NTS Chief Explains Korea's New Business Friendly Tax Strategy To Europeans

by Mary Swire, Tax-News.com, Hong Kong

09 June 2004

In a speech organised by the European Chamber of Commerce in Korea, the head of the National Tax Service Lee Yong-sup reiterated the government’s new business friendly policy towards tax administration, which will see Korean laws brought more into line with international norms.

"To this end, we are in the process of revising those rulings in the international taxation field that have been cumbersome to taxpayers, controversial and are related to new types of cross-border transactions, based on global standards such as OECD Model Tax Convention Commentaries," Lee told the delegates at the recent lunch meeting.

Amongst the laws under review are those with issues arising from permanent establishment legislation, personal service and royalty payments, transfer pricing issues and securities lending transactions.

The NTS has also announced its intention to reform the way that it undertakes transfer pricing audits, which are to be shortened from five years to three years and merged into regular company tax audits, with the changes taking place in August this year.

"It has been decided that a tax audit for transfer pricing will not be conducted separately unless there is a clear indication of tax evasion. Instead a transfer pricing audit will be incorporated in the course of normal tax audits," explained Lee.

As an added sweetener to both domestic and international business for staying on the right side of the tax laws, Lee announced that “exemplary taxpayers” will be identified by the NTS and rewarded with a three year exemption from future tax audits.

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