Samsung Electronics, SK Hynix may have to pay part of the corporate tax in the profit-making country

On October 10th, according to foreign media reports, according to the latest international corporate tax rules agreed by 136 countries and regions around the world, South Korean chip makers Samsung Electronics and SK Hynix may have to pay some corporate taxes in the profit-making countries.

According to the Organization for Economic Cooperation and Development (OECD), the latest rules will impose a minimum 15% global corporate tax on profits earned by multinational companies. At the same time, these taxes will be collected separately in different countries to prevent tax evasion.

According to the agreement, multinational companies with global sales of more than 20 billion euros (approximately US$23.1 billion) and profits of 10% and above will be subject to the new rules. In those markets where there are business activities and earning profits, these companies are expected to pay 25% of the profits. Multinational companies have been criticized for long-term transfer of profits to countries or regions with lower corporate tax rates.

Samsung Electronics is the world’s largest manufacturer of memory chips and is expected to become the first company in South Korea to be subject to the new rules. Last year, Samsung Electronics’ revenue reached 236.8 trillion won (approximately US$198 billion), a year-on-year increase of 2.78%.

If calculated on the basis of annual sales, South Korea’s second largest chip maker SK Hynix will also be included in the new tax agreement. However, depending on the profit margin, the company may be excluded from the list of multinational companies to be taxed.

Last year, Samsung Electronics and SK Hynix paid 4.8 trillion won (approximately US$4 billion) and 1.4 trillion won (approximately US$1.17 billion) in corporate taxes, respectively.

However, the South Korean Ministry of Finance stated that the new global tax rules are expected to have limited impact on the competitiveness of Korean companies. The agency said that this tax agreement will help the South Korean government collect more taxes, because global technology giants such as Google and Facebook will have to pay more corporate taxes in South Korea when the 2023 rules take effect.

South Korean Finance Minister Hong Nam-ki said earlier that it is expected that the tax paid by global multinational companies to the South Korean government will exceed the tax paid by local companies to foreign countries.

According to the OECD, the lowest corporate tax rate may add about US$150 billion in revenue to countries each year, and the right to tax more than US$125 billion in profits is expected to be redistributed to the market where large companies make money.

The new tax agreement will be sent to the G-20 finance ministers meeting scheduled for next Wednesday for approval, and G20 leaders are expected to approve the agreement at the Rome summit on October 30 and 31.