Domestic automotive and battery companies receiving U.S. Inflation Reduction Act (IRA) subsidies will also not have to pay additional taxes
Google, Apple, Netflix, and other multinational companies headquartered in the United States will be excluded from the global minimum tax of at least 15%.
Domestic automotive and battery companies receiving U.S. Inflation Reduction Act (IRA) subsidies will also not have to pay additional taxes to the Korean government under the global minimum tax. While this measure aims to reduce the tax burden on companies expanding into the U.S., it is expected to partially reduce the Korean government’s taxation rights.
The Organization for Economic Cooperation and Development (OECD) and the Group of 20 (G20) Inclusive Framework (IF) announced the “Global Minimum Tax System Reform Plan” on Jan. 5 (local time), which includes the exemption of U.S. companies, after approval from more than 145 member countries.
The global minimum tax is a system that allows other countries to impose additional taxes equivalent to the shortfall from 15% when multinational companies with global revenues of 750 million euros or more (approximately 1.27 trillion won) pay less than 15% tax in their home country. Fifty-six countries, including Korea, the United Kingdom, Germany, and Japan, are implementing this system. The United States agreed to introduce the global minimum tax in 2021 during the Barack Obama administration, but the Donald Trump administration reversed this decision, leading to today’s new agreement.
The core of this agreement consists of two main elements. First, tax incentives for investment promotion operated by governments, including the U.S. IRA, will be recognized as exceptions in calculating the global minimum tax rate. Accordingly, Samsung Electronics, Hyundai Motor Company, and domestic battery companies will not have to pay additional taxes even if the effective tax rate of their U.S. subsidiaries falls below 15% due to IRA tax credits. In other words, Korean tax authorities, which hold primary taxation rights, cannot impose additional taxes on parent companies such as Samsung Electronics or Hyundai Motor Company.
This is an issue that the Korean government has been requesting from the international community to alleviate the tax burden on domestic companies expanding into the United States. A Ministry of Economy and Finance official said, “Korea’s comprehensive investment tax credit, research and development (R&D) cost tax credit, and the U.S. IRA advanced manufacturing production tax credit are exceptions in calculating the global minimum tax rate,” adding that “the tax burden on Korean companies receiving U.S. subsidies will be alleviated, which will help their international competitiveness.”
The OECD also decided to exempt ultimate parent companies headquartered in the United States from the global minimum tax application. Accordingly, even if big tech companies such as Google and Apple pay less than 15% tax in the United States, other countries cannot tax the difference. In other words, even if the effective tax rate of Google or Apple headquarters in the United States falls below 15%, Korean tax authorities cannot impose additional taxes on Google Korea or Apple Korea.
However, the government explained that since the current effective corporate tax rate in the United States exceeds 15%, Korea will virtually lose no tax revenue from this agreement. The OECD presented requirements for receiving global minimum tax exemptions: “a nominal corporate tax rate of 20% or more and a minimum tax of 15% or more must be applied, and the effective tax rate applied to the income of multinational corporate groups must be 15% or more.” This indicates that the United States operates its own minimum tax that meets these requirements.
This agreement is interpreted as the result of accepting the U.S. argument that “the global minimum tax is discrimination against U.S. companies.” U.S. Treasury Secretary Scott Bessent evaluated it as “a historic victory that protects American workers and businesses from offshore overreach.”
However, criticism has emerged that the effectiveness of the system has been weakened as U.S. companies are excluded from the global minimum tax target. Zorka Milin, policy director of the international non-profit organization Financial Accountability and Corporate Transparency Coalition (FACT Coalition), pointed out in a Washington Post interview that day, “This not only jeopardizes about a decade of global progress in corporate taxation but also allows the largest and most profitable U.S. companies to continue hiding their profits in tax havens.”
