South Korea plans to strengthen tax inspections into global companies suspected of trying to avoid paying taxes by shifting their profits generated in the country to other countries.
The Ministry of Economy and Finance said if global companies are found trading products with their affiliates overseas at excessively low or high prices, those transactions could be taxed based on market prices from this year.
The measure is being taken as multinational companies are suspected of readjusting the prices of products traded with affiliates to make it appear as if more of their profits were generated in other countries which impose a lower tax.
According to an official of the ministry, a revision to the tax law last year can provide a legal basis for the move.
However, South Korea is still prudent about introducing so-called digital sales tax, which has been under discussion in Europe, as it can cause adverse effects on local companies.