Article 11-2 of the Law for Coordination of International Tax Affairs (LCITA) in Korea is a specific provision within the broader framework of the LCITA, which is designed to prevent double taxation and tax avoidance, and to facilitate international cooperation in tax matters. The LCITA is the principal legislative basis for Korea’s transfer pricing, international tax adjustments, and related-party transaction rules.

Article 11-2: Content and Purpose

While the provided search results do not include the verbatim text of Article 11-2, they indicate that the LCITA covers a range of international tax issues, including transfer pricing, the application of arm’s length principles, and the exchange of tax information. Article 11-2 is likely to be a provision related to these core topics, possibly addressing a specific aspect such as documentation requirements, adjustments, or the application of transfer pricing rules to certain transactions.

Key Points from the LCITA and Related Provisions

• The LCITA empowers the Korean tax authorities to adjust transfer prices to the arm’s length price in transactions between related parties, ensuring that profits are appropriately allocated and taxed in Korea.
• The law aligns with OECD BEPS (Base Erosion and Profit Shifting) recommendations, particularly regarding intangibles, risk allocation, and high-risk transactions.
• The LCITA also contains provisions for the exchange of tax and financial information with other countries, cooperation in tax audits, and the enforcement of tax treaties.
• The law is periodically updated to reflect changes in international standards and domestic policy, as evidenced by frequent amendments and enforcement decrees.

Summary Table

Provision	Focus Area	Relevance to Article 11-2
Article 5	Arm’s Length Principle for Transfer Pricing	Related to transfer pricing rules
Article 11-2	(Exact content not provided in results)	Likely details on transfer pricing or documentation
Article 31	Exchange of Tax and Financial Information	International cooperation
Enforcement Decrees	Detailed implementation of LCITA articles	May elaborate on Article 11-2

Country by Country Report

Article 11-2 of the LCITA is directly related to Korea’s implementation of Country-by-Country Reporting (CbCR) obligations for multinational enterprise (MNE) groups. This article, along with related enforcement decrees and supplementary regulations, forms the legal basis for requiring Korean entities to submit CbC reports in accordance with OECD BEPS Action 13 recommendations.

Key Points of the Relationship

• CbCR Requirement: Article 11-2, together with Article 21-2 of the Presidential Enforcement Decree (PED) of the LCITA, mandates that Korean ultimate parent companies of MNE groups with consolidated revenue exceeding KRW 1 trillion (or EUR 750 million for foreign parents in countries without local CbCR rules) must prepare and submit a CbC report.
• Alignment with OECD Standards: Korea’s CbCR rules closely follow the OECD’s content and threshold requirements for CbC reporting, ensuring consistency with global standards.
• Reporting Entities: The obligation applies to:
  • Korean-headquartered MNEs meeting the revenue threshold.
  • Korean subsidiaries or branches of foreign MNEs, if the foreign parent is not obligated to file a CbC report or if information exchange with Korea is not ensured.
• Filing and Notification Deadlines:
  • The CbC report must be filed within 12 months of the fiscal year-end.
  • A notification identifying the reporting entity must be submitted within 6 months of the fiscal year-end.
• Submission Method: Reports are submitted electronically via the National Tax Service’s HomeTax system.
• Penalties for Non-Compliance: Failure to comply with CbCR obligations can result in significant penalties, including monetary fines and shifting of the burden of proof to the taxpayer.
• Information Exchange: Korea participates in the Multilateral Competent Authority Agreement (CbC MCAA) and has information exchange agreements with numerous countries, facilitating the automatic exchange of CbC reports.