North Korean troops have opened fire across the demilitarised zone dividing the peninsula, prompting South Korean forces to fire back.
The rare exchange of gunfire took place on Sunday, a day after North Korean state media reported the country's leader Kim Jong-un made his first public appearance in about three weeks.
Mr Kim's absence caused intense speculation about his health and fears about the stability of North Korea.
A South Korean guard post was hit by several shots fired from the North Korea, the joint chiefs of staff in Seoul said.
No casualties were reported in the South, they said.
"Our military responded with two rounds of gunfire and a warning announcement," the joint chiefs said.
The South Korean military said the North Korean gunshots were "not deemed intentional", according to Seoul's Yonhap News Agency.
The nations remain technically at war after the Korean War ended with an armistice in 1953.
Despite its name, the demilitarised zone is one of the most fortified places on Earth, replete with minefields and barbed-wire fences.
Easing military tension on their border was one of the agreements reached between Mr Kim and South Korean President Moon Jae-in at a summit in Pyongyang in September, 2018.
Choi Kang, vice president of the Asian Institute for Policy Studies in Seoul, said the timing of the "grey area" provocation showed Mr Kim was still in charge of the North Korean military.
"Yesterday, Kim was trying to show he is perfectly healthy, and today, Kim is trying to mute all kinds of speculation that he may not have full control over the military," Mr Choi said.
"Rather than going all the way by firing missiles and supervising a missile launch, Kim could be reminding us, 'yes, I'm healthy and I'm still in power'.
Leif Eric Easley, an international affairs professor at Ewha University in Seoul, said the shooting could have been aimed at boosting morale in the North Korean military.
"The Kim regime may be looking to raise morale of its frontline troops and to regain any negotiating leverage lost during the rumour-filled weeks of the leader's absence," Mr Easley said.
"South Korea and the United States should not take lightly such North Korean violations of existing military agreements."
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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