국제적 자본이동과 과소자본세제

Under the Korean tax regime, there are primarily two provisions whichmonitor an international capital movement with intentof tax avoidance. Thin capitali- zation provision is introduced to discourage tax avoidance driven inducement of foreign capital while the controlled foreign company (“CFC") provision to prevent tax avoidance by a Korean company through a foreign investment. Under the Law for Coordination of International Tax Affairs (“LCITA"), where a domestic company’s borrowings from a foreigncontrolling shareholder (“FCS") (a person or entity who directly or indirectly owns 50% or more of the voting shares of a domestic company) and its borrowings from a third party based on FCS’s guarantee (including issuance of comfort letter) exceed three times the equity invested by the FCS, the interest and discount fee on the excess borrowings should be treated as dividends and cannot be deducted. Under the recent amendment to the LCITA, for a financial institution, a debt to equity ratio in determining deductibility of interest expense under thin capitalization provision has been reduced from 6：1 to 3：1. As mentioned, CFC rule is to accelerate or capture the undistributed income from a CFC. Undistributed income from a CFC is deemed to be distributed to Korean shareholder with 20% or more direct or indirect ownership to the extent the income attributable to ownership ratio. For this purpose, CFC generally refers to the company located in a tax shelter jurisdiction where the effective tax rate for the preceding 3 years, including current year, is 15% or less. Given the current globalization of capital flow, an implementation of advanced and transparent tax policyenhancing global capital movement is highly recommended. In this regard, an extended review and analysis of current provisions (i.e. CFC and thin capitalization) is required to accommodate Korea’s long term government goal of being positioning as a financial hub of Asia.