Government Position on EU Announcement of

the List of 17 Non-cooperative Jurisdictions

EU Decision

The EU’s announcement of the list of 17 non-cooperative jurisdictions includes Korea.

Position of the Ministry of Strategy and Finance

The EU has decided that Korea’s tax regimes for foreign investment[1], including its free economic zones and foreign investment zones, fall under ‘harmful preferential tax regimes.’[2]

However, the EU’s decision is not in accordance with international criteria, such as the OECD, is in violation of international agreement and poses the risk of violating Korea’s tax sovereignty.

First, the OECD/G20 Base Erosion and Profit Shifting (BEPS) standards apply only to easily mobile activities, such as service and finance, and Korea’s tax system for foreign investment was previously confirmed to comply with the standards.  However, in reaching its decision, the EU has expanded the OECD’s BEPS standards to include the manufacturing sector, which violates international standards.

Second, the EU had previously agreed to accept the OECD/G20’s assessment of harmful tax practices at a meeting of the Inclusive Framework on BEPS in February 2017.  The EU’s decision goes against this agreement.

Third, the EU’s decision poses the risk of violating Korea’s tax sovereignty as the EU attempts to impose its standards on a non-EU country.

Furthermore, the EU has cited lack of transparency as its reason for including Korea on the list.  However, Korea has an extensive and effective information exchange system through tax treaties with other countries, as well as a high level of transparency in tax administration.

The Korean government plans to respond to the EU’s decision through concerted efforts by the relevant ministries, including the Ministry of Foreign Affairs and the Ministry of Trade, Industry and Energy.  The government will also advance its position at various international settings, such as the OECD.