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NTS addresses double taxation problems

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A man passes by the National Tax Service (NTS) building in Sejong City in this undated file photo. Newsis
A man passes by the National Tax Service (NTS) building in Sejong City in this undated file photo. Newsis

By Yoon Ja-young

The National Tax Service (NTS) announced that it has addressed hundreds of double taxation issues that weighed on businesses.

The tax agency said it has resolved a total of 430 cases related to double taxation jointly with foreign tax authorities under double taxation avoidance agreements between March 2018 and October this year. March 2018 is when the NTS launched the Mutual Agreement Procedure Division, which is in charge of resolving the issue through Advance Pricing Arrangement (APA) and Mutual Agreement Procedure (MAP) schemes.

The division has had a dozen meetings per year with foreign tax authorities. Despite the unprecedented pandemic and subsequent lockdowns in 2020 and 2021 across the globe, it has actively responded to the double taxation burden on taxpayers through video conference, conference calls, and correspondence.

Under the MAP scheme, the NTS and its counterparts overseas discuss and resolve taxpayers' double taxation burden caused by overlapping tax jurisdictions ex post facto. Since its launch five years ago, the division has resolved a total of 190 double taxation cases or an annual average of 39.3 cases by October this year, up by 94.6 percent from 20.2 cases in the previous five years.

The tax agency also introduced the APA scheme that enables companies engaged in international transactions, either Korean businesses operating overseas or foreign companies doing business in Korea, to conduct business without worrying about transfer pricing tax audits. Transfer pricing refers to the pricing of international transactions between related companies within a multinational corporation, such as between a Korean parent company and a foreign subsidiary, and it often becomes a subject of disputes in taxation.

"While tax appeals in certain countries would cost a significant amount of time and effort for companies doing overseas businesses, these schemes are far more convenient as well as cost-effective for taxpayers in responding to double taxation issues," a spokesperson for the NTS said.

"At the same time, the NTS will remain fully committed to resolving the burden of double taxation by paying close attention to the main points of international businesses operating in Korea regarding tax matters and running schemes in accordance with the Principle of Non-Discrimination in Tax Treaties," the spokesperson added.

Yoon Ja-young

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