Tax News June 2016
The following tax information is translated from Korean for foreign-invested companies, and is not legally binding.
Q. What is the overseas financial accounts reporting system?
A. ◈ Persons and entities required to file a report
☞ Domestic residents and companies as of the last day of the relevant year subject to reporting.
i) Korean nationals residing abroad: Korean nationals residing abroad whose total period of
having a residence in Korea from two years before the end of the relevant year subject to
reporting is more than one year.
* Residents who are not Korean nationals residing abroad: Persons who have had heir domicile
or place of residence in Korea for 183 days or longer, as prescribed by Article 1-2 of the
Income Tax Act.
ii) Foreign residents: Foreigners who have had their domicile or place of residence in Korea for
more than five years in total from 10 years before the end of the relevant year subject to
◈ Minimum balance of accounts to be reported
☞ Overseas financial accounts with total balance exceeding KRW 1 billion (USD 860,000) on
any last day of each month of the year subject to reporting should be reported.
◈ Accounts and assets subject to reporting
☞ Overseas financial accounts subject to reporting
◈ When and how to file a report
☞ Taxpayers subject to reporting should submit a report form to the competent tax office or
electronically file a report through Hometax (http://www.hometax.go.kr). The period for
submitting a report is from June 1 through 30.
◈ Penalties for unreported or under-reported amount
☞ (Administrative fine) A fine of up to 20 percent of the unreported (or under-reported) amount
shall be imposed.
(Disclosure of personal information) Where the unreported (or under-reported) amount
exceeds KRW 5 billion (USD 4.3 million), the account owner’s personal information can be
(Criminal penalties) Where the unreported (or under-reported) amount exce eds KRW 5
billion (USD 4.3 million),the account owner may face imprisonment of not more than two
years and/ or a fine of up to 20 percent of the unreported (or under-reported) amount.
Q. Who is the withholding agent for a foreign investor’s income from the transfer of bonds and interests
on bonds accrued during the owned period? Also, can the withholding obligation be delegated to
A. Where a domestic company acquired bonds deemed as securities pursuant to Article
93 Subparagraph 9 of the Corporate Tax Act and Article 119 Subparagraph 11 of the Income Tax Act
from a foreign investor through a financial company that is an investment broker, the financial
company shall withhold the tax for the income from transfer of bonds, and theinter ests on bonds
accrued during the owned period as prescribed by Article 98-3 (1) of the Corporate
Tax Act and Article 156- 3 of the Income Tax Act. In this case, the withholding obligation of the
financial company cannot be delegated to the domestic company.
Source: National Tax Service (Jan. 29, 2016)
Q. Is an app store operator obligated to collect value added tax?
A. Where a non-resident or foreign company provided service (in this case, applications) as prescribed
by Article 53 (1) of the Value Added Tax Act to domestic customers through an open market
operated by a mail order broker who is a mail order distributor pursuant to Article 2 of the Act on
Consumer Protection in Electronic Commerce, etc. (hereafter ‘app store operator’), and the app store
operator collects the proceeds from sales and remits the funds after deducting fees to the non-resident
or foreign company, it is considered that the app store operator provided the service, in accordance
with Article 53 of the Value Added Tax Act.
Source: Ministry of Strategy and Finance (Apr. 5, 2016)
Q. Is an “officetel” (a multipurpose building with residential and commercial suits) rented out to
employees subject to tax credit for investment in facilities for promotion of workers’ welfare?
A. Where an officetel that is smaller than national housing* is acquired and rented out for residential
purposes to employees who own no housing, the officetel is subject to tax credit for investment in
facilities for promotion of workers’ welfare as prescribed by Article 94 of the Restriction of Special
Taxation Act. However, the relevant facts shall be considered when determining whether the officetel
is actually rented out for residential purposes to employees who own no housing.
* National housing: Housing constructed or renovated with funds subsidized from the National
Housing Fund and the area of which used exclusively for residential purposes is not more than
85m2 per family or household.
Source: Ministry of Strategy and Finance (Mar. 31, 2016)