Asia Tax Forum May 9-10, 2012 – Raffles, Singapore Transfer pricing vs. Customs valuation Transfer...

Asia Tax ForumMay 9-10, 2012 – Raffles, SingaporeMay 9-10, 2012 – Raffles, Singapore

Transfer pricing vs. Customs valuationTransfer pricing vs. Customs valuation

Kiok HyungProgram manager, ACVA

Corporate Post Clearance Audit DivisionKorea Customs Service


Table of Content• KCS• Customs controls• MNCs in import• International taxation• PCA for international transactions• ACVA• Taxation Adjustments• Practices


’06 ’07 ’08 ’09 ’10 ’11

36.4

39.7

51.3 49.8

55.9

64.2

<Billion $>

NTS

KCSKCS

32.4% of 205.8 trillion KRW

1. KCS 1. KCS 1. KCS 1. KCS

Expected Revenue collection, 2012 Revenue collected by the KCS


- AEO

- Advanced Customs Valuation

- Advanced HS classification

- FTA-Origin

Trade Compliance Check (35 Acts)

Customs duty audit(pre-selected items)

Clearance Audit Post-Audit

Comprehensive Audit

Pre-Audit

Periodical Audit

Special Audit

Correctional Audit

Foreign currency transactional Investigation

Customs Criminal Investigation

FTA Origin Audit

2. Customs Controls 2. Customs Controls 2. Customs Controls 2. Customs Controls


381,6 68%

183.4 32%

Ratio of Import by MNCs(unit: Billion USD)

359,171 56%

283,320 44%, MNC

s

Ratio of MNCs Taxation(billion KRW)

3. MNCs in import 3. MNCs in import 3. MNCs in import 3. MNCs in import


Category Internal Tax Customs Duties Remarks

Tax AuditNational Tax

ServiceKorea Customs

ServicePost audit

Advance Ruling Service

APA(Advance Pricing

Arrangement)

ACVA(Advanced Customs

Valuation Arrangement)

Advance audit

Taxation Adjustment

Adjustment & mitigation July 01, 2012

4. International taxation 4. International taxation 4. International taxation 4. International taxation


Year 2010 2011

total 523 501

MNCs 71 60

ratio(%) 13.6 12.0

Year2010 2011

Nbr. Amount(billion KRW)

Nbr. Amount

Total 912 432.3 125.5 193.7

MNCs 158 367.4 171 54

Ratio(%)

17.3 85.0 13.6 27.9

Audit for MNCs Audit for MNCs (nbr. of companies)(nbr. of companies)

Post Taxation charged for MNCs

5. PCA for international transactions 5. PCA for international transactions 5. PCA for international transactions 5. PCA for international transactions

Enhanced PCA for MNCs - Pre-Alert Monitoring system for Transfer Pricing - Enhanced policy for PCA to MNCs


6. ACVA 6. ACVA 6. ACVA 6. ACVA

Determining in advance the customs value of imported goods in transactions between related parties through a mutual agreement between Customs authority and a taxpayer

Taxpayer - Stable business management by finalizing taxation

Customs - Securing national financial income in advance

Resolving risks of CV


Tax payer is allowed to request for an adjustment between internal tax base and custom value.

7. Taxation Adjustments7. Taxation Adjustments7. Taxation Adjustments7. Taxation Adjustments


8. Practices8. Practices8. Practices8. Practices

Importe

r

Import price

Whole sale price

Customs Valuation

NTC

Exporter vs. Tax

authority

Initial declarati

on

Post adjustme

nt

A 100 c.u. 230 c.u. 220 c.u. ?

Cost of sales 80c.u.↑

Corp. tax 18 c.u. or 0 c.u.

i)Export priceii)Profit

C 170 c.u. 170 c.u.210 c.u.

(unknown)170 c.u. - - -

180 c.u.

MNC A


Unit : billion KRW

Year SalesCost of sales

OP margin

T/P adjustment

C/V post adjustment

KCSdecision

2008 489 497 -10.8% +71.8 -14%

2009 692 665 -3.4% +25 -5%

2010 1,094 902 13% -63 +7%

MNC B

No adjustment


[email protected], [email protected]

Asia Tax Forum May 9-10, 2012 – Raffles, Singapore Transfer pricing vs. Customs valuation Transfer...

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