Korea: Annually updated benchmarking allowed (Tax Tribunal decision)
Tribunal rejected position of tax authority that same comparable companies must be used each year.
The Tax Tribunal on June 9, 2025, held that companies may annually update their comparable companies when testing their transfer pricing, rejecting the position of the National Tax Service (NTS) that the same comparable companies must be used each year.
Summary
A Korean subsidiary of a global car maker was audited for 2017-2021. To assess whether the transfer prices paid to its foreign parent were arm’s length, the company compared its profit margin to a set of comparable companies, which were updated each year. The NTS excluded companies not appearing in all five years during the audit and recalculated the arm's-length range with fewer comparable companies, resulting in a significant income adjustment and penalties.
The company appealed, and the tribunal ordered the NTS to accept the taxpayer’s broader, annually refreshed comparable companies and recalculate adjustments year-by-year. The tribunal also emphasized the importance of detailed, year-specific functional and economic analyses that clarify changes in the comparable pool.
For more information, contact a KPMG tax professional in Korea:
Shawn Kim | sanghoonkim1@kpmg.com
Gilwon Kang | gilwonkang@kr.kpmg.com