Tax Filing for South Korean Companies in India
South Korean companies have a deep and growing presence in India. Samsung operates the world's largest mobile phone factory in Noida. Hyundai Motor India is the country's second-largest carmaker. Kia India has invested over $2 billion in its Anantapur plant. LG Electronics runs major manufacturing facilities across the country. These are not small operations — they generate significant tax obligations.
A South Korean company operating in India through a wholly-owned subsidiary is taxed as an Indian domestic company. Under Section 115BAA, the effective tax rate is 25.17% (22% plus surcharge and cess). New manufacturing companies incorporated after October 1, 2019, can opt for the lower rate of 17.16% under Section 115BAB.
If the Korean entity operates through a branch office or project office without incorporating a subsidiary, it is taxed as a foreign company at 35% plus surcharge and cess, bringing the effective rate to approximately 38.22%.
Every Korean entity earning income in India must obtain a Permanent Account Number (PAN). The annual income tax return is filed using ITR-6. The due date is October 31 for companies requiring statutory audit, or November 30 if the company has international transactions requiring a transfer pricing report in Form 3CEB.
South Korea and India also share a Comprehensive Economic Partnership Agreement (CEPA), which entered into force in January 2010. While CEPA primarily addresses trade in goods and services, it complements the DTAA by creating a more favorable overall business environment for Korean companies operating in India.
How South Korea's DTAA Affects Tax Filing
The India-South Korea DTAA was comprehensively revised in 2015 and came into force on September 12, 2016. The revised treaty significantly lowered withholding tax rates compared to the original agreement, making it one of India's more favorable tax treaties for Asian economies.
| Income Type | Old DTAA Rate | Revised DTAA Rate (2016+) | Domestic Rate (Without DTAA) |
|---|---|---|---|
| Dividends | 20% | 15% | 20% |
| Interest | 15% | 10% | 20% |
| Royalties | 15% | 10% | 20% |
| Fees for Technical Services | 15% | 10% | 20% |
The revised DTAA reduced withholding on interest, royalties, and FTS from 15% to 10%. The dividend rate remains at 15%, which is higher than some of India's other Asian treaties (the India-China DTAA provides 10% on dividends).
A critical change in the revised DTAA: the scope of dependent agent Permanent Establishment provisions was broadened, aligning with India's policy of source-based taxation. Korean companies providing services through agents in India should carefully evaluate their PE exposure under the revised treaty.
The treaty also introduced source-based taxation for capital gains from the sale of shares representing more than 5% of the share capital of an Indian company. Korean investors selling significant stakes in Indian companies should account for this when structuring exits.
To claim DTAA benefits, the Korean entity must furnish a Tax Residency Certificate (TRC) from the National Tax Service of South Korea and file Form 10F electronically on the Indian Income Tax portal. Surcharge and cess are not applicable on top of treaty rates.
Document Requirements from South Korea
South Korea has been a member of the Hague Apostille Convention since 2007. All Korean corporate documents for Indian tax compliance can be authenticated through the apostille process, which is significantly faster than the old embassy attestation route.
The following documents are required from the Korean parent entity for tax filing in India:
- Tax Residency Certificate (TRC): Issued by South Korea's National Tax Service (NTS). Must be valid for the relevant assessment year and renewed annually. The TRC should confirm the Korean company's tax residency status and provide the Korean Tax Identification Number.
- Form 10F: Self-declaration form filed electronically on the Indian Income Tax portal. Required fields include the entity's status, nationality, tax identification number, period of residential status, and address. Must be filed before submitting the ITR.
- Apostilled corporate documents: Certificate of incorporation, articles of incorporation, and board resolutions must be apostilled by the Ministry of Foreign Affairs of South Korea or designated competent authorities. Processing typically takes 3-5 working days.
- Transfer pricing documentation: Korean companies with Indian subsidiaries must maintain detailed transfer pricing documentation under Section 92D. Form 3CEB must be certified by a chartered accountant and filed before November 30.
- Audited financial statements: Both Korean parent and Indian subsidiary financial statements may be required during transfer pricing assessments. Korean parent financials should be translated into English and apostilled.
