Corporate Tax Confusion Triggered by Tariffs

As major countries’ tax authorities are strengthening their taxation rights to protect domestic companies and secure tax revenue, Korean companies also need to take proactive measures to avoid double taxation. In the case of parent companies and subsidiaries, that is, related parties, it is necessary to set export and import prices for products at reasonable arm’s length prices and to receive appropriate royalties for technology and service usage when establishing local production facilities and selling products. This can minimize the risk of double taxation. On November 3, the National Tax Service will hold a ‘Tax Issues Seminar’ for companies expanding overseas, in cooperation with the Korea Chamber of Commerce and Industry. Transfer pricing experts from the National Tax Service will attend the event to discuss tax issues that companies need to review in advance to prepare for potential double taxation. The core issue in double taxation is the appropriateness of transfer pricing. Tra

Recently, the spread of protectionism worldwide has led tax authorities in various countries to strengthen taxation on global companies in order to secure tax revenue. As a result, companies now face an increased risk of double taxation from both the country where the parent company is located and the country where the subsidiary operates. Korean companies, which have a high dependence on exports and have established overseas production subsidiaries, are also facing the issue of double taxation. According to the Organisation for Economic Co-operation and Development (OECD) on October 31, unresolved cases of double taxation worldwide reached 11,500 as of the end of 2023. Since 2016, the OECD has published annual statistics on mutual agreement procedures between national tax authorities regarding double taxation and other issues. The mutual agreement procedure is a process in which the relevant countries negotiate to resolve cases of international double taxation that have already occurr

Editor's NoteThe Korea-US tariff negotiations were finalized on the 29th, relieving companies from tariff-related uncertainties. However, the impact of the 15% reciprocal tariffs is highly likely to extend to issues regarding taxes (corporate tax). For companies where a domestic parent sells products to its US-based subsidiary, the amount of tax paid in each country may differ depending on which entity bears the losses from the tariff increase. If the parent company absorbs an excessive portion of the losses, the Korean government will inevitably face a reduction in tax revenue. The Asia Business Daily examines the tax uncertainties facing Korean companies and explores response strategies to minimize them. A domestic food company exporting K-food to the United States is now inevitably facing reduced profits due to the tariff hike. The issue is not limited to tariffs alone; there is also a high likelihood of encountering uncertain tax (corporate tax) issues. This is beca