On 23 December 2022, South Korea’s National Assembly approved the budget for 2023 including the tax reform proposal for 2023. Accordingly, South Korea changes the existing tax-related measures including transfer pricing measures. The key tax measures in the tax reform include the following:

• The National Assembly cuts the corporate tax by 1 percentage point applicable from 1 January 2023:

1. 1. 9% on the first KRW 200 million of taxable income;
   2. 19% on taxable income above KRW 200 million up to KRW 20 billion;
   3. 21% on taxable income above KRW 20 billion up to 300 billion; and
   4. 24% on taxable income above KRW 300 billion.

* Note: A resident surtax at a rate of 10% is charged on CIT liability assessed each year.

• Introduces global minimum tax of 15% in accordance with OECD’s pillar two model rules applicable from 1 January 2024 for multinational enterprises (MNEs) with minimum revenue EUR 750 million in at least two of the immediately four preceding fiscal years.
• With effect from 1 January 2023, 95% of the dividends received from foreign subsidiaries will be subject to income exclusion, and the remaining 5% will be subject to the general corporate tax rate. The foreign tax credit cannot be applied to foreign dividends for which the dividend is not included in the gross income. For dividends received before 31 December 2022, the foreign tax credit will be applied.
• Dividend received deduction for domestic companies will depend on their ownership percentage:

• Deduction limitation for carried forward losses has been increased from 60% of taxable income to 80% of taxable income (100% of taxable income for SMEs).
• The tax reform 2023 provides the following exemption threshold for submitting information on international transactions from 1 January 2023:

• The tax reform 2023 introduces a new requirement to keep and maintain transfer pricing documents domestically from 1 January 2023.