Google Taxed
The Korean government will impose the so-called Google Tax on multinational corporations. On Dec. 23, the Ministry of Strategy & Finance made public the new enforcement ordinances for the amended tax law to that end. The enforcement ordinances are to be pre-announced by Jan. 15 of next year and then become effective on Jan. 29 through a resolution at a Cabinet meeting.
According to the international taxation clauses of the new law, the companies subject to base erosion and profit shifting (BEPS) prevention including Korean companies and the Korean branches of non-Korean companies each with annual sales of more than 100 billion won (US$85 million) and exceeding 50 billion won in terms of annual transaction with affiliate persons abroad have to submit reports to the National Tax Service showing international transaction details like governance structures, transaction relationships, and business details. Those violating this rule are to face a penalty of 30 billion won, and the rule is applied to the tax year starting on the first day of next year.
It seems that about 7 percent of Korean and non-Korean enterprises engaged in cross-border transactions will have to follow the rule. The number is estimated at 600 or so, including Google Korea, Apple Korea, Microsoft Korea and Samsung Electronics.
This measure is to prevent multinational corporations from evading taxes by taking the structure of limited liability companies in their branches. The G20 and OECD member countries recently agreed to turn BEPS prevention into law in order to forestall the practice.