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  • Korean Global Companies Need to Prepare for Digital Tax
    2020-02-12 hit 1326

    Korean Global Companies Need to Prepare for Digital Tax

     

    - EU will introduce the tax even though the OECD agreement fails Need to work on internal accounting and financial systems -

     

    As advanced countries such as the European Union (EU) have a strong will to introduce digital services tax, it is argued that Korean global companies need to be prepared for it.

     

    According to a report titled The EU's Introduction of Digital Services Tax and Countermeasures issued by the Brussels Branch of the Korea International Trade Association (Chairman: Kim Young-ju) on February 12th, as the EU’s member states have failed to agree on the introduction of digital service tax failed in December 2018, the Organization for Economic Cooperation and Development (OECD) will lead an international agreement on digital tax by the end of this year. However, some EU member states have decided to introduce their own digital service tax until the agreement is reached and Korean companies' attention is required.

     

    Digital services tax entered into effect in Italy and Austria in January and the UK and Czech Republic will implement it in April and in June, respectively. France was the first EU member state to pass the digital services tax bill in July last year, but the taxes have been suspended for a while until the end of the year.

     

    According to the report, the EU targets digital services tax on information and communication technology (ICT) companies whose main business is online and mobile platform operations and no Korean company has been taxed yet. However, the OECD's digital tax extends the taxable scope to consumer businesses, including home appliances and automobiles, franchises, and luxury brands that utilize ICT technologies and it is expected that a large number of Korean companies will be taxed. When the consensus is reached in the OECD, EU member states that have separately implemented digital service taxes will follow.

     

    The report said, "If the OECD does not reach the agreement by the end of the year, not only EU member states but also the European Commission will push for digital services taxes at the EU level," and analyzed, This is a strategy of one stone three birds that encourages the OECD's rapid agreement, prevents tax avoidance of global ICT companies, and enhances their bargaining power over the United States at the same time."

     

    The report also stated, "When OECD's digital tax is introduced, administrative costs such as the establishment of a system for the distribution of sales by each country and tax settlement, and legal and accounting advice will be incurred, and added, Korean companies are required to adjust their internal accounting and financial system to the global standard and put more emphasis on other factors such as marketability and infrastructure than tax benefits when selecting overseas locations.”

     

    Kang Nho-kyung at the Brussels office of the Korea International Trade Association said, There is a growing consensus that the taxation rights of the countries in which digital services are provided need to be strengthened, and added, Korean companies need to pay attention to the discussion of digital tax at the OECD level, and even if the agreement cannot be reached, they should be prepared as there is a strong commitment to implementing digital services tax at the EU level.


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