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South Korea's budget bill for 2023, approved by parliament on 23 December, includes the Korean rules on a global minimum tax (the GloBE Rules). The newly enacted rules are added to the existing Korean Law for the Coordination of International Tax Affairs (the ‘LCITA’) by establishing new Section 5. This section includes five sub-sections and 27 Articles that correspond closely to the OECD’s Pillar Two Model Rules. The rules include an Income Inclusion Rule (IIR) and ‘Supplementary rules for income inclusion’ (referred to as the UTPR in the OECD Model Rules). Both rules will be effective for fiscal years beginning on or after 1 January 2024.  

The takeaway: Now that the new rules are in force, South Korea is the first country to have codified the global minimum tax rules in its domestic legislation. Given the short timeline before the new rules become effective, non-Korean MNEs that have a Korean presence are highly encouraged to assess the impact of the new rules and understand the additional compliance and reporting obligations.