Korea Act on the Adjustment of International Taxes (AITA), Chapter V — GloBE Rules (Pillar Two)

Mechanism

Korea's first-mover status and legal structure

Korea's National Assembly passed Chapter V amendments to the Act on the Adjustment of International Taxes (AITA; 국제조세조정에관한법률) on 23 December 2022. The amended statute was promulgated on 31 December 2022, making Korea the first jurisdiction worldwide to enact binding primary legislation implementing the OECD/G20 Pillar Two GloBE Model Rules (published December 2021). This predates the EU Council Directive (2022/2523; adopted 14 December 2022) by a matter of weeks in legislative timeline but was enacted on the same broad schedule — both jurisdictions racing to implement before their fiscal year 2024 effective dates.

The amendment inserts new Articles 60–83 into AITA Chapter V, comprehensively replacing the prior transfer-pricing chapter content with the GloBE computational mechanics. Existing penalty articles are renumbered to begin at Article 84. This direct-codification approach — rewriting the OECD Model Rules into domestic statutory language rather than issuing a separate GloBE Act — is structurally distinct from Canada's stand-alone Global Minimum Tax Act and broadly similar to the UK's Finance (No. 2) Act 2023 approach.

Charges enacted

Korea's choice to omit a QDMTT at the initial enactment stage is structurally significant: without a domestic top-up, Korean-located profits of in-scope MNEs are exposed to foreign IIR charges (EU Member State IIRs, UK MTT, or other UPE-state IIRs) if the Korean effective tax rate falls below 15%. Korea has a statutory corporate income tax rate of 9%–24% (progressive), with a headline rate of 24% on large-company income — well above 15% — so most Korean-source income is unlikely to trigger a foreign IIR. The QDMTT discussion is primarily about retaining Korean fiscal authority over any residual sub-15% situations (e.g., companies benefiting from large investment tax credits under the K-Chips Act).

Revenue threshold and scope

The law adopts the OECD standard verbatim:

• In-scope groups: MNE groups with consolidated annual revenue ≥ EUR 750 million in

at least 2 of the 4 preceding fiscal years.

• Constituent entities: Korean members of in-scope MNE groups — both Korean-headquartered

MNEs (Samsung, LG, SK, Hyundai-Kia et al.) and inbound subsidiaries of foreign MNE groups operating in Korea.

• Excluded entities: Investment funds and pension funds consistent with OECD exclusion

carve-outs.

Interaction with K-Chips Act (2023) investment tax credits

The AITA Chapter V GloBE rules directly intersect with the Semiconductor Industry Competitiveness Enhancement Act (K-Chips Act; 2023-03-31) and subsequent amendments. The K-Chips Act provides enhanced investment tax credits (up to 25% for large firms in designated facilities) that reduce Korean corporate tax liability and therefore reduce the GloBE ETR. Three scenarios:

1. ETR stays above 15% despite credits: No top-up triggered. K-Chips credits retain full after-tax value. 2. Credits push ETR below 15%: Under GloBE rules, non-refundable tax credits reduce covered taxes and therefore reduce GloBE ETR. If the resulting ETR falls below 15%, a top-up charge applies — collected by a foreign IIR (or, if Korea enacts a QDMTT, by Korea itself). 3. Credits structured as Qualifying Refundable Tax Credits (QRTCs): OECD Administrative Guidance clarifies that refundable tax credits paid within 4 years retain their economic value under GloBE because they are treated as income rather than covered-tax reductions. Korea's K-Chips credits are primarily non-refundable, so they are more exposed to GloBE friction than if they were structured as refundable grants.

This interaction is the central reason the QDMTT proposal has remained live in Korean tax reform discussions — a domestic QDMTT would ensure Korea collects any residual top-up on K-Chips credit beneficiaries rather than ceding that revenue to the UPE state.

Relationship to the broader Pillar Two architecture

Related Korea filings

• 2023-03-31-south-korea-k-chips-act — investment tax credits that interact with Pillar Two ETR
• 2024-11-15-korea-outbound-investment-screening — parallel Korea regulatory action in the same fiscal cycle
• 2026-01-29-south-korea-semiconductor-special-act — successor industrial-policy act

Downstream implications

• Samsung, SK Hynix, LG, Hyundai-Kia: Every Korean-headquartered MNE group above the

EUR 750M threshold is in scope for the IIR as a Korean ultimate parent. These companies must compute GloBE ETR across all jurisdictions and collect top-up on subsidiaries in sub-15%-ETR jurisdictions (e.g., manufacturing in Vietnam, Malaysia, or tax-favoured SEZs). The compliance and structural burden is significant for Korean conglomerates with complex multi-jurisdictional supply chains.

• Inbound MNEs operating in Korea: US, EU, and Japanese MNE groups with Korean

subsidiaries face Korean IIR top-up if their Korean ETR (post-credits) falls below 15%. Until Korea enacts a QDMTT, the IIR is the only collection mechanism, meaning top-up on Korean operations of inbound MNEs is collected at the UPE level by the UPE's IIR state — not by Korea. Korea cedes this revenue without a QDMTT.

• Tax treaty interactions: Korea's extensive bilateral tax treaty network (80+ treaties)

is not directly overridden by the GloBE rules — the GloBE rules are designed to operate alongside treaties. However, treaty-based reduced withholding rates do not shield constituents from GloBE top-up, which operates at the jurisdictional ETR level.

• K-Chips Act friction: The structural mismatch between non-refundable K-Chips credits

and GloBE covered-tax mechanics means that Korea's flagship semiconductor industrial policy is partially undermined by Pillar Two for the largest global MNEs. This has created political pressure for either a QDMTT (to retain top-up domestically) or a conversion of K-Chips credits to QRTC-eligible refundable structures.

• Korea as a GloBE bellwether: As the first national primary law, Korea's AITA Chapter V

served as a reference model for non-EU common-law and civil-law jurisdictions designing their own Pillar Two statutes. Korea's enforcement experience (first IIR returns due for FY 2024) provides early empirical data on GloBE computation practices and audit approaches.

Open questions

• QDMTT enactment timeline: Korea has not yet enacted a QDMTT as of the 2024 reform.

If enacted, it would retroactively (from an architecture standpoint) protect Korean fiscal revenue on inbound MNE operations and resolve the K-Chips/GloBE friction for Korean-located constituents.

• UTPR effectiveness and US reciprocity: The UTPR operative from FY 1 January 2025 enables

Korea to collect top-up on Korean entities of US-parented MNE groups where the US has not enacted a qualifying IIR. US-Korea trade relations and the 2025-26 US trade reset add diplomatic complexity to this mechanism.

• GloBE ETR computation in Korean statute vs. OECD Admin Guidance: AITA Chapter V was

enacted before several rounds of OECD Administrative Guidance (2022–2024). Korea must issue subordinate enforcement decrees (시행령) and enforcement rules (시행규칙) to keep domestic computation rules aligned with evolving OECD consensus.

• First IIR assessment cycle: FY 2024 is the first operative year. Korean tax authority

(NTS) enforcement practices for GloBE — audit selection, covered-tax verification, substance-based income exclusion computation — will set precedents for the Asia-Pacific Pillar Two enforcement landscape.