Minimum Corporate Tax Rate Set at 15%
The G20 Inclusive Framework and the OECD made their global corporate tax agreement public on July 1. According to it, the top 100 global enterprises must pay taxes in countries where their sales are large as well as their home countries starting from 2023. In addition, a minimum corporate tax rate of 15 percent will be applied to those multinational companies. Of the 139 members of the framework, only nine, including Ireland, are currently opposed to the agreement.
The accrual-basis taxation will be applied to those with consolidated annual sales of at least 20 billion euros and an annual operating profit of more than 10 percent. Samsung Electronics and SK Hynix are likely to be included in this group. The minimum corporate tax rate will be applied to those with consolidated annual sales of 750 million euros or more.
According to the agreement, the South Korean government can impose taxes on the global enterprises including Google and Apple and foreign governments can do so in relation to Samsung Electronics and so on.
The agreement stipulates that 10 percent of a multinational company’s global profit is regarded as an ordinary profit, this profit is subject to taxation in its home country, and taxation on 20 percent to 30 percent of the extra profit will be carried out on an accrual basis.
As mentioned above, Samsung Electronics and SK Hynix are likely to be affected by the agreement. Last year, Samsung Electronics posted sales of 236.81 trillion won along with an operating profit ratio of 15.19 percent. The figures of SK Hynix were 31,900.4 billion won and 15.6 percent.
The impact of the minimum corporate tax rate on the South Korean companies is likely to be rather limited. This is because the corporate tax rates in South Korea are relatively high, up to 25 percent to be specific.
The G20 member states are aiming to finalize the agreement at their summit scheduled for October this year so that it can take effect in 2023. In addition, they are considering lowering the sales threshold to 10 billion euros in 2030.