Burden of Global Minimum Tax Eased for Korean Auto and Battery Companies in the U.S.

Yonhap News Agency

A pathway has opened for domestic automobile and battery companies receiving subsidies under the U.S. Inflation Reduction Act (IRA) to avoid additional taxation under the global minimum tax rate of 15%.

The Ministry of Economy and Finance announced on January 5 that the Organisation for Economic Co-operation and Development (OECD) and the Group of Twenty (G20) had reached an agreement on a "global minimum tax reform plan" containing these provisions.

According to the agreement announced by the OECD on the same day, even if the effective corporate tax rate for Korean companies falls below the global minimum tax rate of 15% due to tax credits earned from overseas investments, they will not be required to pay additional taxes.

The Ministry explained, "Korea's integrated investment tax credit, research and development (R&D) expense tax credit, and the U.S. IRA advanced manufacturing production tax credit are all considered eligible tax incentives."

This has been a consistent demand by the Korean government during international negotiations, and domestic automobile and battery companies operating in the United States are expected to benefit.

The burden on multinational companies headquartered in countries that independently operate a global minimum tax system is also expected to be significantly reduced. Korea, the European Union (EU), the United Kingdom, and Japan have already implemented the global minimum tax system since 2024.

The Ministry of Economy and Finance stated, "If a country operates a system sufficiently similar to the global minimum tax (an eligible parallel system), the overseas subsidiaries of multinational companies will not be subject to the global minimum tax in that country."

This addresses concerns that, in cases where a country already implements its own minimum tax system that achieves the same policy objectives as the global minimum tax, multinational companies could be exposed to double taxation if another country also imposes the global minimum tax.

The minimum tax system independently operated by the United States has also been recognized as an eligible parallel system. As a result, large U.S. technology companies such as Google and Apple are also expected to be exempt from the global minimum tax.