[‘Countdown’ Global Minimum Tax]⑥HD Hyundai Attracts Attention by Fully Disclosing Target Countries and Subsidiaries... "Just Followed the Standards"

Companies Begin Simulation Work
HD Hyundai and Others Draw Attention by Revealing Specific Status
Samjong KPMG Launches 'Global Minimum Tax' Calculator

Most companies are uneasy due to the uncertainty surrounding the global minimum tax (Pillar 2), but some companies are attracting attention by openly disclosing specific statuses. It is analyzed that the willingness to accurately understand the current situation is more important than vague anxiety. Already, a considerable number of companies have begun detailed simulation work to identify the taxes they need to pay.

HD Hyundai disclosed all countries and subsidiaries subject to the global minimum tax during the public announcement last March. The photo shows the HD Hyundai booth at CES 2024 in Las Vegas, USA, taken in January. Photo by HD Hyundai

On the 28th, Asia Economy analyzed the March disclosure data of 50 companies considered likely to be subject to the global minimum tax, and found that HD Hyundai was the only company that disclosed both the applicable countries and subsidiaries in its business report. HD Hyundai stated, "The consolidated financial statements of the consolidated entity (HD Hyundai) for the fiscal years 2021 and 2022 show sales exceeding 750 million euros each year, and among the countries where subsidiaries operate, those with statutory tax rates below 15% include Hungary, the United Arab Emirates (UAE), and the Marshall Islands." They added, "Based on last year's financial statements, we conducted a transitional application exemption test under Article 80 of the Framework Act on National Taxes, and as a result, subsidiaries Hyundai Heavy Industries Argentina S.R.L, Hyundai Arabia Company L.L.C, and HD Hyundai Global Service Middle East FZE, located in Argentina and the UAE, are expected to be subject to the global minimum tax." Unlike other companies that simply stated "estimation is impossible" or "currently under review," HD Hyundai clearly provided the anticipated information to affiliates and investors.

The company explained that such information disclosure is not unusual. An HD Hyundai disclosure officer said, "We simply followed the guidelines and examples outlined in the Korean International Financial Reporting Standards." According to the revised 'K-IFRS' corporate tax section by the Korean Accounting Standards Board's Accounting Standards Committee, "During the period when the law has been enacted or effectively enacted but the enforcement date has not yet arrived, companies must disclose information that is already known or can be reasonably estimated to help understand the company's exposure to the Pillar 2 corporate tax arising from the law."

However, the standards do not require the information to be as specific as HD Hyundai's disclosure. The standards state that information about exposure should cover both qualitative and quantitative data, but it is not necessary to reflect all specific legal requirements; a general range is sufficient. If the information is unknown or cannot be reasonably estimated, companies should describe this fact and provide information on the progress of their risk exposure assessment. Nevertheless, the fact that HD Hyundai disclosed detailed information suggests that the company has confidence in the data obtained through its own evaluation.

It is reported that many companies, like HD Hyundai, have conducted internal evaluations such as simulations. A representative from a large corporation said, "It seems that companies have run simulations in their own ways, but whether to disclose depends largely on how the reliability of the content is viewed." Most companies' simulations were based on last year's accounting data. Since the fiscal years subject to the system have not yet started, simulations based on last year’s data may lack accuracy. Still, the fact that companies are trying to confirm additional tax amounts and respond through these simulations reflects the significant anxiety about the global minimum tax.

As large corporations show interest in simulations, the accounting industry has introduced a ‘calculator’ aimed at the global minimum tax. Samjong KPMG released the ‘BEPS 2.0 Modeling Tool,’ a program that calculates additional tax amounts under the global minimum tax and compares various scenarios. Companies wishing to calculate additional tax amounts in advance can access the related website and run this program. Additionally, the firm is developing the ‘KBAT’ program to improve the efficiency of data collection and management related to the global minimum tax. Samjong KPMG developed these calculation programs, judging that companies must quickly prepare for the global minimum tax due to the nature of the system. Osangbeom, Vice President of Samjong KPMG, advised, "Since a lot of data is required and calculations are complex, companies should hurry to respond."