluding sovereign wealth funds from the definition of Ultimate Parent Entity (Article 61(1)(6)); and

– Transitional Penalty Relief (Article 84, Paragraph 5 and Article 87, Paragraph 4).

The Amended Enforcement Decree enacted on February 29, 2024, takes this one step further by implementing many other aspects of the February and July 2023 OECD Administrative Guidance.

It also provides additional detailed rules of application, as the South Korean GloBE law delegated many of the detailed rules to the Enforcement Decree. 

Whilst the Amended Enforcement Decree fleshes out the remaining aspects of the OECD Model Rules that are not covered in their original GloBE law there were still some aspects that are outstanding. These were addressed in the amended Enforcement Regulation of March 22, 2024.

On December 31, 2024, Law No. 20612, was published to amend the Global Minimum Tax Act for the 2025 Tax Reform provisions. This includes the Transitional UTPR Safe Harbour and a number of other amendments to the GloBE provisions.

The Enforcement Decree No. 35348 of February 28, 2025 and the Decree of the Ministry of Economy and Finance No. 1114 of March 21, 2025 provide for further aspects of the December 2023 and June 2024 OECD Administrative Guidance.

Administrative Guidance

First Set of OECD Administrative Guidance

Aspects of the First Set of OECD Administrative Guidance included in the law/decree/regulation are:

-Sovereign wealth funds and the definition of Ultimate Parent Entity (Article 1.4)

-Forex hedge election (Article 2.2)

-Debt release election (Article 2.4)

-Accrued pension expenses (Article 2.5)

-Covered Taxes on deemed distributions (Article 2.6)

-Excess negative tax carry-forward guidance (Article 2.7)

-Substitute loss carry-forwards (Article 2.8)

-Equity gain or loss inclusion election (Article 2.9)

-Blended CFC Regimes (Article 2.10)

-The extension of the taxable distribution method election to insurance investment entities (Article 3.1)

-Exclusion of Insurance Investment Entities from the definition of Intermediate Parent Entity and Partially-Owned Parent Entity (Article 3.2)

-Restricted Tier One Capital (Article 3.3)

-Portfolio shareholding election (Article 3.5)

-Application of Tax transparency election to Mutual insurance companies (Article 3.5)

-Deferred tax assets with respect to tax credits under Article 9.1.1 (Article 4.1)

-Applicability of Article 9.1.3 to transactions similar to asset transfers (Article 4.2)

-Asset carrying value and deferred taxes under 9.1.3 (Article 4.3)

Second Set of OECD Administrative Guidance

Provisions of the Second Set of OECD Administrative Guidance included in the law/decree/regulation are:

-Currency Conversion Rules

-Tax Credits Guidance (MTTCs)

-SBIE Rules

-Foreign rules

-Leases

-Stock-based compensation

-Impairment losses

-QDMTT Safe Harbour

On December 31, 2024, Law No. 20612, was published to amend the Global Minimum Tax Act for the 2025 Tax Reform provisions. This includes the Transitional UTPR Safe Harbour and a number of amendments to the South Korean global minimum tax law to reflect aspects of the OECD Administrative Guidance from January 1, 2025.

Many of the revisions are minor technical changes (eg slight amendments to the definitions of a Group, PEs and Constituent Entities). Other changes include:

-Providing that the method of calculating consolidated revenue will be provided in a Presidential Decree (to implement a provision in the Third Set of OECD Administrative Guidance (‘AG3’)).

-Providing for an exception to the de-minimis exemption where post-filing adjustments effect eligibility.

-Inclusion of AG3 guidance on JVs for the Transitional CbCR Safe Harbour.

-Reflecting the AG3 guidance and fixing the GIR filing deadline as not before June 30, 2026.

-A new Article 67(4) inserted by Law No. 20612 provides that instead of calculating the total deferred tax adjustment amount, constituent entities can apply 15% of GloBE losses as a deferred tax asset. This applies on a jurisdictional basis to each country of location of the constituent companies (excluding constituent companies to which the special rules for the qualified distribution tax system under Article 78 of the International Tax Adjustment Act apply).

-Article 73(5)/(6) of Law No. 20612 provides for new allocation methods for UTPR top-up taxes. A new allocation method applies in case of nonpayment after applying the designated allocation, e.g., allocating the unpaid tax entirely to the ultimate parent entity if located in Korea.

