Recent Developments

On 29 January 2026, the Korean National Assembly passed amendments to the Attorney-at-Law Act that formally recognize attorney-client privilege, or ACP, as a statutory right. The reform grants attorneys and clients the right to withhold confidential legal communications, and certain related materials, from disclosure to third parties. The new regime is expected to have meaningful implications for tax audits, investigations, and administrative and judicial appeals, particularly by strengthening resistance to overly broad collection efforts and limiting downstream reliance on privileged materials. The amendment was promulgated on 19 February 2026 and is scheduled to take effect one year after promulgation. The addendum also suggests that the new ACP provision can apply to communications or materials created prior to the effective date, raising the possibility of its retroactive application. 1. Prior Legal Landscape     Historically, Korean law imposed on attorneys a duty of confidentiality concerning client communications. That duty, however, did not operate as a procedural shield in the way privilege does in many jurisdictions. While attorneys argued that legal advice should be immune from seizure under the constitutional right to counsel, the lack of a formal statute meant that the protection was inconsistent and determined only on a case-by-case basis. Consequently, taxpayers effectively had no legal grounds to refuse document disclosure during tax audits, and confidential communications were routinely seized in enforcement actions.     This legal landscape began to shift as the judiciary recognized the constitutional necessity of protecting attorney-client communications. Notably, Lee & Ko secured the first Supreme Court decision (Supreme Court Decision 2024-Mo-730, dated February 20, 2026) recognizing the illegality of seizing legal advice and communications between an attorney and a client. The lower court's ruling in this case (Seoul Southern District Court Decision 2023-Bo-4, dated February 23, 2024) was incorporated into the "Statement of Reasons" for the newly passed amendment, serving as a significant judicial catalyst for the legislative reform.     The newly enacted law addresses this previous gap by transforming from an ethical confidential obligation framework to an enforceable right against third-party disclosure. 2. Key Provisions and Our Interpretation     The amended law adds a new Article 26-2 following the existing confidentiality provision in Article 26. The new article grants attorneys and their clients, including prospective clients, two core rights:     1) A non-disclosure right over attorney-client communications exchanged for purposes of providing or receiving legal services, and     2) A non-disclosure right over documents and materials (including electronic records) prepared in connection with litigation, investigations (audits), or other inquiries relating to matters for which counsel was engaged.     Unlike the work-product doctrine recognized in other jurisdictions in the context of discovery, which extends not only to attorneys but also to documents or materials prepared in anticipation of litigation by other representatives or advisors, the newly enacted ACP law in Korea limits this protection to documents or materials prepared by attorneys. In this respect, the newly enacted ACP provision may be viewed as placing particular emphasis on protecting the client's right to receive legal assistance from counsel. 3. Exceptions to the ACP     The statute provides that ACP will be waived or not apply in certain circumstances, including:     ■ where the client expressly consents,     ■ where substantial public interest concerns override confidentiality (for example, if legal advice is used to facilitate unlawful conduct, or counsel is involved in illegal activity),     ■ where disclosure is necessary for counsel to assert or defend rights in a dispute with the client, or     ■ where another statute expressly provides otherwise. 4. Implications for Tax Audits and Appeals in Korea     The codification of ACP is poised to materially affect Korean tax enforcement practice.     Historically, during tax audits and dawn raids in Korea, authorities routinely collected emails, internal memoranda, and external legal opinions without meaningful limitation. These materials were frequently incorporated into assessment notices and later relied upon in administrative and judicial proceedings.     In practice, Korean tax authorities conducting special tax audits have also exercised the power to temporarily seize books and records from the taxpayer's premises. Although such temporary seizure (so-called "deposit" or provisional custody of documents) formally requires the taxpayer's consent under Korean tax audit procedures, refusal in practice often results in a markedly more adversarial and pressured audit environment. As a result, taxpayers frequently feel compelled to provide consent, effectively under practical duress, for lack of a viable alternative. In this environment, tax authorities have historically obtained broad access to documentary materials, including internal communications and legal analyses.     Under the new regime, however, taxpayers may be positioned to assert privilege objections against the seizure or compelled production of protected materials. Under circumstances where tax authorities seek access to legal communications during on-site inspections or document seizures, the codification of ACP may therefore serve as an important procedural safeguard for taxpayers' rights, particularly in the context of intrusive special audits.     Although the Korean statutory framework does not yet provide explicit procedural mechanisms comparable to those developed in other jurisdictions, the amended law may function in a manner broadly analogous to privilege logs and claw-back procedures in U.S. discovery, allowing taxpayers to identify and withhold privileged materials or to seek the return of privileged documents that were inadvertently obtained by the authorities. 5. Unanswered Questions     Despite its structural significance, the amended law leaves several operational issues unresolved.     The statute does not provide detailed guidance regarding the scope of protected materials, the procedural mechanisms for asserting ACP during audits or investigations, or the remedies available in the event of a violation. In particular, it remains unclear what formal steps taxpayers and counsel must take to ensure that documents are recognized and treated as privileged.     For example, the amended law does not specify:     ■ whether documents must be expressly labeled or marked as "privileged" or "confidential" to qualify for protection;     ■ whether a privilege log or similar disclosure protocol will be required when resisting production;     ■ whether authorities must segregate or seal potentially privileged materials during searches or electronic data imaging; and     ■ whether an independent review mechanism, such as judicial or in camera inspection, will be available to resolve privilege disputes before enforcement measures are imposed.     From a more practical perspective, during a tax audit in Korea, authorities typically mass-collect virtually all text-based documents—such as emails and memoranda—based on file extensions. That is, rather than assessing the relevance of individual files before copying, they systematically collect all files matching certain extensions (e.g., .doc, .pdf, or .xls) regardless of content. This blanket data collection approach raises a significant practical challenge: how to prevent documents protected under ACP from being collected in the first place.     At present, as detailed implementing regulations or guidelines have not yet been released, it would be advisable to (i) clearly indicate on communications with attorneys and documents prepared by attorneys that they are protected under ACP, for example by marking them with the phrase "Protected by Attorney-Client Privilege," (ii) manage such materials separately from other documents so that, in the event of a tax audit, it can be clearly asserted that they should not be copied or collected, and (iii) ensure that legal counsel is present during the tax audit to prevent officials from photocopying or otherwise collecting such materials.     Accordingly, practitioners and taxpayers should expect further legislative refinement and judicial interpretation to clarify the privilege's practical boundaries. 6. Concluding Assessment     The statutory recognition of ACP marks a significant evolution in Korean procedural law. By affording enforceable protection to confidential legal communications and litigation-related materials, the newly enacted law strengthens taxpayers' defense rights and enhances procedural fairness in investigative and judicial contexts.     Functionally, the reform aligns Korea more closely with common law jurisdictions, particularly the United States, where ACP and the work-product doctrine form the backbone of adversarial litigation strategy.     The ultimate scope and strength of the Korean ACP regime, however, will depend on how courts interpret its boundaries and how enforcement authorities adapt their investigative practices in response. The Tax Group at Lee & Ko possesses extensive experience and expertise in both domestic and international tax matters. Please feel free to contact us should you require assistance with any tax-related matters, including those discussed in this newsletter.  

