At Least 15% of Income Must Be Taxed... First Global Minimum Tax Filing Due by End of June

National Tax Service Sends Guidance to 2,547 Multinational Enterprise Groups

Applies to Groups with Consolidated Revenue of at Least 750 Million Euros

Multinational Enterprises Must Pay a Minimum 15% Tax

Multinational enterprises with consolidated revenue exceeding 750 million euros (approximately 1 trillion won) are required to file and pay the Global Minimum Tax for the first time by the end of June this year. The Global Minimum Tax is a system that imposes a minimum tax rate of 15% on multinational enterprise groups, regardless of the country in which they conduct business.

The National Tax Service announced on April 28 that it has sent out the "2024 Global Minimum Tax Filing Guidelines" to 10,188 domestic constituent companies belonging to 2,547 multinational enterprise groups.

The Global Minimum Tax has either been adopted or is scheduled to be adopted by 70 countries and has been implemented in 38 countries, including the United Kingdom, France, Japan, Germany, and Australia, since 2024. Korea introduced the Global Minimum Tax in December 2022 through the "Law for the Coordination of International Taxation." It applies to fiscal years starting on or after January 1, 2024, and the first filings are scheduled to begin on May 1 this year. Accordingly, domestic corporations and foreign corporate permanent establishments belonging to multinational enterprise groups whose ultimate parent company’s fiscal year ends on December 31, 2024, must file and pay the tax for the first time between May 1 and June 30.

The Global Minimum Tax is a system that ensures that multinational enterprise groups pay at least 15% of their income as tax. If overseas subsidiaries or branches are taxed at a rate lower than 15%, the ultimate parent company in Korea must report and pay the additional top-up tax amount to the National Tax Service. For example, if a company with its ultimate parent in Korea does not pay tax on 10 billion won of income generated by a subsidiary in Country A and pays 1 billion won (5% of 20 billion won) in tax on the income generated by a branch in Country B, it must report and pay a total of 3.5 billion won to the National Tax Service, comprising 1.5 billion won (15% of the income generated in Country A) and 2 billion won (the additional tax, 10% of the income generated in Country B).

The Global Minimum Tax applies to constituent companies of multinational enterprise groups whose consolidated revenue has exceeded 750 million euros in at least two out of the previous four fiscal years. For the 2024 fiscal year, eligibility must be determined based on the consolidated revenue for the four most recent fiscal years, from 2020 to 2023.

Domestic constituent companies of multinational enterprise groups that meet the consolidated revenue requirement are obliged to file in Korea, regardless of whether the ultimate parent company is located in Korea or abroad. The filing obligation applies to domestic constituent companies of eligible groups regardless of whether the country of the ultimate parent company has implemented the Global Minimum Tax. However, government enterprises, international organizations, non-profit organizations, and pension funds are excluded from the scope of the Global Minimum Tax.

To support companies in making accurate filings, the National Tax Service will continue to provide various types of guidance materials, including filing assistance resources, itemized checklists, and materials tailored to taxpayer needs, following the preliminary filing period operated in March and April. In addition, a consultation session will be held on the 8th of next month for companies and tax agents to explain the basic concepts of the Global Minimum Tax, detailed filing methods, key reporting considerations, and to listen to difficulties and suggestions.

This content was produced with the assistance of AI translation services.