The Ministry of Strategy and Finance of South Korea published a proposal for detailed procedures of the country -by country reporting requirements on 28 December 2016.
The proposal requires the provision of a full report on cross-border transactions with related parties, consisting of the master file, the local file, and the CbC report.
A master file and a local file are to be submitted for cross-border related persons with a turnover of over KRW 50 billion (including financial transactions, ie intercompany loans) and KRW 100 billion in turnover. For consolidated sales of KRW 1 trillion (approximately US $ 1 bn), the CbC report must be provided.
According to Article 21-2 of the proposed enforcement order, the multinational entities (MNEs) operating in Korea would have to submit a “reporting form for the reporting company” in advance, and the MNEs would require to determine which company and which jurisdiction the CbC report would be submitted.
The reporting entity notification form must be submitted within six months after the end of the financial year.
The penalty provision would also be revised, so that each report would be subject to a separate fine of KRW 10 million. As suggested, if a taxpayer lacks a detailed statement of cross-border transactions for one entity, the taxpayer would be subject to a separate fine of KRW 5 million. In other words, a taxpayer would be subject separately to a fine of KRW 5 million per missing entity. The penalty for the combined report on international transactions and a detailed presentation of the cross-border transactions could not exceed KRW 100 million.