Global

Details

  • Service: Tax, Global Indirect Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 7/16/2013

Korea - Deemed tax reporting due 31 July; constitutionality questioned 

July 16: The first voluntary reporting by corporations for the deemed gift tax concerning the “unfair funneling of work to subsidiaries” is due 31 July 2013.

With the approaching filing due date, questions are being raised as to the constitutionality of the relevant legislation (Article 45, Subparagraph 3 of the Inheritance tax and gift tax law). The three main constitutional issues concern:


  • Unrealized gains taxation
  • Double taxation issue
  • Violation of the liberty of contract

Corporations that benefit from “unfair funneling of work to subsidiaries” would have an increase to their profit, leading to an increase in the value of shares in the future—therefore, although the gain on disposal of shares may not be currently finalized, it still could be taxed as a deemed gift.


Read a June 2013 report [PDF 2 MB] prepared by the KPMG member firm in Korea: Tax Brief / June 2013


Also discussed in the KPMG report are recent tax court cases and administrative rulings concerning:


  • Taxability on capital gains from the land upon condemnation and the recognition period for the liquidation proceed
  • Calculation of a resident’s dividend income received from a private investment special purpose company
  • Bad debts tax credit on VAT on receivables conversed to shares upon an approval of corporate reorganization plan
  • Supply time for installment payments for apartments with previously unsold purchasing rights

The KPMG report also includes a discussion of foreign tax credits.




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