The amendment to the Personal Information Protection Act (the Amended PIPA) was passed at the plenary session of the National Assembly on February 12, 2026. Following a recent series of large-scale data breach incidents (i.e., incidents involving the loss, theft, or unauthorized disclosure of personal information) involving major telecommunications companies, financial institutions, and platform operators, public demand has grown for stronger preventive measures and enhanced corporate accountability. While this amendment is widely known for introducing administrative penalties of up to 10% of revenue for violations of the PIPA, including data breaches, its significance extends further in that it calls for substantial changes to corporate data protection governance frameworks and security incident response systems. In this newsletter, we review the specific details of the Amended PIPA and highlight its key implications. 1. Key Amendments     A. Increased cap on administrative penalties for repeated or serious personal information infringements and specification of data protection investments as grounds for mitigation         Administrative penalties may now be imposed at up to 10% of a data handler (a concept analogous to a data controller under the GDPR)'s total revenue (excluding any amounts unrelated to the violation at issue)—or up to KRW 5 billion if there is no revenue or if calculating revenue is difficult, as prescribed by the Enforcement Decree (a proposed amendment to which is expected to be publicly notified)—in the following circumstances (Article 64-2(2)):         (i) if a violation constituting grounds for an administrative penalty is committed within three (3) years from the date of receiving a previous administrative penalty, with intent or gross negligence;         (ii) if a violation constituting grounds for an administrative penalty is committed with intent or gross negligence, and the number of affected data subjects is 10 million or more; or         (iii) where a data breach occurs as a result of failure to comply with a corrective order.         Conversely, the Amended PIPA requires the reduction of administrative penalties if grounds prescribed by the Enforcement Decree are met, such as the investment in and operation of data protection budgets, personnel, facilities, and equipment (excluding cases where the violation was committed with intent or gross negligence) (Article 64-2(6)).     B. Expansion of the concept of data breach and obligations related to data breach notification         The scope of "data breach" under the PIPA has been expanded beyond the current statutory categories of "loss, theft, or unauthorized disclosure" of personal information to additionally include "forgery, alteration, or damage" (Articles 23(2) and 34(1)).         The PIPA requires that certain information be notified to the affected data subjects in the event of a data breach. Under the Amended PIPA, the scope of required notification items has been expanded to include the following (Article 34(1)(6)):         (i) information regarding the data subject's legal rights and methods of exercising such rights, including claims for compensatory and statutory damages arising from the data breach or similar incident and dispute resolution procedures; and         (ii) other matters prescribed by the Enforcement Decree.         In addition, even prior to confirmation of a data breach, where a data handler becomes aware of the possibility of a data breach as prescribed by the Enforcement Decree—taking into account the type of personal information involved, the impact on data subjects, and the level of risk—the data handler is now required to notify, without delay, all potentially affected data subjects of such possibility, including information necessary to minimize potential damages and other matters to be prescribed by the Enforcement Decree (Article 34(2)).     C. Mandatory ISMS-P certification for data handlers above a certain scale         The PIPA provides that the Personal Information Protection Committee may certify the level of personal data protection of a data handler. Data handlers may apply for such certification—i.e., Personal Information & Information Security Management System (ISMS-P) certification—and, under the current PIPA, obtaining ISMS-P certification is voluntary. Under the Amended PIPA, however, data handlers that meet certain criteria prescribed by the Enforcement Decree—based on factors such as annual revenue and the scale of personal information processed—will be required to obtain ISMS-P certification (Article 32-2(1), proviso).     D. Clarification of the representative's responsibility and strengthening of the CPO's role         The Amended PIPA expressly provides that the representative (e.g., CEO) or business owner bears ultimate responsibility for the secure processing of personal information and the protection of data subjects' rights, and must effectively implement comprehensive management measures, including the allocation of qualified personnel and sufficient budgetary support (Article 30-3).         In addition, the statutory duties of the Chief Privacy Officer (CPO) have been expanded to include (Article 31(4)(2) and (3)):         (i) managing qualified personnel and securing the budget necessary for the protection of personal information; and         (ii) reporting to the representative and the board of directors on the status of personal information protection and other related matters of importance.         Furthermore, for data handlers meeting criteria prescribed by the Enforcement Decree—based on factors such as annual revenue and volume of personal information processed—are now subject to obligations to (Article 31(3)):         (i) obtain board approval when appointing, changing, or dismissing the CPO; and         (ii) report matters concerning the appointment, change, or dismissal of the CPO to the Personal Information Protection Commission in accordance with the Enforcement Decree.     E. Effective Date         The Amended PIPA will enter into force six (6) months after the date of its promulgation; provided, however, that the provisions mandating ISMS-P certification will take effect on July 1, 2027 (Addendum, Article 1). 2. Implications     A. Increased importance of establishing robust data protection governance and investment         The Amended PIPA introduces punitive administrative penalties, thereby significantly increasing the level of sanctions for data breaches and other infringements. At the same time, it strengthens not only the duties and role of the CPO but also the responsibilities of the representative and the board regarding data protection, while incentivizing corporate investment in data protection by providing additional grounds for mitigation of administrative penalties. Accordingly, before the Amended PIPA takes effect, businesses should establish or refine governance structures to ensure the effective implementation of data protection measures and proactively invest in adequate personnel, systems, and infrastructure. Regarding specific compliance measures, it will also be important to closely monitor how the provisions of the Amended PIPA are further specified through the forthcoming amendment to the Enforcement Decree.         