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 Switzerland
which transposed the OECD Model GloBE Rules by way of a direct reference.
Nevertheless, the draft law is not self-contained legislation.
Although detailed, it frequently refers to Presidential Decrees (as yet unpublished) for the more granular aspects. This is in line with the general approach taken in the South Korean tax legislation, with the tax law providing the key framework and Presidential Decrees containing the detailed application.
The draft law replaces Chapter 5 of the International Tax Adjustment Act. Under the current version of the law, Chapter 5 relates to penalties and contains four articles (Arts 60-63). The revisions under the draft law apply new Articles 60 – 83 and move the existing penalty articles which now commence at Article 84 (with some further amendments).
In general, the implementation of the GloBE Rules in the draft law mirrors the OECD Model Rules.
Key aspects to note are:
Under Article 61(1) of the revised law, the Pillar Two GloBE rules in South Korea apply to groups that have annual revenue of 750 million euros or more
in the Consolidated Financial Statements of the UPE in at least two of the four Fiscal Years preceding the relevant Fiscal Year.
Article 69 of the draft law applies the income inclusion rule.
It follows the same approach as Article 2 of the OECD Model Rules, including the specific rules for intermediate parent entities and partially-owned parent entities.