PwC Korea

The ins and outs of the Korean Transfer Pricing System

Justin (Junghwan) Cho is a transfer pricing partner at PwC Korea who has accumulated 18 years of experience as a transfer pricing specialist in Korea and the U.S. He currently leads transfer pricing practices in Korea for major multinational companies such as Samsung, LG, POSCO, Hyundai Motor, CJ, Lotte, SK, Doosan, etc. Here, Justin sheds some light on the subject of transfer pricing in Korea.


How would you characterise Korea’s Transfer Pricing environment?

After introducing transfer pricing regulations in 1995, Korea has built the regulations as well as practices in line with OECD developments over decades.

I believe that Korea would be one of the most developed countries in Asia from transfer pricing perspectives in the future.

Recent trends in the sector include increasing tougher audit environment, like in many other countries and focus on intangible transactions.


What methods of transfer pricing are currently available there?

As a member country of OECD, Korea follows methods defined in OECD transfer pricing guidelines.


Are there any challenges related to transfer pricing that companies should be aware of?

-In accordance with the G20/OECD Base Erosion and Profit Shifting (“BEPS”) project, Action 13 compliance has been enacted from 2016 in Korea.

-All domestic corporations and foreign corporations in Korea, whose international-related party transaction amounts exceed KRW 50 billion and sales revenue exceed KRW 100 billion are required to annually submit the Master file and the Local file.

-The ultimate parent company of a Multinational Enterprise Group (“MNE Group”) domiciled in Korea whose consolidated sales revenue for the preceding year exceeds KRW 1 trillion (approximately EUR 750 million) should prepare and submit the CbC Report.


How might companies tackle these challenges?

Most companies have just started to evaluate their risk exposure from the new documentation requirements, while some companies are upgrading their system to gather information and prepare the documentation more adequately.


What are your top tips for maintaining compliancy for transfer pricing in Korea?

  • Take a fresh look at your company’s operational and tax footprint.
  • Make adjustments before earnings are affected.
  • Check your systems preparedness for increased compliance obligations and disputes.
  • Stay tuned on the development of BEPS compliances in each territory and step ahead for the preparation of the compliances.


Do you have a mantra or motto you live by when it comes to helping your clients with transfer pricing?

 Transfer pricing is more than tax issues. Transfer pricing structure should be designed in line with business facts and strategies. Substance is always over the form.


 Is there anything else you would like to add?

 New reporting requirements for larger companies will make detailed country-by-country tax and financial information visible to many eyes, and possibly (in the future) not just those of tax authorities. In addition, the volume of data disclosed will be much more than companies are currently reporting worldwide, so companies should be more careful to prepare the documentation.

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