In this context, the presence or absence of intent or gross negligence on the part of a data handler will serve as a key factor in determining the amount of an administrative penalty.         However, as the responsibilities of the representative and other directors with respect to data protection have now been expressly articulated—and as they are expected to participate in related decision-making—the propriety of the board's conduct, in addition to that of the CPO and personnel directly handling personal information, may also be considered in assessing intent or gross negligence. Therefore, guidance from legal experts may be necessary from the very beginning—such as when preparing guidelines for board reporting matters—to ensure compliance and mitigate potential liability risks.         In addition, with respect to ISMS-P certification, businesses should note that the certification review process is expected to become more rigorous, and that the Personal Information Protection Commission has indicated that it will actively revoke certifications in light of the seriousness of violations.     B. Need to strengthen monitoring systems and revise incident response processes         The scope of incidents subject to data breach notifications and the required notification items have been broadened, and notably, the notification obligation now extends to circumstances where only the possibility of a data breach or similar incident has been identified, even if no actual breach has been confirmed. Companies should therefore review and update their existing incident response processes. In particular, it has become increasingly important to enhance monitoring at pre-breach stages (e.g., upon detection of a security incident) and to establish corresponding response mechanisms at an earlier stage.         As these changes may necessitate amendments to internal regulations or policies, as well as adjustments to the roles of relevant departments, companies should begin preparations well in advance of the Amended PIPA's effective date. Lee & Ko's Data Privacy & Cybersecurity (DPC) Practice Group comprises more than 50 professionals—including dedicated privacy attorneys, former regulatory officials, and information security and technology experts—and maintains close collaborative relationships with external IT and cybersecurity specialists. Through this integrated network, we provide fast and accurate one-stop advisory services across the full spectrum of data protection and information security matters, including the establishment of information security governance frameworks, incident response relating to data breaches and similar leakage/infringement incidents, and assistance with ISMS and ISMS-P certification. Should you require advice regarding the Amended PIPA or any other data protection or information security matters, please do not hesitate to contact Lee & Ko's DPC Practice Group.  

In December 2025, the National Assembly enacted tax law amendments that had previously been proposed by the Ministry of Economy and Finance (MOEF). These included amendments to the Corporate Income Tax Law (CITL), Individual Income Tax Law (IITL), International Tax Coordination Law (ITCL) and Restriction of Special Taxation Law (RSTL), National Tax Basic Law (NTBL), among others. On January 16, 2026, the MOEF published proposed amendments to the Presidential Decrees(1) to the tax law, including the Presidential Decrees to the CITL (CITL-PD), IITL (IITL-PD), ITCL (ITCL-PD) and RSTL (RSTL-PD) and NTBL (NTBL-PD), among others. Presidential Decrees are regulations published by the MOEF to elaborate details or specify matters prescribed in the tax law. Unlike tax law amendments, the amendment to the Presidential Decree were promulgated and entered into force in February 27, 2026, following the public notice and comment period, January 19 to February 5, 2026, and the completion of deliberations at the Vice Ministers’ Meeting and the State Council. The key items of this reform package relating to international taxation and cross-border investments are summarized below. Unless otherwise stated, all changes are effective as of the date of promulgation by the MOEF 1. Improvement to the Application Method for Foreign Tax Credits on Indirect Investments     ① Revised Method for Individual Investors (2)         For individual investors that are subject to comprehensive taxation, the IITL amendments introduce a new method for applying for foreign tax credits in respect of indirect investments (e.g. investments through a fund). Previously, if an individual earned foreign income indirectly, their foreign tax credit was calculated using a formula based on their Korean tax rate. This often limited the credit.         But under the new rule prescribed in the IITL amendments, the foreign tax credit is based on the actual foreign tax already paid or withheld, adjusted using specific adjustment factors. (3)     ② Rationalization of the Foreign Tax Credit Mechanism for Corporate Investors (4)         Previously, under the CITL, indirect foreign income taxes were not included in the company’s taxable income or in the foreign tax credit limit calculation. Because of this, a Korean company effectively could not fully claim credit for those foreign income taxes. Specifically, the limitation was calculated as: [Korean corporate income tax liability x (Total income received from funds / taxable base)]. Because indirect foreign income taxes were not included in either the taxable base or the limitation formula, they were not appropriately reflected in determining the allowable credit.         To address this structural issue, the CITL amendments introduced a new provision(5) requiring that indirect foreign income taxes eligible for credit be included in gross income and, consequently, reflected in the taxable base. In addition, the foreign tax credit limitation formula has been amended(6) as follows: [Korean corporate income tax liability x (Total income received from funds + Indirect foreign income tax) ÷ Taxable base)]. This amendment ensures that indirect foreign income taxes are appropriately taken into account in calculating the foreign tax credit limitation. 2. Introduction of a Penalty for Failure to Submit Foreign Company’s Liaison Office Status Report (7)     The obligation for foreign companies to submit an annual information report regarding the status of their liaison offices was introduced in 2022.(8) However, the absence of specific sanctions for non-compliance has limited the effectiveness of the regime, as instances of non-compliance have been frequent.     The CITL amendments contain a new provision to strengthen enforcement,(9) whereby the tax authority may issue a corrective order to a foreign company that fails to submit a liaison office status report with the requisite details, or that submits false information. Non-compliance with such an order can result in an administrative penalty of up to KRW 10 million. 