Korea's Law for the Coordination of International Tax Affairs strictly regulates transfer pricing for firms in which foreign ownership exceeds a certain percentage and firms over which foreigners exercise managerial control. This study analyzes the effects of foreign ownership ratios and internal transactions on income shifting resulting from transfer pricing decisions. The level of income shifting can be expressed as internal transaction volume × (arm's length price − transfer price), and in this study, its level is measured using the gross profit margin. If the foreign ownership ratio influences internal transaction volume and transfer pricing decisions, then the level of income shifting should vary as the foreign ownership ratio increases. In particular, if domestic income is shifted overseas, this has the effect of transferring domestic shareholders' income to foreign shareholders, creating a conflict of interest between domestic and foreign shareholders regarding income shifting. Therefore, the main proposition of this study is that the gross profit margin will decrease as the foreign ownership ratio increases. The results of the analysis show that the gross profit margin decreased as the internal transaction ratio increased. For firms with foreign ownership ratios of 70% or above, the gross profit margin decreased as the foreign ownership ratio increased, as predicted; however, for firms with foreign ownership ratios below 70%, the opposite result was observed.