South Korea Issues 2025 Amendments to its Global Minimum Tax Law

Legislation

On December 31, 2024, Law No. 20612, was published to amend the International Tax Adjustment Act for the 2025 Tax Reform provisions. This includes some amendments to the Global Minimum Tax provisions.

Article 1 of the Supplementary provisions provides that the amendments apply for fiscal years commencing on or after January 1, 2025.

Key amendments to the Global Minimum Tax provisions are:

Identifying Consolidated Revenue

The amended Article 62 in Law No. 20612 incorporates (at a high level) Article 3.1 of the December 2023 OECD Administrative Guidance relating to identifying consolidated revenue.

It provides that the amount of sales in the consolidated financial statements will be the amount reflecting the adjustments prescribed by the Presidential Decree, such as the addition of profits from ordinary business activities that are shown separately from sales in the consolidated financial statements.

Special Treatment for Losses

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 rules for the distribution tax regimes under Article 78 of the International Tax Adjustment Act apply).

If a reporting constituent company wishes to be subject to the special treatment of losses, it must select and submit the country of location of the constituent company when submitting the GloBE Information Return for the first fiscal year. This treatment will then continue to be applied in the first year of application and subsequent years.

Allocation Method for the UTPR

Article 73(5)/(6) of Law No. 20612 provides 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.

De Minimis Exclusion

Article 74(2), as amended by Law No. 20612 provides for an exception to the de minimis exclusion if a GloBE Information Return is filed and there is then a change to the jurisdiction meeting the de minimis requirements for that jurisdiction, as prescribed by Presidential Decree. This includes post-filing adjustments under Article 68 of the International Tax Adjustment Act.

Transitional UTPR Safe Harbour

Article 80 as amended by Law No. 20612 provides for the Transitional UTPR Safe Harbour.

The July 2023 OECD Administrative Guidance included a safe harbour which deems the UTPR Top-up Tax amount for a UPE Jurisdiction to be zero if the UPE Jurisdiction has a corporate income tax rate of at least 20 percent.

This applies for Fiscal Years which begin on or before 31 December 2025 and end before 31 December 2026.

Article 80 provides that this is subject to requirements prescribed by Presidential Decree.

Transitional CbCR Safe Harbour – JVs

Article 80(3) as amended by Law No. 20612 provides that joint ventures (standalone entities or JV groups) are deemed to be located in a different country from other constituent entities in the jurisdiction for the purposes of the Transitional CbCR Safe Harbour.

GIR Filing Date

The amended Article 83 in Law No. 20612 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.

This applies Article 5.3 of the December 2023 OECD Administrative Guidance.