3. Expansion of the Tax Base and Refinement of the Exit Tax Regime (10)     Under the IITL, exit tax(11) is a deemed capital gains tax on certain Korean company shares held by a Korean resident at the time of his/her permanent departure, when the individual ceases to be a Korean tax resident and satisfied specified requirements.     In light of the increasing volume of overseas equity investments by Korean residents, the scope of the exit tax was broadened to include foreign company shares under IITL amendment. The detailed taxation requirements and scope of applicable foreign shares have been delegated to the IITL-PD.     Specifically, the amended IITL-PD(12) provides that the following foreign company shares shall be excluded from exit tax regime: 1) foreign shares held by the departing resident where the total value does not exceed KRW 500 million at the time of departure; 2) foreign shares held by a foreign national working in Korea, provided that the foreign national was physically present and working in Korea for at least 80% of the worker’s Korean residence period during the ten years preceding the date of departure; and 3) foreign shares acquired by the foreign national’s spouse and under-age children prior to the commencement of the foreign national’s period of working in Korea. Items (2) and (3) apply only where the foreign national departs Korea within six months from the termination date of his or her employment in Korea).     The IITL-PD amendments(13) also further clarify the method for determining the deemed transfer value of foreign company shares subject to exit tax regime: 1) the listed shares are valued at the legally prescribed benchmark value per IITL; and 2) unlisted shares are valued based on a weighted average of the net profit value (3) and net asset value (2) per share.(14)     These amendments will apply to individuals departing Korea on or after January 1, 2027. 4. Enhancements to the Global Minimum Tax Regime and Introduction of the Domestic Minimum Top-up Tax (“DMTT”)     In response to the OECD Pillar Two framework, Korea introduced the Income Inclusion Rule (IIR) and the Under-taxed Payments Rule (UTPR) through earlier amendments to the ITCL promulgated on December 31, 2022. The IIR has applied from January 1, 2024; and the UTPR has applied from January 1, 2025.     In the 2025 ITCL amendments, the DMTT was also introduced.(15) In parallel, the Presidential Decree Amendments to the ITCL further refine and align Korea’s global minimum tax framework. In particular: (i) the domestic rules have been aligned with the OECD Global Anti-Base Erosion (GloBE) Model Rules and accompanying Commentary; (ii) the deadline for applying the transitional Country-by-Country Reporting (CbCR) safe harbor was extended, reflecting the OECD administrative guidance (until January 5, 2026); and (iii) detailed calculation methods and procedural requirements for the implementation of the DMTT have been set out. A detailed summary of the relevant amendments are as follows.     A. Complementing the Global Minimum Tax Framework(16)         The ITCL-PD has been amended to align more closely with the GloBE Model Rules and accompanying Commentary. The key amendments are summarized below:         1) Amendment to Art. 101 of the ITCL-PD clarifies the method for determining whether the consolidated revenue threshold is met after a merger. Where a standalone company merges with a corporate group, the company’s turnover must be aggregated with the group’s consolidated revenue for the purposes of assessing the threshold.         2) Amendments to Arts. 111(1) and (2) of ITCL-PD expand the scope of allocation of top-up tax to include entities that are not Constituent Entities (CEs) of the multinational enterprise (MNE) group but are nonetheless subject to the adjusted covered taxes.         3) Amendment to Art. 111(1)(3) of ITCL-PD clarifies that, where the jurisdiction of establishment does not operate a corporate income tax system, hybrid entity rules also apply to entities that are not treated as taxable entities under Art. 108(2) of ITCL-PD.         4) New provisions in Arts. 111(3) and (4) of ITCL-PD introduce a method for allocating accounting deferred tax expenses of a CE for the purposes of calculating adjusted covered taxes. The rules clarify how deferred tax expenses may be allocated or excluded in determining adjusted covered taxes.         5) Amendment to Art. 119 of ITCL-PD amends the terminology used in calculating the current additional top-up tax under Art. 40(4) of the ITCL. The previous references to “estimated adjusted covered tax” and “adjusted covered tax” are replaced with “estimated aggregate amount of adjusted covered taxes” and “aggregate amount of adjusted covered tax” to ensure greater clarity and consistency.         6) Amendment to Art. 125-2 of ITCL-PD clarifies the statutory allocation method among domestic CEs in respect of top-up tax allocated under the UTPR, specifying the allocation ratio by reference to the location of the ultimate parent entity (UPE).         7) Amendment to Art. 133(1) of ITCL-PD refines the terminology applicable to deductions from GloBE income where the UPE is a flow-through entity. The phrase “tax resident in the UPE’s jurisdiction” is replaced with “established and operated in the UPE’s jurisdiction” to better reflect the legal status of such entities.         8) Amendment to Art. 139 of ITCL-PD revises the method for calculating the total deferred tax adjustment amount for the first year of application and subsequent fiscal years, thereby enhancing consistency in the operation of the regime     B. Extension of the Transitional CbCR Safe Harbor(17)         1) The ITCL-PD amendments will also extend the application period of the transitional CbCR safe harbor. This safe harbor deems that no top-up tax is payable where the simplified effective tax rate (ETR), calculated based on CbCR data under the simplified methodology, meets the prescribed threshold (15–17%). The deadline for applying the Transitional CbCR Safe Harbor has been extended by one year, to fiscal year beginning before December 31, 2027 and ending before June 30 and the applicable simplified ETR threshold for the extended period has been set at 17%. Additionally, the exemption from the UTPR, which provides that no UTPR top-up tax is allocated where the statutory corporate tax rate in the UPE’s jurisdiction is at least 20%, has also been extended. This exemption applies to fiscal years beginning before December 31, 2025 and ending before December 30, 2026.     C. Introduction of the DMTT         The ITCL-PD amendments also introduce DMTT in line with the OECD GloBE Model Rules and related administrative guidance. The DMTT is intended to meet the requirements as a Qualified DMTT (QDMTT) under the OECD Inclusive Framework, subject to peer review and approval. The amount of QDMTT is calculated as follows: [Minimum tax rate (15%) – ETR of domestic CEs] x Excess profit (Net GloBE income – Substance Based Income) + Current Additional Top-up Tax. Given that Korea’s statutory corporate income tax rate ranges from 10% to 25%, exclusive of local taxes, under the CITL amendments, it is not anticipated that a significant number of domestic corporations will fall below the 15% minimum rate. However, where the ETR is reduced due to tax incentives, exemptions, or credits, the DMTT may become applicable. In such cases, the QDMTT will take precedence over the IIR and the UTPR.         