The Enforcement Decree No. 35348 of February 28, 2025 and the Decree of the Ministry of Economy and Finance No. 1114 of March 21, 2025 provide for further aspects of the June 2024 OECD Administrative Guidance, including:

-Aggregate DTL Category basis (Article 1.2.1);

-Exclusion of certain types of GL accounts and separate tracking (Article 1.2.1);

-Exclusion of GL accounts that generate standalone DTAs (Article 1.2.1);

-Exclusion of swinging accounts and separate tracking (Article 1.2.1);

-FIFO/LIFO Basis (Article 1.2.2);

-Aggregation of Short-term DTLs (Article 1.2.3);

-Reversal of DTLs that accrued before the Transition Year (Article 1.2.2);

-5 year unclaimed accrual election (Article 1.2.2);

-Recalculated deferred tax where GloBE carrying value differs from accounting carrying value (Article 2.1.2);

-Exclusion of GloBE carrying value from SBIE (Article 2.1.2);

-Extension of the Substitute Loss Carry-forward DTA to PEs, hybrids and reverse hybrids (Article 4.1);

-Allocation of deferred tax expenses and benefits from a Parent Entity to a CFC, PE Hybrid or Reverse Hybrid: 5 step process (Article 4.2);

-Five-Year Election to exclude the allocation of all deferred tax expenses and benefits to CFCs, PEs, Hybrids and Reverse Hybrids (Article 4.2.2);

-Determining GloBE status when a Flow-through Entity is held directly by another Flow-through Entity (Article 5.2.2);

-Non-group owners: Partially owned Flow-through Entities (Article 5.3.2);

-Non-group owners: Indirect minority ownership (Article 5.3.5);

-Taxes allocated to a flow-through entity (Article 5.4.2);

-Hybrid entities – Taxes pushed down include indirect owners (Article 5.5.2);

-Hybrid entities – Entities located in jurisdictions without a Corporate Income Tax system (Article 5.5.4); and

-Extension of taxes pushed down to include Reverse Hybrids (Article 5.6.2).

Safe Harbour and Penalty Relief Guidance

The GloBE Law and Amended Enforcement Decree include the Transitional CbCR Safe Harbour and the QDMTT Safe Harbour. Further details on the QDMTT Safe Harbour are to be provided in a Ministerial Ordinance.

The Transitional UTPR Safe Harbour is included in Law No. 20612 of December 31, 2024.

Decree No. 1114 of March 21, 2025 of the Ministry of Economy and Finance, amended the Enforcement Regulations to provide for aspects of the December 2023 OECD Administrative Guidance that relate to the Transitional CbCR Safe Harbour, including:

-Transitional CbCR – Purchase Accounting Adjustments (consistent reporting condition, goodwill impairment adjustment);

-Transitional CbCR – JVs;

-Transitional CbCR – Same Financial Statements/Local Financial Statements for Statutory Reporting;

-Transitional CbCR – MNEs not required to file CbC Reports;

-Transitional CbCR – Qualified Financial Statements for PEs; and

-Transitional CbCR – Treatment of hybrid arbitrage arrangements.

ELECTIONS

Elections in the OECD Model Rules

Elections currently included in the law/decree are:

-Excluded Entity Election (Article 62(4) of the GloBE law and Article 103 of the Amended Enforcement Decree);

-Prior Year Adjustment Election (Article 68(1)/(2) of the GloBE law and Article 68(1)/(2) of the Amended Enforcement Decree);

-De Minimis Election (74(1) of the GloBE law and Article 148 of the Amended Enforcement Decree);

-Deemed Distribution Tax Election (78(1) of the GloBE law and Article 156 of the Amended Enforcement Decree);

-Investment Entity Tax Transparency Election (79(5) of the GloBE law and Article 158) of the Amended Enforcement Decree);

-Taxable Distribution Method Election (79(6) of the GloBE law and Article 156 of the Amended Enforcement Decree);

-Deemed disposal of assets election (Section 76(4) of the GloBE Law);

-Stock-Based Compensation Election (Article 114 of the Amended Enforcement Decree);

-Election to use the Realization Method (Article 117 of the Amended Enforcement Decree);

-Election to Spread Capital Gains (Article 118 of the Amended Enforcement Decree);

-Consolidation Election (Article 120 of the Amended Enforcement Decree);

-Unclaimed Accrual Election (Article 133(2) of the Amended Enforcement Decree);

-GloBE Loss Election (Article 135 of the Amended Enforcement Decree);

-Substance-Based Income Exclusion Election (Article 140(11) of the Amended Enforcement Decree)

Elections in the Administrative Guidance

All elections included in the OECD Administrative Guidance are included in the law/decree.

