South Korea Transfer Pricing Documentation Requirements
South Korea requires a Master File and Local File where a Korean entity exceeds both a transaction-volume and a revenue threshold, filed electronically within twelve months of year-end. A separate contemporaneous documentation duty applies to any entity with foreign related-party transactions, regardless of those thresholds.
Requirements at a glance
| Requirement | Threshold | Deadline | Deadline type | Language | Penalty |
|---|---|---|---|---|---|
Master File Required | Cross-border related-party transactions > KRW 50bn and sales revenue > KRW 100bn | 12 months after fiscal year-end | Submission deadline The documentation must be filed with the tax authority by the date shown. | EN / KO | Yes (KRW 30m; KRW 60m if both files unfiled) |
Local File Required | Same dual threshold as the Master File | 12 months after fiscal year-end | Submission deadline The documentation must be filed with the tax authority by the date shown. | KO | Yes (KRW 30m; KRW 60m if both files unfiled) |
TP documentation Contemporaneous documentation
Required | Any entity with a foreign related-party transaction, irrespective of the file thresholds | By the return filing date | Preparation deadline The documentation must exist by the date shown and is produced only when the tax authority requests it. Once requested, it must be provided within 60 days. | KO | Yes (non-compliance penalty for late production) |
CbC report Required | Group revenue ≥ KRW 1,000,000m | 12 months after fiscal year-end | Submission deadline The Country-by-Country report is filed by the group's ultimate parent entity; a local notification identifying the reporting entity is filed separately. | — | Yes |
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Scope of the documentation obligation
The Master File and Local File are required where a Korean entity meets two conditions together: cross-border related-party transactions exceeding KRW 50 billion, combining goods, services, intangibles, and financial transactions, and sales revenue exceeding KRW 100 billion. Both thresholds are tested at the level of the local Korean entity, and the files are submitted electronically through the tax authority’s portal within twelve months of the fiscal year-end. The Master File may be submitted in English, with a Korean version required within one month.
A distinct obligation sits beneath the file thresholds. Even where an entity is not caught by the formal Master File and Local File regime, it must prepare and maintain contemporaneous documentation each year where any foreign related-party transaction exists, in line with the general national tax framework.
Distinctive features of the Korean regime
The defining feature of the Korean regime is the genuine separation between the formal file filing and the broader documentation duty, paired with an escalating penalty structure. Non-compliance with the Master File or Local File attracts KRW 30 million, rising to KRW 60 million where both files are unfiled. Beyond that, additional documents requested by the tax authority must be provided within 60 days, and a failure to do so can attract a substantial non-compliance penalty. Where an approved advance pricing arrangement is in place, the covered transactions may be exempt from the Local File, although basic information about the arrangement must still be provided.
Benchmarking and comparables
The tax authority will request a local benchmark where the tested party is a Korean company. A single-year analysis is preferred. Roll-forward of the comparable set with annual financial updates is accepted. The limitation period is generally seven years from the day after the return filing due date, extending to ten years in cases of fraud or other wrongful conduct.
Frequently asked questions
Does an entity below the KRW thresholds have any documentation duty in South Korea?
Yes. Even where the formal Master File and Local File thresholds are not met, an entity with any foreign related-party transaction must prepare contemporaneous documentation each year, alongside its corporate income tax return filing.
How does the Korean documentation penalty escalate?
Non-compliance with either file attracts KRW 30 million, rising to KRW 60 million where both the Master File and the Local File are unfiled. Additional requested documents must follow within 60 days or a further non-compliance penalty can apply.
This guide is an informational research aid prepared by Comp-Press and is not tax or legal advice. Transfer pricing rules change; verify current requirements before relying on them for filing.