A detailed summary of the ITCL-PD amendments are summarized below:         1) Calculation of Adjusted Covered Taxes for Purposes of the Domestic Top-up Tax (DMTT)(18) In determining the DMTT, the calculation of adjusted covered taxes generally follows the methodology prescribed under the GloBE framework. However, certain covered taxes allocated to a domestic CE from foreign CEs for the purposes of the GloBE calculation are excluded when computing the DMTT.             The specific scope of such exclusions has been delegated to the ITCL-PD. Under the ITCL-PD amendments, the following covered taxes are excluded from the calculation of adjusted covered taxes for DMTT purposes: (i) covered taxes recorded by a foreign head office that are attributable to income derived by a domestic permanent establishment (PE); and (ii) covered taxes recorded by a foreign shareholder CE that are attributable to: 1) income of hybrid entities that are domestic CEs; 2) dividend income received from domestic CEs; and 3) Income of domestic CEs treated as controlled foreign corporations (CFCs).         2) Scope of Permanent Establishments (“PEs”) Subject to the DMTT(19)             The scope of PEs subject to the DMTT, particularly in the case of a stateless or flow-through entity deemed not to have a jurisdiction of residence, has been delegated to the ITCL-PD. Under the ITCL-PD amendments, where the head office conducts business in Korea through a “Type 4 PE” (a PE whose income is not subject to taxation in any jurisdiction), the DMTT will be computed separately with respect to that PE.         3) Statutory Apportionment of DMTT Among Domestic CEs(20)             The DMTT attributable to an MNE group may be allocated among domestic CEs either through a statutory allocation method or a designated allocation method.             The detailed statutory allocation rules have been delegated to the ITCL-PD. Under the ITCL-PD amendments: (i) in principle, the DMTT is allocated in proportion to the GloBE income of each domestic CE; and (ii) where there is no net GloBE income for the relevant fiscal year, but DMTT arises due to accumulated adjustments, the allocation is determined as follows: 1) where the ETR and DMTT are recalculated for a prior fiscal year, the additional domestic tax is allocated based on the GloBE income of each CE for that prior year; and 2) where the adjusted covered tax amount is lower than the estimated adjusted covered tax amount and the difference is treated as additional DMTT, the tax is allocated in proportion to the difference calculated for each CE         4) Reporting and Payment of DMTT(21), Calculation of GloBE Top-up Tax that apply to other DMTT(22), and Other Special Rules(23)             The reporting and payment procedures applicable to the allocation of the DMTT follow the same framework as that applicable to the allocation of top-up tax under the global minimum tax regime.             In addition, the methods for calculating covered taxes, adjustments to covered tax, and determining the ETR follow the same methodology as that used for the calculation of top-up tax for global minimum tax purposes. Various special provisions applicable to the global minimum tax (such as the de minimis exclusion, special rules for minority-owned entities, investment CEs, and joint ventures, as well as applicable exclusions) also apply to the DMTT. 5. Introduction of a Domestic Investment Income Exemption for the Bank for International Settlements (“BIS”) (24)     BIS is an international financial institution established to promote cooperation among central banks worldwide. Funds deposited with the BIS by national central banks and international organizations are invested and managed in assets of major jurisdictions. At present, the BIS invests in Korean government bonds and monetary stabilization securities (treasury bills), which are exempt from Korean taxation.     To support the BIS’s expansion of KRW-denominated investments, the BIS’s domestic investment income (interest, dividends, securities transfer gains, and other income) is now included within the scope of tax exemption applicable to interest income from international financial transactions.(25)     The RSTL-PD amendments (Art. 18) further delegates detailed matters, including the scope of eligible international financial organizations, the specific categories of exempt income, the application procedure for exemption, and the process for claiming such exemption. Specifically: 1) “Other income” eligible for exemption is limited to income derived from economic benefits related to domestic assets under Art. 93(10) k) of the CITL; 2) the application procedure for exemption follows the existing procedure applicable to interest and transfer income from government bonds earned by foreign corporations; and 3) the claim procedure for exemption follows the procedure applicable to treaty-based tax exemptions for foreign companies. 6. Introduction of Special Tax Treatment for In-kind Contribution of Shares in a Foreign Company (26)     To support the overseas business restructuring of domestic corporations, the amended RSTL introduces a tax deferral mechanism for capital gains arising from the in-kind contribution of shares in a foreign company by a domestic corporation to another foreign company. Under this provision, where a domestic corporation that has been in business for at least five years makes an in-kind contribution of shares or equity interests in a foreign subsidiary in which it holds at least 20% to a foreign corporation in which it holds at least 80%, taxation of the capital gains arising from the transaction is deferred for 4 years. The deferred capital gains are then included in taxable income in equal installments over the subsequent 3 years.     Detailed matters including the method for calculating the deferred capital gain and the circumstances triggering termination of the deferral (such as a subsequent disposal of the contributed shares) have been delegated to the RSTL-PD amendments. Under the amended RSTL-PD, where shares acquired through the in-kind contribution are subsequently disposed of, the amount to be included in taxable income is calculated as follows:     Capital gains from the in-kind contribution not yet included in taxable income as of the end of the previous fiscal year × (Number of shares disposed of during the fiscal year ÷ Number of shares held at the end of the previous fiscal year that were acquired through the in-kind contribution).     