1. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore Transfer pricing vs. Customs valuation Transfer pricing vs. Customs valuation Kiok Hyung Program manager, ACVA Corporate Post Clearance Audit Division Korea Customs Service

2. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore Table of Content KCS Customs controls MNCs in import International taxation PCA for international transactions ACVA Taxation Adjustments Practices

3. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore ’06’07’08’09’10’11 36.4 39.7 51.3 49.8 55.9 64.2 NTS KCS 32.4% of 205.8 trillion KRW 1. KCS Expected Revenue collection, 2012 Revenue collected by the KCS

4. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore - AEO - Advanced Customs Valuation - Advanced HS classification - FTA-Origin Trade Compliance Check (35 Acts) Customs duty audit (pre-selected items) Clearance AuditPost-Audit Comprehensive Audit Pre-Audit Periodical Audit Special Audit Correctional Audit Foreign currency transactional Investigation Customs Criminal Investigation FTA Origin Audit 2. Customs Controls

5. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore 3. MNCs in import

6. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore CategoryInternal TaxCustoms DutiesRemarks Tax Audit National Tax Service Korea Customs Service Post audit Advance Ruling Service APA (Advance Pricing Arrangement) ACVA (Advanced Customs Valuation Arrangement) Advance audit Taxation Adjustment Adjustment & mitigationJuly 01, 2012 4. International taxation

7. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore Year20102011 total523501 MNCs7160 ratio(%)13.612.0 Year 20102011 Nbr. Amount (billion KRW) Nbr.Amount Total912432.3125.5193.7 MNCs158367.417154 Ratio (%) 17.385.013.627.9 Audit for MNCs (nbr. of companies) (nbr. of companies) Post Taxation charged for MNCs 5. PCA for international transactions Enhanced PCA for MNCs - Pre-Alert Monitoring system for Transfer Pricing - Enhanced policy for PCA to MNCs

8. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore 6. ACVA Determining in advance the customs value of imported goods in transactions between related parties through a mutual agreement between Customs authority and a taxpayer Taxpayer - Stable business management by finalizing taxation Customs - Securing national financial income in advance Resolving risks of CV

9. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore Mitigation Committee for international taxation Tax payer MOSFNTS Tax payer is allowed to request for an adjustment between internal tax base and custom value. 7. Taxation Adjustments

10. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore 8. Practices Im por ter Import price Whole sale price Customs Valuation NTC Exporter vs. Tax authority Initial declarati on Post adjustme nt A100 c.u.230 c.u.220 c.u.? Cost of sales 80c.u.↑ Corp. tax 18 c.u. or 0 c.u. i)Export price ii)Profit C170 c.u. 210 c.u. (unknown) 170 c.u.--- 180 c.u. MNC A

11. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore Unit : billion KRW YearSales Cost of sales OP margin T/P adjustment C/V post adjustment KCS decision 2008489497-10.8%+71.8-14% 2009692665-3.4%+25-5% 20101,09490213%-63+7% MNC B No adjustment

12. Asia Tax Forum May 9-10, 2012 – Raffles, Singapore kiokhyung@gmail.com, valuationa@customs.go.kr