과소자본세제 - 2007년 세제개편안을 중심으로 -

Abstract

Under the Law for Coordination of International Tax Affairs (“LCITA”), where a domestic company’s borrowings from a foreign controlling shareholder (“FCS”) (a person or entity who directly or indirectly owns 50% or more of the voting shares of a domestic company) and its borrowings from a third party based on FCS’s guarantee (including issuance of comfort letter) exceed three times the equity invested by the FCS, the interest and discount fee on the excess borrowings should be treated as dividends and cannot be deducted. Under the proposed amendment to the LCITA, for a financial institution, a debt to equity ratio in determining deductibility of interest expense under thin capitalization provision has been proposed to reduce from 6:1 to 3:1, effective January 1, 2008. The Minster of Finance and Economy explained that such amendment is likely to induce foreign capital which will mitigate the current shortage of foreign capital in short term money market. However, decreasing interest deductibility for a financial institution by reducing a debt to equity ratio would encourage inducement of foreign currency is still in a question as a financial institution has other source of borrowings or funding. Further, inconsistency in tax policy which discourages foreign investment may deteriorate Korean government’s long term policy, development of a financial hub in Korea. In light of above, the proposed amendment to LCITA should be reconsidered with respect of entities to which new provision applies.