SOUTH KOREA Trends and Developments Contributed by: Dong Shin Lee, Wankyu Jeon, Sung Hyun Ryu and Young Woong Park, Yoon & Yang LLC
Trends and Developments South Korea Global Minimum Tax trends – Approaching the first filing deadline and the announcement of the OECD/G20 IF Global Minimum Tax Reform Plan (Side-by-Side Package) Approaching the first filing deadline for the fiscal year 2024 The Korean government has formally introduced the Income Inclusion Rule (IIR) effective as of 1 January 2024, thereby completing its domestic implementa - tion of the Global Minimum Tax framework under the Organization for Economic Co-operation and Devel - opment’s (OECD). South Korea has aligned itself with the broader inter - national initiative to enhance transparency in the global tax environment and to curb tax avoidance practices. At the same time, acknowledging both the need for the stable establishment of the new regime and con - siderable compliance burden imposed on enterprises, the government has adopted a transitional measure for the first year of application, extending the filing deadline to 18 months from the end of the respective business year solely for the 2024 fiscal year. This tem - porary relief is intended to provide multinational cor - porations with additional time to address the technical and operational complexities arising from the initial implementation. For corporations with a December fiscal year-end, the first filing and payment deadline will fall on 30 June 2026, and the tax authorities are urging enterprises to undertake thorough preparatory measures to ensure timely compliance. As part of the phased rollout of the Pillar Two Frame - work, and following the enforcement of the IIR, the Korean government introduced the Undertaxed Profit Rule (UTPR) starting January 2025, and the Domestic Top-up Tax (DMTT) is set to be implemented as of 1 January 2026. The government plans to seek recog - nition as a Qualified Domestic Minimum Top-up Tax (QDMTT) through peer review process. Once qualified, the regime will ensure the imposition of a minimum tax rate of 15% on under-taxed domestic companies starting from income attributed to 2026. Under the current timetable, the first filing and payment deadline for the domestic top-up tax is scheduled for March 2028.
Implications for South Korea regarding key aspects of the side-by-side package The OECD/G20 Inclusive Framework (IF) released the Global Minimum Tax Reform Plan (Side-by-Side Pack - age) on 5 January 2026, introducing further refine - ment of the Pilar Two architecture and establishing new standards for the operation of the international tax regime. As of January 2026, the Side-by-Side application exemption is confirmed to be available only where the Ultimate Parent Entity (UPE) is in the USA. The Korean government is closely monitoring subsequent developments, particularly the potential implications for Korean-headed multinational compa - nies should domestic legislative improvements enable South Korea to satisfy the requirements of the Quali - fied Side-by-Side mechanism. At present, the Side-by-Side application exemption is not available for business years commencing before 2025 nor does it apply to groups should whose UPE is in a non-qualified jurisdiction. Nevertheless, if South Korea were to meet the requirements for the Quali - fied Side-by-Side mechanism through amendments to domestic tax laws, it is anticipated that taxpayer- favourable retroactive application could be permitted in accordance with the policy with the intent of the OECD reform. In that scenario, it is highly likely that the Korean government would consider applying the revised rules to fiscal years beginning on or after 1 January 2026, to mitigate uncertainties for affected enterprises. Furthermore, the special provision commonly referred to as the UPE Safe Harbour carries particular signifi - cance for Korean-headed multinational enterprises as under this rule, the UTPR top-up tax allocated to the jurisdiction of the UPE is deemed to be zero where the UPE is located in a jurisdiction that has implemented a Qualified Domestic Minimum Top-up Tax. The UPE Safe Harbour rule applies only where the relevant domestic minimum tax regime is recognised as quali - fied and was in operation as of 1 January 2026. Given that South Korea’s statutory corporate income tax rate exceeds the minimum rate of 15% and that the DMTT takes effect from 2026, it is expected that multination - al enterprise groups with a UPE in Korea will be able to apply this special provision from 2026. Its defini - tive availability, however, will hinge on whether Korea’s
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