Therefore, the following are now included:

-Equity Investment Inclusion Election;

-Excess Negative Tax Carry-Forward Election;

-Debt Release Election;

-Foreign Exchange Hedge Election; and

-Portfolio Shareholding Election.

DEVIATIONS FROM THE OECD MODEL RULES/EU GLOBAL MINIMUM TAX DIRECTIVE

In general, the implementation of the GloBE Rules in the GloBE law/decree mirrors the OECD Model Rules.

One point to note is that Article 79(2) of the revised law provides that South Korea is an implementing jurisdiction for the purpose of Article 9.3.5 of the OECD Model Rules.

This is an optional anti-avoidance rule for corporate inversions  that jurisdictions can choose to implement or not. It relates to the transitional rule that excludes MNEs from the under-taxed payments rule for the first five years of operations.

There is the potential for an MNE group to use the UTPR transitional rules to avoid or minimise Pillar Two top-up tax.

This is because if an MNE group had its Ultimate Parent Entity (UPE) in a jurisdiction it would generally be subject to the Income Inclusion Rule (IIR) on low-taxed profits of its foreign constituent entities. However, the UTPR transitional rules treats all jurisdictions as having no UTPR top-up tax liability.

Therefore, a UPE could restructure the group to create a new UPE in a jurisdiction that did not implement an IIR. The UTPR would then not apply to its foreign subsidiaries providing the conditions were met for the UTPR transitional rule.

As such, Article 9.3.1 of the OECD Model Rules includes an optional provision that allows a jurisdiction to apply the UTPR to MNE groups that have a foreign UPE but significant operations in that jurisdiction.  South Korea includes this provision in the law.

Under Article 73(6) of the International Tax Adjustment Act, the UTPR operates as an additional tax amount (not a denial of a deduction or notional income).

DOMESTIC MINIMUM TAX

General

This is not currently included in the South Korean GloBE Law.

However, South Koreas 2025 Tax Reform Proposal (announced on July 31, 2025), provides that a QDMTT will be applied from January 1, 2026.

QDMTT Design Features

This is not currently included in the South Korean GloBE Law.

However, South Koreas 2025 Tax Reform Proposal (announced on July 31, 2025), provides that a QDMTT will be applied from January 1, 2026.

The Tax Reform Proposal is high level and much of the detail will be left to Regulations, however, it provides:

-A new Article 73-2 of the International Tax Adjustment Act to apply a QDMTT where a domestic constituent company of a multinational group is taxed at a rate lower than 15%.

The QDMTT tax amount is distributed to each domestic constituent company and taxed.

The calculation of the QDMTT is based on the general GloBE rules ie:

QDMTT = [15% – Effective tax rate of domestic constituent companies] × Excess profit + Additional tax for the current period

The Excess profit is net GloBE income less the substance-based income exclusion.

Regulations are to provide more detail on the on the distribution of the QDMTT to domestic entities, however, the Tax Reform Proposal provides for 2 options:

1.The Statutory Distribution method where the amount is distributed in proportion to the income of each constituent company in the relevant fiscal year

2.A Designated Distribution method based on agreement between domestic constituent companies

It also provides that the QDMTT applies to Stateless entities.

-Amended Articles 63-84 of the International Tax Adjustment Act are to apply the standard GloBE filing and payment deadlines for QDMTT purposes (15 months after the end of the relevant fiscal year (18 months in the transitional year)).

-Amended Article 74 of the International Tax Adjustment Act applies the de minimis exemption for QDMTT purposes.

-Amended Articles 75 and 77 of the International Tax Adjustment Act apply the special rules for minority-owned constituent entities and joint ventures for QDMTT purposes.