Documents in Korean must be accompanied by a certified English translation. The Indian Income Tax Department does not accept filings in Korean.
Step-by-Step Tax Filing Process
Step 1: Year-End Book Closure
Close the books of accounts for the Indian entity as of March 31 (India's financial year-end). Korean companies typically follow a December year-end in Korea, but the Indian subsidiary must follow the April-March fiscal year for Indian tax purposes. Reconcile intercompany balances with the Korean parent.
Step 2: Statutory Audit
Engage a chartered accountant for the statutory audit. All foreign-owned companies in India require a mandatory audit. The audit report in Form 3CA/3CD must be uploaded to the Income Tax portal. For companies with net worth above Rs 250 crore, Indian Accounting Standards (Ind AS) apply.
Step 3: Transfer Pricing Study
If the Indian subsidiary has international transactions with the Korean parent — sale/purchase of goods, payment for services, royalties, interest on loans, management fees, or cost-sharing arrangements — prepare the transfer pricing study. File Form 3CEB through a chartered accountant by November 30. Korean automotive and electronics companies in India often have complex intercompany arrangements that require detailed benchmarking analysis.
Step 4: Obtain TRC and File Form 10F
Request the TRC from South Korea's National Tax Service. Upload it to the Indian Income Tax portal along with Form 10F. This step is critical for claiming the reduced withholding rates of 10% on interest, royalties, and FTS under the revised DTAA.
Step 5: Compute Tax and File ITR-6
Calculate total income, apply the applicable corporate tax rate, claim treaty benefits on cross-border payments, and account for advance tax and TDS credits. File ITR-6 electronically. The due date is October 31 (or November 30 with Form 3CEB).
Step 6: GST Compliance
File monthly GST returns (GSTR-3B and GSTR-1). Korean manufacturing companies in India typically have significant GST obligations given their large-scale operations. Ensure input tax credits are properly claimed and reconciled with the annual GSTR-9 return.
Step 7: TDS Returns
File quarterly TDS returns in Form 24Q (salaries), Form 26Q (non-salary payments), and Form 27Q (payments to non-residents including the Korean parent). TDS on payments to the Korean parent must be at DTAA rates if TRC and Form 10F are available.
Step 8: FEMA and RBI Compliance
File the Annual Return on Foreign Liabilities and Assets (ARFLA) with the RBI by July 15. Report all FDI inflows through FC-GPR. Maintain records of all cross-border remittances under FEMA regulations.
Timeline and Costs
The annual tax compliance cycle for Korean companies in India follows this calendar:
| Filing | Deadline | Estimated Cost (INR) |
|---|---|---|
| Advance Tax (4 installments) | Jun 15, Sep 15, Dec 15, Mar 15 | Based on estimated liability |
| GST Returns (monthly) | 20th of following month | 25,000-1,00,000/year |
| TDS Returns (quarterly) | Within 31 days of quarter end | 30,000-1,00,000/year |
| Statutory Audit (Form 3CA/3CD) | Before ITR due date | 2,00,000-10,00,000 |
| Transfer Pricing Report (Form 3CEB) | November 30 | 3,00,000-15,00,000 |
| Income Tax Return (ITR-6) | October 31 / November 30 | 75,000-3,00,000 |
| FEMA/RBI Returns (ARFLA) | July 15 | 25,000-75,000 |
Costs for large Korean manufacturers like Samsung or Hyundai subsidiaries are at the higher end of these ranges, given the complexity of their operations, multiple factory locations, and extensive intercompany transactions. Mid-sized Korean companies operating single-location businesses can expect costs at the lower end.
The overall timeline from year-end close to final ITR filing is approximately 5-8 weeks, assuming the TRC from South Korea's NTS is obtained on time.
Common Challenges for South Korean Companies
Fiscal Year Mismatch
Korean companies follow a January-December fiscal year, while India follows April-March. This mismatch creates complexity in reconciling intercompany balances, preparing transfer pricing documentation, and aligning financial reporting between the Korean parent and the Indian subsidiary. Korean parent companies often need to prepare separate carve-out financials for the Indian fiscal year.
