(1) The tax base for an overseas place of business of a domestic corporation shall be calculated in accordance with the method reported to the head of the tax office having jurisdiction over the place of tax payment, among the following methods (hereafter referred to as "calculation method of tax bases" in this Article); provided, the tax base of the income for the business year before the calculation method of tax bases prescribed in subparagraph 2 or 3 is first reported and applied shall be calculated by applying the calculation method of tax bases prescribed in subparagraph 1:
1. Method of re-preparing the financial statements where the financial statements of an overseas place of business are not prepared in any functional currency, other than Korean Won, combining them with the financial statements of the headquarters and calculating the tax base based on such combined financial statements;
2. Method of calculating the tax base based on the financial statements of an overseas place of business denominated in the functional currency of the overseas place of business, converting such tax base into Korean Won and aggregating it with the tax base of the headquarters;
3. Method of converting, into Korean Won, the items on the statement of financial position at the exchange rate as at the end date of the business year and the items on the consolidated income statement at the exchange rate prescribed by Presidential Decree in the case of the financial statements of an overseas place of business, combining them with the financial statements of the headquarters and calculating the tax base based on the combined financial statements.
(2) A corporation that has reported and applies the calculation method of tax bases prescribed in paragraph (1) 2 or 3 shall not change the calculation method of tax bases unless there arise circumstances prescribed by Presidential Decree, such as a merger between corporations using a different calculation method of tax bases.
(3) For purposes of paragraphs (1) and (2), matters necessary for the application of exchange rates, the report and change of the calculation method of tax bases, the report of tax bases of a corporation that selects each calculation method of tax bases, the application of calculation method of tax bases, and other matters shall be prescribed by Presidential Decree.[This Article Added on Dec. 30, 2010]