-Amended Article 79 of the International Tax Adjustment Act apply the special rules for investment entities for QDMTT purposes.

-Amended Article 80 of the International Tax Adjustment Act applies the Transitional CbCR Safe Harbour for QDMTT purposes.

Registration

No specific registration requirements are provided in the South Korean GloBE Law.

Filing

Article 83(1) of the GloBE Law provides that the Global Minimum Tax Information Return (the ‘GloBE Information Return’) must be filed annually within 15 months (or 18 months in the case of the first year) from the end of the business year as prescribed by Presidential Decree.

Another company belonging to the same multinational group as a resident company may file the GloBE Information Return on behalf of the resident company.

A resident company is not required to submit a GloBE information return if a foreign-based constituent company belonging to the same multinational group as the resident company submits a GloBE information return in its jurisdiction of residence. In this case, Article 83(4) of the GloBE Law requires the resident company to report the foreign entity that files the GloBE Information Return within 15 months (18 months in the first year) of the end of the business year.

The amended Article 83 in Law No. 20612 of December 31, 2024, provides that if the filing date for the GloBE Information Return falls before June 30, 2026, the filing deadline will be extended to June 30, 2026.

The amended Enforcement Regulation issued on March 22, 2024 and March 21, 2025 includes attachments for a number of Pillar Two forms, (forms 53 to 58 which includes the GIR, IIR and UTPR Tax Returns and forms for the UTPR allocation method).

The information required for the Korean GloBE Information Return ties into the data points as required by the OECD July 2023 guidance.

Article 84 of the Law  requires submission of an additional self- assessment return (a ‘GloBE Top-Up Tax Return’) by the GIR filing deadline if there is a top-up tax liability. Further details are included in the Enforcement Decree and Regulations. A different tax return applies for IIR and UTPR purposes. And for the UTPR an additional form is also required to be filed depending on the allocation mechanism chosen to allocate jurisdictional top-up tax to CEs.

The 2025 Tax Reform Proposal includes a QDMTT from January 1, 2026 with the standard GloBE filing deadline.

Payment

Under Article 84(1) of the GloBE Law payment of top-up tax under the Income Inclusion Rule or the Under-Taxed Payments Rule is required by the filing deadline.

Article 84(3) of the GloBE Law provides that if the amount of top-up tax exceeds 10 million won, part of the amount payable may be paid in instalments.

Penalties

Failure to submit a GloBE Information Return or a South Korean top-up tax return within the filing deadline can result in a penalty of up to 100 Million Won, under Article 167 of the Amended Enforcement Decree.

The amended Enforcement Regulation issued on March 22, 2024 and March 21, 2025 includes attachments for a number of Pillar Two forms, (forms 53 to 58 which includes the GIR, IIR and UTPR Tax Returns and forms for the UTPR allocation method).

See: GMT Forms

The information required for the Korean GIR ties into the data points as required by the OECD July GIR guidance.

The filing requirements are:

Domestic constituent entities subject to IIR top-up tax are required to file an IIR top-up tax return (Form 56)

Domestic constituent entities subject to UTPR top-up tax are required to file a UTPR top-up tax return (Form 56-2), as well as either form 57 or form 58 to report the UTPR top-up tax allocation mechanism used.

This is to implement the reporting provisions for Article 73(5)/(6) of Law No. 20612 which provided for new allocation methods for UTPR top-up taxes.

Article 73 provides that the UTPR allocation to constituent entities in a jurisdiction is generally based on (1) a method prescribed by Presidential Decree, taking into account the ownership ratio of the domestic constituent entity company directly or indirectly held by the UPE and the available capacity of the constituent entity, or (2) a method designated by the reporting constituent entity, agreed upon by all domestic constituent entities of the MNE group.

The amended Article 73(5) provides that all or part of the UTPR tax allocated has not been paid by the end of the fiscal year immediately preceding the fiscal year in which the allocation is made, the unpaid tax is allocated entirely to the UPE if located in Korea, and if the ultimate parent company is not located in Korea, method 1 is used.

If method 1 is used, form 57 is filed (the ‘Statement of additional tax calculation’).

If method 2 is used, form 58 is filed (the ‘Additional tax allocation and designation agreement form’).

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