초록 close

The taxation on a foreign entity depends on how this entity is classified according to the domestic tax laws. It is not easy to establish the classification criteria as each country has its own civil law and tax system. However, as the international trades become common place and more foreign entities actively conduct operation in Korea, it is imperative that Korea suggest a certain classification criteria as other countries do. The classification of foreign entity according to its characteristics related to civil law as adopted by Germany and Japan is desirable in Korea because that system can maintain the consistency with the existing domestic entity classification system. In addition, even though the classification system of foreign entities is established in consistent with the existing classification system, there are some cases in which the different tax treatment can conflict with each other on one entity, depending on the countries. These hybrid entity issues are related to whether those entities should be granted the tax treaty benefit. If we look at the international trends on these issues, the OECD report, US’s model tax treaty and other tax treaties suggests the method in which the tax is levied on the person which gets the income from the entity. I think that Korea should establish the pass-through taxation on these entities including the partnerships, taking into consideration the international taxation trends.