Tax Treaty Case Law around the Globe 2015
1. Aufl. 2016
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S. 57South Korea: The Application of Tax Treaties to Partnerships and Hybrid Entities
Hyejung Byun
I. S. 58Introduction
Tax treaties offer tax benefits that contracting states agree to grant to each other in order to prevent double taxation. South Korea (Korea) has 86 tax treaties in place, under which only residents of the contracting states and Korea are entitled to the benefits under the tax treaties. However, there is a concern that these tax treaties are being exploited by taxpayers to obtain benefits which were not intended by the contracting states and Korea. Therefore, it is important to ensure that the tax benefits are granted to those who are genuinely entitled to them by effectively countering attempts to abuse the treaties.
In 2014, the Supreme Court in Korea issued a judgment on tax treaty abuse including treaty shopping and the application of tax treaties to hybrid entities. In the case, entity classification and attribution of income were also dealt with as closely connected issues. It is the most recent decision the Supreme Court has made on the tax planning structures which foreign investors were involved in when they sold stock in Korean companies using the fluctuation in price...