Korea: Master file and local file templates are released

Korea: Master and local file templates are released

Korea’s Ministry of Strategy and Finance released templates of the “master file” and “local file” in an effort to implement changes to the tax law that require certain reporting of transactions with cross-border related parties.

Related content

Read unofficial English translations of the master file template [PDF 218 KB] and the local file template [PDF 207 KB].

Background

Korea’s parliament in December 2015 approved legislation to implement the OECD’s base erosion and profit shifting (BEPS) recommendations. Among the legislative rules are requirements for all Korean domestic corporations, and all foreign corporations with a domestic place of business in Korea, that are engaged in certain cross-border related-party transactions to file both master file and local file reports. 

The Korean rules require—for fiscal years beginning on or after 1 January 2016—the filing of both master files and local files by all domestic corporations having a Korean domestic place of business if:

  • The volume of cross-border related-party transactions exceeds KRW 50 billion (approximately U.S. $42.5 million); and 
  • The sales revenue exceeds KRW 100 billion (approximately U.S. $85 million).

These rules were implemented by a “presidential enforcement decree” to the Korean law that is known in English as: “Law for the Coordination of International Tax Affairs” or LCITA.

Templates released

Korea’s Ministry of Strategy and Finance announced an amendment to the LCITA enforcement rule, and included the “fixed templates” for both the master file and local file to be used by taxpayers that are subject to the new reporting rules. Among the revisions are the following provisions:

  • Cross-border related-party transactions volume that exceeds KRW 50 billion is determined by the total amount of goods, services, and loan transactions as provided by Form #8-1. 
  • When there are two or more affected taxpayers that are part of a taxpayer group filing the same consolidated financial statements, the subsidiary maintaining the ultimate level of control within each business segment may be responsible for the submission.

KPMG observation

Notwithstanding that the templates for the local file and master file are “fixed,” it has been observed that it is not yet certain whether the tax authorities would accept non-authorized master file or local file templates (stated another way, there is yet no legislation addressing submissions of non-authorized templates). Therefore, corporations that have a parent company located outside of Korea and that are attempting to comply with their own local reporting rules need to consider whether it would be appropriate to amend their templates when submitting the master file and local file to the tax authorities in Korea.

 

For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Korea:

Gil Won Kang | 82-2-2112-0907 | gilwonkang@kr.kpmg.com

Kyoung Lee | 82-2-2112-0988 | klee22@kr.kpmg.com

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