1. Overview of the Regime
With the introduction and implementation of the Pillar Two, as part of the OECD/G20 BEPS Project, into the Korean Law for Coordination of International Tax Affairs (LCITA) effective from 2024, new taxation and reporting obligations have arisen for multinational enterprise (MNE) groups meeting certain thresholds.
The global minimum tax (Pillar Two) is designed to prevent tax avoidance and base erosion by multinational enterprises by imposing a top-up tax where the effective tax rate (ETR) in a jurisdiction falls below 15%.
(1) Where the ETR in a specific jurisdiction is below 15% → Top-up Tax arises
(2) As a general rule, the jurisdiction of the parent entity has the primary taxing right under the Income Inclusion Rule (IIR) (applicable for fiscal years beginning on or after January 1, 2024)
(3) Where necessary, other jurisdictions may impose additional taxation under the Undertaxed Profits Rule (UTPR) (applicable for fiscal years beginning on or after January 1, 2025)
(4) From FY2026, the Korea tax authority may impose tax directly under the Qualified Domestic Minimum Top-up Tax (QDMTT) (applicable for fiscal years beginning on or after January 1, 2026)
2. Scope of Application
Under Article 62 of the LCITA, Pillar Two applies to MNE groups where the consolidated revenue of the ultimate parent entity, as reflected in its consolidated financial statements (with certain adjustments, including the addition of income arising from ordinary business activities that is presented separately), is at least EUR 750 million in at least two of the four fiscal years immediately preceding the relevant fiscal year.
3. Filing Obligation – Global Minimum Tax Information Return (GIR)
Under Article 83 of the LCITA, the Korean Constituent Entity that falls within the scope of Pillar Two is required to file a Global Minimum Tax Information Return (GIR). However, the filing obligation for the Korean Constituent Entity may be exempted if:
(1) another Designated Foreign Filing Constituent Entity within the MNE group files the GIR with its local tax authority; and
(2) such jurisdiction has entered into a GIR Multilateral Competent Authority Agreement (MCAA) with Korea providing for automatic annual exchange of information.
In such cases, the Korean Constituent Entity is instead required to submit a GIR notification (a simplified reporting form used to report information on the Designated Foreign Filing Constituent Entity that files the GIR).
For FY2024, the GIR or GIR notification must be filed with the Korean tax authority within 18 months after the end of the fiscal year (i.e., by June 30, 2026).
From FY2025 onwards, the filing deadline will be within 15 months after the fiscal year-end.
Please note that failure to comply with the GIR or GIR notification filing obligations may result in an administrative penalty of up to KRW 100 million.
4. Conclusion
For FY2024, the Korean Constituent Entity should first assess whether the multinational enterprise (MNE) group to which they belong falls within the scope of Pillar Two.
If the group is within scope, the Korean Constituent Entity should confirm whether a Designated Foreign Filing Constituent Entity (DFE) has been designated within the group and whether such DFE will file the GIR.
If a DFE files the GIR and the DFE’s jurisdiction has entered into the Multilateral Competent Authority Agreement on the Exchange of GIR (GIR MCAA) with Korea, the Korean Constituent Entity is required to submit a GIR notification by June 30, 2026.
If there is no DFE filing the GIR, or if the jurisdiction of the DFE has not entered into the GIR MCAA with Korea, the Korean Constituent Entity must file the GIR directly with the Korean tax authority by June 30, 2026.
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