In addition, the tax deferral will be terminated where: (i) the transferee disposes of more than 50% of the shares in the foreign corporation acquired through the in-kind contribution; or (ii) the contributing company’s ownership interest in the transferee falls below 50%. In such cases, the entire remaining balance of the deferred capital gain that has not yet been included in taxable income will be recognised as income in the relevant fiscal year. 7. Clarification of the Criteria for Recognizing an “Agent PE” (27)     The IITL-PD and CITL-PD amendments align the criteria for recognizing an Agent PE with OECD standards. In particular, the requirement has been revised from referring to “an independent agent that conducts a significant portion of its business primarily for a specific foreign corporation” to “an independent agent that conducts a significant portion of its business wholly or almost wholly for a related party.” 8. Streamlining Documentation for Claims of Exemption on Interest and Capital Gains from Government Bonds (28)     The CITL amendments simplifies the documentation requirements for non-residents and foreign companies seeking tax exemption on interest and capital gains derived from government bonds. In particular, the former “Application for Tax Treaty Exemption or Reduction” has been renamed the “Tax Treaty Exemption Claim Form for Interest and Capital Gains on Government Bonds.” In addition, the revised rules permit the submission of alternative documentation demonstrating non-resident or foreign company status in lieu of the previously required certificate of residence.     This amendment applies to claims filed on or after the effective date of the revised provisions. 9. Expansion of the Scope of Partial Tax Audits in Relation to Advance Pricing Agreements (“APAs”) (29)     Previously, where an application for an APA is submitted prior to the notification of a tax audit, the audit may be suspended solely with respect to the transfer pricing aspects of the relevant international transactions for the period covered by the APA application.(30) The NBTL-PD amendments expanded the scope of partial tax audits in order to enhance the effectiveness of tax audit with respect to the APA implementation. Under the amended NBTL-PD, even where an APA application is subsequently cancelled, withdrawn, or the review process is suspended after submission, the tax authorities may conduct a partial tax examination in respect of the matters covered by the APA application.     This measure will apply to tax audits initiated on or after the effective date of the amended NBTL-PD (expected to be in the last week of February 2026, since it takes effect immediately upon promulgation). The Tax Group at Lee & Ko possesses extensive experience and expertise in both domestic and international tax matters. Please feel free to contact us should you require assistance with any tax-related matters, including those discussed in this newsletter. (1) Also referred to as Enforcement Decrees. (2) IITL, Art. 57-2(2) and (3); IITL-PD Art. 117-2(3) and (5) (3) IITL, Art. 57-2(2) (4) CITL, Art. 15(2) and 57-2(1)-(3); CITL-PD, Art. 94-2(3)-(4) (5) CITL, Art. 15(2), sub-paragraph 3 (6) CITL, Art. 57-2(2) (7) Art. 124(2) of the CITL, Appendix 2 to the CITL-PD (8) CITL, Art. 94(2) (9) CITL, Art. 124(2) (10) IITL, Art. 118-9 to 118-18; ITL-PD Art. 178-8(2) and 178-9(2) (11) IITL, Art. 118-9 (12) IITL-PD, Art. 178-8(2) (13) IITL-PD, Art. 178-9(2) (14) This is calculated in accordance with Art. 63 of the Inheritance and Gift Tax Law, at a ratio of 3:2. (15) ITCL, Art. 73-2 to 73-7 (16) ITCL-PD, Art. 101, 111, 119, 125-2, 113(1), 139 (17) ITCL-PD, newly established Art. 138(1)-(6) (18) ITCL, Art. 73-3; ITCL-PD, Art. 125-3(2) and (3) (19) ITCL, Art. 73-5(5); ITCL-PD Art. 125-6 (20) ITCL, Art. 73-7(2); ITCL-PD, Art. 125-8 (21) ITCL, Art. 73-7(2); ITCL-PD, Art. 125-8 (22) ITCL Art. 73-3 to 73-6; ITCL-PD Art. 125-3 to 125-5, 125.7 (23) ITCL Art. 74, 75, 77, 79, 80; ITCL-PD Art. 126, 131, 135, 137, 138 (24) RSTL, Art. 21(4)-(6); RSTL-PD, Art. 17 (25) RSTL, Art. 21 (26) RSTL, Art. 38-4; RSTL-PD, Art. 35-6 (27) IITL-PD, Art. 180; CITL-PD, Art. 133 (28) IITL-PD, Art. 207-2; CITL-PD, Art. 138-4 (29) Presidential Decree of the National Basic Tax Law (“NBTL-PD”), Art. 63-12 (30) Regulations on the Administration of International Tax Affairs, Art. 81  

Statistical Analysis of Domestic Intellectual Property in 2025 This report analyzes the 2025 statistics on intellectual property applications and Intellectual Property Trial and Appeal Board (IPTAB) cases based on the data published by the Ministry of Intellectual Property (MOIP) in January 2026. While the number of intellectual property applications filed with MOIP in 2025 increased compared to 2024, there was a slight decrease in the number of cases handled by IPTAB. 1. Overall Intellectual Property Application Trends     The total number of IP applications, including applications for patents, utility models, designs, and trademarks, in 2025 reached 582,005 – an increase compared to 2024 (560,629) – and represents an increase of 3.8%. Specifically, the number of applications for patents, utility models, designs, and trademarks increased by 5.9%, 7.9%, 1.3%, and 2.3%, respectively.

1. Background: Evolution of the Foreign Omnibus Account System     Foreign investment in the Korean stock market has exhibited a long-term growth trend despite periods of volatility. As of the end of 2025, foreign investors’ total equity holdings in Korea reached approximately KRW 1,309 trillion, a substantial increase from KRW 509.7 trillion in 2018. Notwithstanding this growth, the regulatory framework governing foreign investment in Korean equities had long been regarded as relatively inaccessible, particularly for foreign retail investors and small-to mid-sized institutional investors. Traditionally, foreign investors were required either to register directly with Korean financial authorities under the foreign investor registration regime (which remained in effect until December 2023) or to open individual accounts with Korean financial institutions, creating practical and administrative barriers.     To address these issues, Korea introduced the foreign omnibus account system in 2017, aligning its capital market infrastructure more closely with global practices. A foreign omnibus account is an account opened in the name of a foreign financial investment firm, through which foreign ultimate investors may collectively purchase and settle Korean equities without opening individual accounts with Korean securities brokerage firms.     Since its introduction, the regulatory framework has been gradually refined to enhance usability. A notable development occurred in 2023, when the obligation to report omnibus account transaction details on a T+2 basis was abolished, significantly reducing operational burdens.     Despite these improvements, the foreign omnibus account system had not been widely used, largely due to (i) overly restrictive eligibility requirements for account opening and (ii) the absence of clear and practical implementation guidance.     Under the prior framework, a foreign financial investment firm seeking to open an omnibus account was required to be a controlling shareholder or affiliate of a Korean financial investment firm or a Korean general partner of collective investment vehicles, while lawfully conducting, outside Korea, business activities equivalent to investment dealing, investment brokerage, or collective investment business. These requirements effectively excluded many small- and mid-sized foreign financial institutions from using omnibus accounts on behalf of their investors. 