The South Korean Ministry of Strategy and Finance has recently released a draft legislation which would amend the existing provisions of Article 11 of the Korean Law which is known as the “Law for the Coordination of International Tax Affairs” (LCITA) and Article 21-2 of the “Presidential Enforcement Decree of the LCITA” (PED of LCITA). These changes are to implement certain provisions of the base erosion and profit shifting initiatives of OECD.

As per the draft legislation the required filing deadline of Master file would now be within 12 months of the fiscal year-end.

Certain MNEs would be exempted from the obligation to prepare the Local file. This exemption would apply for MNEs that have relevant transactions covered by an already completed APA and considered to be at an arm’s length price.

Under the draft legislation, the CbC report has been added to the scope of the “Combined Report of International Transactions” (CRIT). The CbC report would be required for any multinational entity (MNE) with consolidated sales of over one trillion KRW, and would be required to be submitted by the ultimate parent company of the MNE. If the parent company resides in a country that does not require a CbC report, or does not facilitate the exchange of the CbC report, it would be the obligation of the domestic entity to submit the CbC report.