• 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.

©2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.


Share this

Share this


Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)

Already a Subscriber? Login

Not a member? Subscribe now