2. Regulatory Relaxation and Practical Guidance     As part of its broader policy agenda to facilitate Korea’s inclusion in the MSCI Developed Markets Index, the Korean government has been pursuing regulatory reforms to activate the foreign omnibus account framework in the foreign exchange and capital markets. In this context, on November 27, 2025, the government announced the Foreign Omnibus Account User Guidelines.     This Guideline relaxed the eligibility requirements for opening foreign omnibus account, eliminating the requirement that a foreign financial investment firm be a controlling shareholder or affiliate of a Korean financial investment firm or a Korean general partner. As a result, foreign investors are now permitted to trade Korean equities directly through their local securities firms without opening separate accounts with Korean brokerage firms, thereby improving accessibility to the Korean stock market.     Beyond expanding eligibility, the reforms significantly streamline operational and administrative processes for foreign asset managers and investors. Under the new framework, a global custodian acting on behalf of individual funds managed by foreign asset managers may establish consolidated settlement accounts in Korea and submit account-opening documentation on behalf of those funds. This represents a substantial departure from prior practice, under which foreign asset managers were required to open accounts and submit documentation separately for each fund, resulting in considerable administrative burden.     In addition, procedures previously required for foreign corporate investors—such as notarization and strict face-to-face identity verification—have been simplified. Foreign entities may now satisfy identity verification requirements through authorized representatives, and notarization requirements have been relaxed. By utilizing foreign omnibus accounts, foreign retail investors are expected to be able to handle currency exchange, stock trading, and settlement through a single account with their local securities firm, enhancing efficiency and convenience.     Against this backdrop, Korea’s first foreign omnibus account was opened in August 2025 through a partnership between a major Korean securities brokerage firm and a Hong Kong securities firm, and trading has commenced. Following this initial launch, interest among Korean securities firms has increased, and additional partnerships between Korean and foreign securities firms are being explored. 3. Application of Reduced Tax Treaty Rates for Non-Residents Using Foreign Omnibus Accounts Through Refund Claims     Although the foreign omnibus account regime enhances operational efficiency and market access, foreign investors should note that Korean withholding tax treatment and access to tax treaty benefits depend on the ability to substantiate beneficial ownership and satisfy applicable procedural requirements.     Under current Korean tax law, Korean-source income arising from investments made through foreign omnibus accounts is generally subject to withholding tax at domestic statutory rates (22% for dividends, including local surtax). However, eligible investors may seek applicable tax treaty benefits through post-withholding refund claims.     To apply for tax exemption or reduced withholding under an applicable tax treaty, a non-resident must, within five years from the end of the month in which the withholding tax was imposed, submit an application for tax exemption or relief under the relevant tax treaty, together with supporting documentation evidencing entitlement to such benefits. These documents include, in particular, a certificate of residence issued by the tax authority of the non-resident’s country of residence, as well as other evidentiary materials supporting the claim for exemption or relief. The application must be filed with the district tax office having jurisdiction over the payor of income.     Under Korean tax law, a non-resident may file such application through an authorized agent. In the context of securities transfers, where a non-resident opens and uses a foreign omnibus account through its local securities firm, the Korean securities company that opens and maintains the omnibus account and bears the withholding obligation under the Korean law may be regarded as an agent of the non-resident account holder for purposes of submitting the relevant tax treaty exemption or relief application. 4. How LK can help     Korean retail investors are already actively trading foreign listed securities—primarily U.S.-listed stocks—through omnibus accounts established by the Korea Securities Depository (KSD), the central securities depository of South Korea, with global custodian banks for the benefit of Korean securities firms. This structure enables Korean retail investors to directly access foreign equity markets through their domestic brokerage firms and has become a well-established and widely used investment channel in Korea.     Lee & Ko has played a significant role in this international securities settlement environment involving omnibus accounts in Korea. In particular, Lee & Ko provides cross-border withholding tax services to KSD—an institution central to the operation of omnibus accounts in Korea—as well as to more than 30 Korean securities firms that have opened foreign accounts dedicated to the foreign investments made by Korean retail investors. In this regard, Lee & Ko has one of the most extensive advisory track records in Korea in connection with omnibus account–based cross-border securities investment structures.     In addition, Lee & Ko has substantial experience in assisting overseas funds and non-resident investors with refund claims for Korean withholding taxes, including numerous successful cases involving Korean equity investments by foreign investors.     Based on its extensive experience and established working relationships with KSD and Korean securities firms—both of which are key participants in the foreign omnibus account business for non-resident investors and foreign brokerage firms—Lee & Ko is well positioned to provide practical guidance on Korean market practice and to support efficient and effective tax refund claims for foreign securities firms and non-resident investors interested in investing in Korean equities through foreign omnibus account structures. Our assistance includes: (i) analysis of withholding tax obligations and tax treaty applicability; (ii) preparation and support of refund claims for excess withholding tax; (iii) review of documentation and contractual arrangements with Korean securities firms; and (iv) engagement with Korean tax and regulatory authorities throughout the investment process. Should you require further assistance regarding the Foreign Omnibus Account Regime or related tax matters, please feel free to contact us at any time.

