Sourcing the South Korean Pillar Two Law to the OECD Model Rules

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. Unlike some jurisdictions (eg Switzerland and Liechtenstein), South Korea doesn’t just transpose the OECD Model Rules into domestic law. Instead it recreates the GloBE rules with a separate body of tax law.

Whilst South Korea may have been the first country to enact a global minimum tax law, there were significant gaps in the implementation and detailed Presidential Decrees were to be issued. Not only to reflect outstanding aspects of the GloBE rules, but also to implement additional rules as provided in OECD Guidance (eg Administrative Guidance, and the Safe Harbours & Penalty Relief Guidance).

In order to achieve this, 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. This draft law is to delay the UTPR until 2025 and it provides for some aspects of the OECD Administrative Guidance. 

On November 9, 2023, South Korea issued the Preliminary Legislative Notice of Partial Amendment to the Enforcement Decree of the International Tax Adjustment Act. This amends the relevant South Korean Enforcement Decree and provides for the remaining provisions to implement the GloBE rules. 

It should be noted that the South Korean legislative framework (ie the original Law, draft Amended Law and the draft Amended Enforcement Decree) does not track the OECD Model Rules and instead focuses on achieving the same result as the relevant provisions in the Model Rules (and other OECD Guidance). As such sourcing the South Korean legislation to the relevant provision in the Model Rules/Administrative Guidance can be complex. 

In the table below we source all of the global minimum tax provisions in the South Korean legislation back to the OECD Model Rules (or other guidance, eg the Administrative Guidance).

This should be viewed in conjunction with our OECD Administrative Guidance: Domestic Implementation Matrix