Technical Update from Korea: new thin cap rules

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Technical Update from Korea: new thin cap rules

as.jpg

TP Week correspondent DJ Yeo of Kim & Chang reports on changes to Korea’s thin capitalisation rules

ak.jpg

The Ministry of Finance and Economy has proposed changing certain thin capitalisation related regulations. The changes are expected to be enacted by tomorrow (December 28 2007) and be effective and applicable to taxable years beginning on or after January 1 2008.

First, the proposal would remove the current beneficial debt to equity ratio of 6 to 1 applicable to companies engaged in a financial business (for example, banks, ABS SPCs), making such companies subject to the same debt to equity ratio of 3 to 1 as all other businesses.

Second, in computing the debt to equity ratio, equity will be measured by the accumulated daily balance of net equity. Currently, equity has been measured by the year-end balance of the equity; thus, it has been possible to avoid thin capitalisation implications by injecting an additional amount of capital before year end.

More details next week.

more across site & shared bottom lb ros

More from across our site

Tax expert Craig Hillier agrees with the comparison of pillar two to using a sledgehammer to crack a nut
The amount is reported to be up 57% from the £5.6bn that the UK tax agency believes was underpaid in the previous year
The US president also unveiled a new 50% levy on copper imports; in other news, a UK wealth tax proposal has been criticised by the Institute for Fiscal Studies
Wim Wuyts, who had been head of the specialist tax network since 2017, is moving on to a new role with WTS’s Belgian member firm
MNEs are increasingly using algorithmic tools in TP. Sahasranshu Dash argues that data ethics should therefore plug directly into the TP design process
The Institute of Chartered Accountants in England and Wales also queried whether HMRC resources could be better spent scrutinising larger entities
Grant Thornton’s Austria tax head likens his practice to an escape room, shares his football coaching ambitions, and explains why tax is cool
Awards
ITR is delighted to reveal all the shortlisted nominees for the 2025 EMEA Tax Awards
Awards
ITR is delighted to reveal all the shortlisted nominees for the 2025 Asia-Pacific Tax Awards
The fates of pillars one and two hang in the balance after the US successfully threw its weight around in G7 and Canadian negotiations
Gift this article