MoEF "Digital Tax 'Amount B', Introduction and Timing to Be Decided Considering Each Country's Legislation"

The government announced that it will decide the timing of the introduction of Digital Tax Pillar 1 'Amount B' by considering legislative trends in various countries.

On the 20th, the Ministry of Economy and Finance stated, "The recent comprehensive implementation framework of the Organisation for Economic Co-operation and Development (OECD) and the Group of Twenty (G20) has reflected the final agreement on the first phase implementation of Digital Tax Pillar 1 Amount B in the OECD Transfer Pricing Guidelines (TPG)."

The digital tax targets global big tech companies that have engaged in tax avoidance by creating paper companies in low-tax countries to shift income, and it consists of two pillars: 'Pillar 1' and 'Pillar 2.'

Pillar 2, commonly known as the 'global minimum tax,' has been implemented since January of this year. It aims to tax the income of multinational enterprises above a certain scale at an effective tax rate of at least 15%. South Korea was the first in the world to legislate the global minimum tax by enacting Articles 60 to 86 of the International Tax Adjustment Act in December 2022.

Pillar 1 is further divided into 'Amount A' and 'Amount B.' Amount A reallocates taxing rights to the country where sales occur regardless of the presence of a fixed place of business, while Amount B simplifies and standardizes the complex transfer pricing system applied to basic distribution activities performed by multinational enterprises by applying a standardized fixed profit margin.

The first phase of Amount B is a stage where Amount B is selectively implemented in countries that wish to do so from tax years starting January 1 of next year. The introduction in South Korea has not yet been decided. The Ministry of Economy and Finance stated, "Even before South Korea introduces Amount B, Korean companies operating in countries that have adopted the first phase of Amount B may be subject to Amount B in those countries according to the announced details."