National Tax Service Resolves 430 Cases of Double Taxation Burden in International Transactions for Korean Companies

[Asia Economy Sejong=Reporter Kim Hyewon] The National Tax Service (NTS) announced on the 20th that since the establishment of the Mutual Agreement Procedure (MAP) Office in March 2018, it has resolved 430 cases of double taxation burdens on international transactions of Korean companies through mutual agreement procedures with foreign tax authorities up to October this year.

The number of double taxation resolutions through the MAP, a procedure where two countries' tax authorities consult to retroactively resolve double taxation burdens arising from tax audits on taxpayers, totals 190 cases.

Additionally, to allow companies engaged in international transactions to focus on their business without worrying about transfer pricing tax audits, the NTS operates a "Advance Pricing Agreement (APA)" system. The number of advance consultations related to this system is 240 cases. Companies that have applied this system were able to avoid the risk of transfer pricing tax audits by both countries for an average of 6 years and 4 months.

According to the "Convention on the Prevention of Double Taxation and Tax Evasion and Avoidance" and the "International Tax Adjustment Act," the NTS resolves taxpayers' double taxation issues both proactively and retroactively through mutual agreement procedures between tax authorities (① Mutual Agreement Procedure ② Advance Pricing Agreement).

In the past, the Mutual Agreement Team within the International Cooperation Office of the NTS was responsible for resolving double taxation and handling APAs, but with support from the National Assembly, the Ministry of the Interior and Safety, and the Ministry of Economy and Finance, the MAP Office at the division level was established in 2018. The NTS conducts more than 20 mutual agreement negotiations (face-to-face, telephone, video conference) annually with foreign tax authorities, and this year, up to October, it held 23 mutual agreement meetings with 17 tax authorities.

The NTS explained, "Considering that Korean companies operating overseas face significant time and costs to resolve double taxation through local tax appeals, the mutual agreement procedure is an efficient system to alleviate the double taxation burden on our companies."

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