Transfer Pricing in Automotive and Electronics
Indian tax authorities have been particularly aggressive on transfer pricing in the automotive and electronics sectors — exactly where Korean companies have their largest presence. Hyundai, Samsung, and LG have all faced transfer pricing assessments. Key risk areas include pricing of completely knocked-down (CKD) kits, royalty payments for technology and brand, management service fees, and allocation of group costs. Maintain robust benchmarking studies with Indian and Asia-Pacific comparables.
GST on Reverse Charge Imports
When the Korean parent provides services to its Indian subsidiary, GST at 18% is payable under the reverse charge mechanism by the Indian subsidiary. This applies to technical assistance, management fees, IT support, and brand licensing. Many Korean companies initially miss this obligation, leading to interest and penalty exposure.
Permanent Establishment Exposure
Korean companies deploying engineers or technical staff to India for extended periods risk creating a PE. Under the revised India-South Korea DTAA, the dependent agent PE provisions are broader than the original treaty. If Korean employees are negotiating contracts or concluding sales on behalf of the Korean parent in India, a PE may be established, making the Korean parent's business income taxable in India.
Withholding on Dividend Repatriation
The 15% dividend withholding rate under the India-South Korea DTAA is higher than several comparable treaties. Korean companies repatriating profits should consider alternative structures such as buyback of shares (which may have different tax treatment) or structuring payments as royalties or FTS at the lower 10% rate, subject to arm's length pricing requirements.
Why Choose BeaconFiling
We provide comprehensive tax compliance services for South Korean companies operating in India. Our team has experience with the specific challenges of Korean manufacturing operations, CEPA provisions, and the revised India-South Korea DTAA.
- Corporate tax filing — ITR-6 preparation, advance tax planning, and e-filing
- Tax advisory — DTAA optimization, PE risk assessment, and withholding tax structuring
- Compliance outsourcing — GST, TDS, FEMA reporting, and statutory audit coordination
We work with Korean companies across automotive manufacturing, electronics, steel, chemicals, and technology services.
WhatsApp: +91 874 501 3644 | Email: [email protected]
Frequently Asked Questions
What withholding tax rate applies to royalties paid to a Korean parent?
Under the revised India-South Korea DTAA (in force since September 2016), royalties are taxed at 10% in India, reduced from the earlier rate of 15%. This applies to payments for the use of patents, trademarks, copyrights, and technical know-how. A valid TRC from South Korea's National Tax Service and Form 10F must be filed to claim this rate.
Do Korean companies in India need to file transfer pricing reports?
Yes. If the Indian subsidiary has international transactions with the Korean parent exceeding Rs 1 crore in aggregate, transfer pricing documentation under Section 92D is mandatory. Form 3CEB must be filed by November 30. Indian tax authorities are particularly active in auditing transfer pricing for Korean automotive and electronics companies.
Can a Korean company use the CEPA for tax benefits?
The India-Korea CEPA (Comprehensive Economic Partnership Agreement) primarily covers trade in goods and services, customs duties, and investment protection. Tax benefits come from the DTAA, not the CEPA. However, CEPA customs duty reductions can lower the effective cost of imports from Korea, which indirectly affects the tax base of the Indian subsidiary.
What GST rate applies to import of services from Korea?
GST at 18% applies under the reverse charge mechanism when a Korean parent provides services to its Indian subsidiary. This covers management fees, technical assistance, brand licensing, IT support, and engineering services. The Indian subsidiary must self-assess and pay the GST. Input tax credit is available if the services are used for business purposes.
Is the India-South Korea BIT still in force?
India terminated its bilateral investment treaty (BIT) with South Korea in 2017. However, the sunset clause provides protection for investments made before termination for a period of 15 years. The CEPA investment chapter continues to provide some investment protection provisions separately from the BIT.
How does the fiscal year mismatch affect filings?
Korean companies follow a January-December fiscal year, while India uses April-March. The Indian subsidiary must prepare financial statements for the Indian fiscal year regardless of the Korean parent's year-end. Transfer pricing documentation must align with the Indian fiscal year. This often requires carve-out financial statements from the Korean parent for the April-March period.