South Korea has published draft 2023 Tax Law Amendment Bill, noting that the UTPR rules would apply from January 1, 2025.
A minimum global tax rate under the OECD’s Pillar two initiative is a significant and important change to the international tax scene. The Pillar Two rules, commonly known as GLoBE, ensure large multinational enterprise pay a minimum level of tax on the income arising in each of the jurisdictions where they operate.
More specifically, the tax rules provide for a coordinated system of taxation that imposes a top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum rate set at 15 percent.
South Korea is the first country in the world to enact global minimum tax rules in its domestic legislation. The tax rules were enacted as Part of the 2023 Tax Reform Act to align with the OECD Pillar Two rules. The rules provide for two interlocking measures, the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR).
Both the IIR and the UTPR were to apply from January 1, 2024. However, the government has now deferred implementation of the UTPR from 2024 till 2025 to align its implementation with that of other countries.
The IIR will be implemented as scheduled from 2024.