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Transfer Pricing

"Kim & Chang’s tax team provides outstanding tax services with substantial expertise
and experience in both tax and transfer pricing areas."
– Asialaw Profiles 2018

Overview

Our Transfer Pricing Practice is the largest among Korean law firms with over 55 professionals, and comprised of certified accountants, lawyers, economists, tax attorneys and industry experts.

Our key service areas include providing effective defense strategies and resolution of transfer pricing issues raised by Korean or foreign tax authorities and other related matters, including global transfer pricing policy setting, transfer pricing documentation and Advance Pricing Agreements (APAs) to mitigate future transfer pricing-related risks and Mutual Agreement Procedures (MAPs) to resolve transfer pricing disputes and double taxation.

Based on in-depth understanding of transfer pricing theories and extensive experience in both international and domestic fields, our Transfer Pricing Practice has built a leading position in a wide range of transfer pricing services.

Key Servicesshow

Establishment of Transfer Pricing Policy

The development and implementation of a consistent transfer pricing policy is important as it may be broadly applied to domestic and foreign group affiliates.  Also, as part of the OECD BEPS initiative, many foreign tax authorities require disclosure of group-wide transfer pricing policies, and as such, a thorough review of the existing transfer pricing policy is essential.  Our Transfer Pricing Practice advises major domestic and foreign multinational companies in developing, documenting, and implementing transfer pricing policies and methodologies.  In addition, we have extensive experience in reviewing transfer pricing issues arising from business restructurings and advising on post-restructuring transfer pricing policies. 

 

Transfer Pricing Documentation and Tax Audit Defense

Korean and foreign tax authorities often require taxpayers to prepare and/or submit transfer pricing documentation of various kinds, either on a regular basis or in connection with an audit.  Advance review of all such documentation can provide an opportunity for taxpayers to evaluate their transfer pricing issues and prepare defense strategies while maintaining contemporaneous transfer pricing documentation can result in a waiver of certain penalties under Korean law. 

 

Our Transfer Pricing Practice has carried out more than 1,000 projects involving transfer pricing analysis and audit defense over the last 20 years since adoption of the transfer pricing taxation regime in Korea, and has successfully assisted our clients in building defense strategies leveraging our expertise and experience in various industries.  Currently, we are serving a variety of domestic and foreign multinational conglomerates in preparing the Comprehensive Report on International Transactions, comprising the master file, local file and country-by-country report under the new transfer pricing documentation requirements in line with BEPS Action Plan 13.

 

Advance Pricing Agreement (APA) and Mutual Agreement Procedure (MAP)

Taxpayers can mitigate or manage their transfer pricing risk through APAs and resolve transfer pricing adjustment and double taxation through MAPs.  Since the inception of the Korean APA program in 1997, our Transfer Pricing Practice has handled the majority (more than 200) of all APA cases in Korea, including the first APA in Korea’s history and conclusion of the APAs in all industries.  Many APAs and MAPs involve inbound transactions, but our practice also handles outbound transactions.  Our experience includes assisting a major multinational company headquartered in Korea in successfully concluding a MAP case in 2012 concerning transfer pricing assessments made in China, which was the first ever Korea-China MAP case.  Our Transfer Pricing Practice also successfully concluded Korea’s first APA for a private equity fund in 2015.

 

Tax Appeal and Tax Litigation of Transfer Pricing Issue

In addition to MAPs involving discussions between the tax authorities of different countries based on tax treaties, transfer pricing assessments and disputes may be resolved through domestic tax appeals and court litigation.  Our Transfer Pricing Practice, working together with litigators of our Tax Audit and Dispute Resolution Group, has an outstanding success record from numerous major tax appeals and litigation cases in Korea.

Key Experiencesshow

Our Transfer Pricing Practice provides advice to clients operating in various industries including automotive, banking & finance, chemicals, engineering & construction, food, healthcare, industrial manufacturing, IT, pharmaceutical, retail and transportation sectors in relation to various types of intercompany transactions, including manufacturing, distribution, royalty, intangible transfers, services and financing.  In particular, the Financial Services Transfer Pricing Team within our practice specializes in transfer pricing analyses for financial institutions and has built an unrivaled reputation in the areas of transfer pricing documentation and tax audit defense.

 

Major APA/MAP Matters
  • Represented Korea’s leading construction equipment company in connection with a bilateral APA. 

  • Represented Korea’s leading automotive company in connection with a bilateral APA.

  • Represented Korea’s leading glass manufacturer in connection with a unilateral APA.

  • Represented a global leading semiconductor chip manufacturer in connection with a bilateral APA. 

  • Represented a global leading software company in connection with a bilateral APA. 

  • Represented Korea’s leading consumer electronics manufacturer in connection with a bilateral APA and MAP. 

  • Represented a global leading pharmaceutical company in connection with a unilateral APA.

  • Represented Korea’s leading foreign invested financial institution in connection with a unilateral APA.

  • Represented a global leading semiconductor equipment manufacturer in connection with a bilateral APA.

  • Represented a global leading computer and peripherals manufacturer in connection with a bilateral APA.

  • Represented a global leading industrial products manufacturer in connection with a bilateral APA.

  • Represented a global leading computer storage device solution provider in connection with a unilateral APA.

  • Represented a global leading tobacco company in connection with a MAP.

  • Represented a Korea’s leading paper and consumer company in connection with a MAP.

  • Represented a global leading investment bank in connection with a MAP. 

  • Represented a global leading chemical company in connection with a MAP.

  • Represented a global leading energy solution company in connection with a MAP.

  • Represented a global leading household item company in connection with a MAP.

 

Major Transfer Pricing Litigations
  • Represented a global multinational pharmaceutical company in winning a landmark Supreme Court appeal in relation to a comparable uncontrolled price issue.

  • Represented a foreign fund in connection with transfer pricing litigation in relation to intercompany interest rates of asset-backed securities issued by Korean SPCs of the fund.

 

Major Cases of TP Policy Establishment
  • Advised in the review and establishment of a transfer pricing policy for a Korean securities company.

  • Advised in the establishment of a global transfer pricing policy and preparation of an implementation manual for a Korean fashion company.

  • Advised in the establishment of transfer pricing policy and preparation of an implementation manual for a Korean heavy equipment company on the intercompany transactions with its Chinese subsidiaries. 

  • Advised in the review of a transfer pricing policy for a Korean construction equipment company. 

 

Major BEPS Project
  • Assisted in the BEPS risk assessment of Korea’s leading automotive parts manufacturer and optimization of its global transfer pricing policy.

  • Provided comprehensive BEPS consultation for Korea’s leading consumer electronics manufacturer.

  • Provided comprehensive BEPS consultation for a Korean IT company.

  •  Assisted in the preparation of global transfer pricing documentation in line with BEPS action plan 13 for major domestic companies of multinational conglomerates.

 

Other Transfer Pricing Services Credentials 
  • Provided consultation on the legislation proceedings to introduce a provision in the law allowing the result of a MAP with one country to be applied to similar transactions with non-MAP countries.

  • Advised clients on the determination of fair market value on the transaction between domestic related parties.

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