SOUTH KOREA Law and Practice Contributed by: Steve M Kim, Philje Cho, Gijin Hong and Kyu Bin Kang, Lee & Ko
such manufacturing know-how was derived from knowledge transferred by Company Y and remained subject to the headquarters’ direction and control. On this basis, the court considered it inappropriate to conclude that the know-how was economically owned by, or exclusively attributable to, YNL, and instead recognised the headquarters as retaining the right to use and control the relevant intangibles. Accord - ingly, when applying the TNMM to determine an arm’s length result for transactions between a headquarters and an overseas manufacturing subsidiary, the over - seas manufacturing subsidiary is likely to be identified as the tested party. Second, the decision provides guidance on the appli - cation of the TNMM in practice. In evaluating differ - ences between the tested party and the selected comparables, the court adopted a relatively flexible approach, finding that the identified differences did not materially affect comparability and therefore did not invalidate the NTS’s selection of comparables. This suggests that, where the tax authority applies reasonable and objective quantitative screening cri - teria in selecting comparables, it may be difficult for a taxpayer to successfully challenge the outcome solely on the basis of qualitative differences. In such cases, a taxpayer seeking to dispute the selection of compa - rables under the TNMM would need to demonstrate that there are significant differences between the con - trolled transactions and the uncontrolled transactions, and that such differences have a material impact on the relevant profit level indicator (eg, operating mar - gin). 15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions Restrictions on outbound payments relating to uncon - trolled transactions apply to payments made both to related parties and to third parties. 15.2 Restrictions on Outbound Payments Relating to Controlled Transactions A Korean resident or corporation intending to make outbound payments to any recipient, in a controlled or uncontrolled transaction, in excess of USD100,000
per transaction, must submit documents to a foreign exchange bank, proving the reason and amount of the payment. The Korean government, with the aim of enhancing public convenience, increased the limit for non-doc - umentary overseas remittances from USD50,000 to USD100,000, effective January 2026. In addition, in co-operation with the Bank of Korea, it has developed and is operating an Overseas Remittance Integration System (ORIS), which enables real-time, centralised monitoring and management of non-documentary overseas remittance transactions. However, the reverse does not apply: foreign funds remitted to Korea by a non-resident or foreign corporation are not subject to this regulation. 15.3 Effects of Other Countries’ Legal Restrictions Upon the request of a taxpayer, the MOEF or the NTS can request that the competent authorities of another jurisdiction initiate a MAP where: • there is a tax treaty between Korea and the other jurisdiction; • the other jurisdiction has made a TP adjustment in a related-party transaction; • the related-party transaction is between a Korean resident and a resident of that other jurisdiction; and • from the taxpayer’s perspective, a corresponding adjustment is required to avoid double taxation. 16. Transparency and Confidentiality 16.1 Publication of Information on APAs or Transfer Pricing Audit Outcomes Every year, the NTS publishes an APA Annual Report, which details the APA processing procedures and various statistics, and provides a description and his - tory of the APA. The latest one available is the 2024
version published in November 2025. 16.2 Use of “Secret Comparables” Taxation With Asymmetry of Information
An NTS internal administrative order states that, when a taxpayer requests information necessary for
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