The Korea Herald


Samsung Electronics, SK hynix likely to be subjected to new global tax rules

By Park Han-na

Published : July 2, 2021 - 17:20

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The Organisation for Economic Co-operation and Development (OECD) headquarters is pictured in Paris, France. (AP) The Organisation for Economic Co-operation and Development (OECD) headquarters is pictured in Paris, France. (AP)

South Korean conglomerates Samsung Electronics and SK hynix are likely to be subject to a global minimum tax rate that multinational companies will have to pay regardless of where their headquarters are.

Some 130 countries and jurisdictions, representing more than 90 percent of global gross domestic product, endorsed a set of tax plans aimed at addressing the tax challenges arising from the digitalization of the economy, according to the Paris-based Organization for Economic Cooperation and Development on Thursday.

The international tax system consists of a two pillar solution.

Pillar One aims to ensure that digitally intensive or consumer-facing multinational enterprises with revenue above 20 billion euros ($23.65 billion) pay taxes where they conduct sustained and significant business, even if they do not have a physical presence.

Under the rule, 20 percent to 30 percent of residual profit -- defined as profit in excess of 10 percent of revenue -- will be allocated to market jurisdictions.

Pillar Two proposes that large multinational businesses with consolidated revenues of 750 million euros or more pay a minimum corporate tax of at least 15 percent.

Among Korean companies, Samsung Electronics and SK hynix are expected to be affected by the first pillar.

“Samsung Electronics is highly likely to be included in the companies to be subject to the new rule as its revenue far exceeds 20 billion euros and is unlikely to drop below that level,” a senior official in charge of corporate taxation policy at the Ministry of Economy and Finance said during a press briefing Friday.

SK hynix’s revenue exceeded the filing threshold last year, but whether the new taxation rule affects the chipmaker will depend on the business environment and the global economic situation in the year that the mechanism actually comes into effect, he said.

In 2020 Samsung Electronics posted 236.87 trillion won in revenue, and SK hynix brought in 31.9 trillion won.

But the Finance Ministry shrugged off concerns over the heavier tax burdens that companies will have to bear.

“Since the double taxation adjustment procedure is separately prepared, the corporate tax burden is more neutral than before the introduction of Pillar One, so the impact on corporate competitiveness is expected to be minimal,” he said.

The new international tax rules are expected to take effect in 2023 after details of the agreement are finalized by October. More discussion will be take place at the meeting of the G-20 finance ministers in Venice, Italy, next week.