SOUTH KOREA Law and Practice Contributed by: Steve M Kim, Philje Cho, Gijin Hong and Kyu Bin Kang, Lee & Ko
In the case of APA applications filed before 1 January 2021, a roll-back provision could allow the APA to cover a period of up to five years immediately preceding the covered period, whereas for a unilateral APA, the limit for a roll- back is up to three years. For APA applications filed after 1 January 2021, a roll-back provision for a bilateral APA could allow the APA to cover a period of up to seven years immediately preceding the covered period under the APA, whereas for a unilateral APA the limit for a roll-back is up to five years. APA and Suspension of Tax Audit In general, a tax audit is not suspended merely by virtue of the taxpayer under audit filing an APA application. The NTS head office, however, may suspend its audit on transactions during the APA-covered period if the taxpayer appropriately filed an APA on the transactions at issue before receiving pre-notice of a tax audit. 8. Penalties and Documentation 8.1 Transfer Pricing Penalties and Defences There are three main types of TP-related infor - mation that the NTS is entitled to request for submission. TP-Related Forms A taxpayer engaged in international transactions with foreign related parties must submit the fol - lowing information within six months from the end of each fiscal year: • an international transaction statement for each foreign related party (submission is waived if the transaction amount does not reach a certain threshold);
• a summary income statement of each foreign related party that has cross-border transac - tions with a Korean taxpayer (submission is waived if the transaction amount does not reach a certain threshold); and • a form stating the TP method selected and reasons for each related-party transaction – there are separate forms for tangible property transactions, intangible property transactions, service transactions and CCAs (but submis - sion is waived if the transaction amount does not reach a certain threshold). If any part of the international transaction state - ment is not submitted or is false, a fine of KRW5 million may be imposed on each foreign related party with which the Korean taxpayer had a transaction during the year. The Comprehensive Report of International Transactions If a taxpayer is required to submit the CRIT (the threshold is explained in 8.2 Taxpayer Obliga- tions Under the OECD Guidelines ) – consisting of a master file, local file and CbC report – the submission must be made within 12 months from the end of each fiscal year. If all or part of the report is not submitted or is false, a fine of KRW30 million is imposed for each such report. Additionally, for non-compliant taxpayers, the NTS may request the submission of missing reports with 30 days’ notice, and failure to com - ply within such timeframe can trigger interest, which could add up to KRW200 million. Given the foregoing burden of penalties for non- compliant taxpayers, starting from 2022, taxpay - ers will be able to benefit from reduced penalties if taxpayers voluntarily take a pre-emptive meas - ure (ie, submission of missing reports or rectify - ing false information) and the rate of reduction
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