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

Multinational companies with consolidated revenues of at least 750 million euros (approximately 1 trillion won) are required to file and pay their first global minimum tax return by the end of June this year. The global minimum tax system ensures that multinational enterprise groups pay at least 15% tax, regardless of the country in which they conduct business.

On April 28, the National Tax Service announced that it had sent the "2024 Global Minimum Tax Filing Guide" to 10,188 domestic entities belonging to 2,547 multinational enterprise groups.

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The global minimum tax has been adopted or is set to be introduced by 70 countries, with 38 countries-including the United Kingdom, France, Japan, Germany, and Australia-implementing it from 2024. Korea introduced the global minimum tax into the "Adjustment of International Taxes Act" in December 2022. It applies to fiscal years beginning on or after January 1, 2024, with the first filing scheduled to begin on May 1, 2024. Accordingly, domestic corporations and permanent establishments of foreign corporations belonging to multinational enterprise groups whose ultimate parent’s fiscal year ends on December 31, 2024, must file and pay the global minimum tax for the first time between May 1 and June 30.

The global minimum tax system requires multinational enterprise groups to pay at least 15% of their income in taxes. If an overseas subsidiary or branch is taxed at less than 15%, the Korean ultimate parent company must report and pay the additional top-up tax 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) on income generated by a branch in Country B, it must 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 an additional 2 billion won (10% top-up on the income generated in Country B).

The global minimum tax applies to entities belonging to multinational enterprise groups whose consolidated revenues were at least 750 million euros in at least two of the four previous fiscal years. For the 2024 fiscal year, whether a group is subject to the rule is determined based on consolidated revenues during the 2020-2023 fiscal years.

Domestic entities of multinational enterprise groups that meet the consolidated revenue threshold are required to file in Korea, regardless of whether the ultimate parent company is based in Korea or abroad. This obligation applies 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.

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To support accurate filings, the National Tax Service will provide a variety of materials, including pre-filing support (conducted in March and April), guidance documents, itemized checklists, and resources tailored to taxpayer needs. In addition, a briefing session for companies and tax agents will be held on May 8 to provide information on the basics of the global minimum tax system, specific filing procedures, key points to consider, and to listen to concerns and suggestions.

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