SEOUL, Oct. 9 (Korea Bizwire) — South Korean chipmakers Samsung Electronics Co. and SK hynix Inc. may have to pay part of their corporate taxes to foreign countries where they earn profits under a new landmark global taxation scheme.
A group of 360 countries agreed on a two-pillar deal Friday to impose a global minimum corporate tax of 15 percent and to share corporate taxes imposed on the profits of multinational companies, in a bid to prevent them from dodging taxes, according to the Organization for Economic Cooperation and Development (OECD).
Under the deal, multinational firms with global sales above 20 billion euros (US$23.1 billion) and profitability of 10 percent will be subject to the new rules.
They are expected to pay 25 percent of profits in excess of a profit margin of 10 percent to markets where they have business activities and earn profits.
Multinational firms have been under fire for their long-held practices of transferring their profits to countries or territories with low corporate tax rates.
Samsung Electronics, the world’s biggest maker of memory chips, is expected to become South Korea’s first company to be subject to the new rules.
Last year, Samsung Electronics’ revenue amounted to 236.8 trillion won ($198 billion), up 2.78 percent from a year earlier.
South Korea’s No. 2 chipmaker, SK hynix, could be covered by the new tax deal when its annual sales are taken into account. But depending on its profit margin, it could also be excluded from the list of multinational firms to be taxed.
Last year, Samsung Electronics and SK hynix paid 4.8 trillion won and 1.4 trillion won in corporate taxes, respectively.
South Korea’s finance ministry said the new global tax scheme is expected to have a limited impact on the competitiveness of Korean firms.
The taxation deal will help the Korean government collect more taxes as global tech firms, such as Google and Facebook, will have to pay corporate taxes here when the rules take effect in 2023, the ministry said.
Finance Minister Hong Nam-ki earlier said global multinational firms are expected to pay larger amounts of taxes to the Korean government than Korean firms would pay to foreign markets.
The OECD said the minimum corporate tax rate could see countries collect around $150 billion in new revenues annually. Taxing rights on more than $125 billion of profit are expected to be reallocated to markets where big firms earn money.
The tax deal will be sent to a Group of 20 (G-20) meeting of finance ministers scheduled for Wednesday for endorsement, and G-20 leaders are expected to approve the deal at their summit in Rome on Oct. 30-31.