The amended Trade Union Act and Labor Relations Adjustment Act (Trade Union Act), scheduled to take effect on March 10, 2026, expands the scope of ‘employer’ to include ‘any person in a position to substantially and specifically control or determine the working conditions of employees’ (Article 2) and recognizes further grounds for labor disputes to include ‘business management decisions affecting working conditions’ (Article 5). To minimize concerns about increased legal uncertainty and reduced predictability arising from these significant amendments, the Ministry of Employment and Labor (MOEL) issued an administrative notice regarding its draft interpretive guideline (December 26, 2025 ~ January 15, 2026). Key points of the MOEL’s latest guidelines are as follows: 1. On the Expansion of the ‘Employer’ Scope     A. Key Criteria for Determining Employer Status         Article 2(2) of the Trade Union Act specifies ‘substantial and specific control over working conditions’ as the criterion for determining the ‘employer’ status. The MOEL has proposed ‘structural control over working conditions’ as a key factor for this determination.         ‘Structural control over working conditions’ is a criterion for determining ‘employer’ status that has been outlined for the first time in the latest guidelines. It establishes that ‘structural control’ exists when the principal contractor structurally constrains the subcontractor’s determination of working conditions for its workers, thereby fundamentally and continuously limiting the subcontractor’s discretion in setting those conditions. For example, this would include cases where: (a) where the number of the subcontractor’s workdays, etc. are determined unilaterally pursuant to the contract prepared by the principal contractor, and a non-compliance thereof may result in the termination of the relevant subcontract, such that changing the number of workdays, etc. through any mutual agreement between the subcontractor and the relevant workers is effectively difficult in practice; (b) where the working hours of the relevant workers are, in substance, determined by factors such as the volume of work, the number of logistics vehicles and their departure times under subcontracting agreements controlled by the principal contractor, including also the scale of work equipment and number of deployed or assigned personnel.         Conversely, when the principal contractor makes general requests or consults/coordinates with the subcontractor regarding the performance or procedures of the subcontracted work, such measures are understood as performance of contractual obligations, and are thus distinguishable from ‘structural control over working conditions’. Examples of such distinguishable acts include: (1) requiring compliance with agreed delivery deadlines and quality requirements; (2) amending subcontract terms through mutual agreement; (3) requesting work performance based on individual purchase or work orders, etc.     B. Factors and Cases to Consider when Determining Employer Status         In its draft interpretation guidelines, the MOEL explains that factors that Korean courts have to date regarded as indicia of employer status under the Trade Union Act—such as the subcontractor’s integration into the principal contractor’s business and the subcontractor’s economic dependence on the principal contractor—will now be considered as supplementary factors for assessing ‘structural control over working conditions’. Under this approach, circumstances such as (a) where the subcontractor is directly incorporated into the principal contractor’s business system, (b) where the principal contractor is the subcontractor’s sole customer, or (c) where the subcontractor’s continued existence depends on the continuation of the subcontract agreement with the principal contractor, may be taken into account in determining whether there is ‘substantive and specific control’ and ‘decision-making over working conditions’.         Furthermore, the MOEL provided several illustrative cases recognizing ‘employer’ status under the Trade Union Act, to facilitate practical use of the draft guidelines. For instance: where (a) from an occupational safety perspective, the principal contractor controls the overall safety and health management system, including work processes and safety procedures, or the subcontractor is structurally unable on its own to improve facilities or equipment by eliminating risk factors or installing safety devices; (b) from a welfare perspective, the principal contractor effectively determines subcontractor employees’ access to convenience facilities or exerts influence over the rules for use; (c) from a working-hours perspective, the principal contractor holds substantive decision-making authority over, or exercises approval rights in respect of, the subcontractor’s production planning, work schedules, working hours, break times, and overtime; or (d) from a compensation perspective, the principal contractor effectively determines labor costs based on the number of subcontractor workers deployed and their working hours, or directly sets wage increase rates or standards for various allowances, thereby fundamentally constraining the subcontractor’s managerial discretion.         These points are summarized in the table below. For more detailed information, please refer to the Attachment.   2. On the Expanded Scope of Recognized Grounds for Labor Disputes     A. Business Management Decisions Affecting Working Conditions         In its draft interpretation guidelines, the MOEL explains that ‘business management decisions as defined in Article 2(5) of the Trade Union Act’ may manifest as a series of combined actions. Among such actions, business management decisions that are subject to labor disputes should be assessed based on whether they cause substantive, specific changes to working conditions. If the impact on employees’ working conditions is merely abstract or speculative at the time of the decision, it would be difficult to recognize such a decision as a permissible ground for a labor dispute.         According to the MOEL’s view, a business management decision aimed to accomplish organizational restructuring (such as a merger, division, transfer, or sale) does not, in and of itself, readily qualify as having a substantive and specific impact on working conditions. Therefore, such decisions cannot be said to fall within the scope of collective bargaining. However, when implementing such a decision, measures that cause substantive and specific changes to employees’ status or working conditions (such as layoffs or reassignments arising from restructuring) may become subject to collective bargaining. In addition, labor unions would now be entitled to demand collective bargaining on employment-security measures not only where workforce adjustment is imminent as a result of a merger, division, sale, or transfer decision, but also where such adjustment is objectively foreseeable.     B. Determination of Working Conditions Related to Employee Status         In its draft interpretation guidelines, the MOEL explains that ‘disagreements over the determination of employee status’ refer to disputes between labor and management concerning the establishment or modification of principles, standards, or procedures related to changes in employment type, disciplinary actions, promotions, etc. The MOEL states that interest disputes concerning matters such as the conversion of non-regular employees to regular employees, and demands to establish or revise disciplinary and promotion criteria, are included within the scope of labor disputes.         Accordingly, once the amended Trade Union Act takes effect, labor unions are anticipated to demand collective bargaining or engage labor disputes not only regarding the conversion of non-regular employees to regular employees but also regarding a wider range of existing HR governance systems, including disciplinary actions and promotions.     C. Employer’s Violation of Collective Agreement         Where an employer clearly violates a collective agreement that stipulates matters relating to working conditions under Article 92(2) of the Trade Union Act – specifically, items (a) through (d) (including wages, welfare benefits, severance pay, working hours, dismissal, occupational safety and health, etc.) – such violation would become a subject of a labor dispute.         In its draft interpretation guidelines, the MOEL stipulates that ‘clear violation of a collective agreement’ may be found where the employer fails to comply with the collective agreement terms without a justifiable reason, despite the agreement’s language being unambiguous and leaving no room for alternative interpretation. Specifically, this includes situations where the employer acknowledges the violation yet refuses to comply, or where the violation is objectively confirmed during labor dispute mediation by the Labor Relations Commission or during labor-management negotiation guidance by local employment and labor offices. 3. Implications     The amended Trade Union Act, while expanding the scope of ‘employers’ and the grounds for labor disputes, provides only abstract criteria for determination, which has raised significant concerns that the legislative change would result in greater uncertainty in practice. Against this backdrop, MOEL’s draft interpretation guidelines are expected to help alleviate some of the difficulties and anxiety. However, as the draft guidelines are currently not yet finalized, they are subject to revision based on future feedback from labor and management. Therefore, continuous attention and monitoring are necessary. In response to the rapidly changing labor policies under the new administration, Lee & Ko acquired Ahn Kyung-duk – the former Minister of Employment and Labor – as a senior advisor on May 14, 2025, and launched a Labor Compliance Team. We have been continuously communicating with clients regarding the Trade Union Act and its Enforcement Decree through newsletters and client seminars. In addition to the MOEL’s draft interpretation guidelines, we anticipate that additional operational manuals for procedures related to the consolidated bargaining channels will be released soon. Lee & Ko will make every effort to communicate with our clients regarding these issues and provide necessary legal support. Should you require assistance regarding the content of the Trade Union Act (effective March 10, 2026), or related corporate response strategies, please feel free to contact us at any time. Attachment : Interpretative Guidelines for the Revised Labor Union Ace (Draft)