【June 2015】
☞ The following tax information is translated from Korean for foreign-invested companies, and is not legally binding.
(Q) What is the foreign financial account report system?
(A) The foreign financial account report system requires Korean residents or domestic corporations in Korea to report information on their foreign financial accounts, if the aggregate balance of all foreign financial accounts (i.e., all assets including cash, securities, bonds, funds, insurances) exceeds KRW one billion as of the end of any month during the relevant year. The report should be filed to the tax office from June 1 to 30 of the following year.
(Q) What is the scope of residents or domestic corporations obligated to file a foreign financial account report?
(A) Residents or domestic corporations (non-residents and foreign corporations are not subject to reporting) that are not exempt from reporting as of the last day of the year subject to reporting should file a report.
※ "Resident" means any individual who has had his/her domicile or place of residence in the Republic of Korea for one year or longer as defined in Article 1-2 of the Income Tax Act
(Q) Who is exempted from reporting?
(A) The following persons and entities are exempted from reporting.
Persons/ entities |
Eligibility for exemption from reporting |
Foreign residents |
A foreign resident who has had his/her domicile or place of residence in the Republic of Korea for not more than five years in total from ten years before the end of the relevant year subject to report |
Korean nationals residing abroad(*1) |
A Korean national residing abroad whose total period of having a residence in Korea from two years before the end of the relevant year subject to report(*2) is not more than one year (those having a domicile in Korea are subject to reporting) |
Financial companies and other entities subject to exemption |
Financial companies, etc.(*3) and other entities under the management and supervision of the government(*4) |
Persons related to foreign financial accounts(*5) |
A person whose foreign financial account information becomes available through a report by another person related to foreign financial accounts |
Central and local governments, public organizations |
*1. Korean nationals residing abroad means a national of the Republic of Korea who has acquired the right of permanent residence in a foreign country or is residing in a foreign country with a view to living there permanently (Article 2 of the Act on the Immigration and Legal Status of Overseas Koreans).
*2. The period of residence in Korea shall be from the date after the date of a person's arrival in Korea to the date of his/her departure. In cases where a person having a place of residence in Korea returns to Korea again after his/her departure from the country, and where the purpose of his/her departure is deemed apparently temporary in view of the place of residence of family living together with him/her and the location of his/her property, the relevant period of his/her absence shall be deemed as the period of residence in Korea (Article 4 of the Enforcement Decree of the Income Tax Act).
*3. Financial companies, etc. as defined by the Act on Real Name Financial Transactions and Confidentiality
*4. Financial investment related organizations, collective investment vehicles, collective investment vehicles rating companies and bond rating companies under the Financial Investment Services and Capital Markets Act; financial holding companies under the Financial Holding Companies Act; institutions conducting foreign exchange affairs and foreign exchange brokerages under the Foreign Exchange Transactions Act; and credit information companies under the Use and Protection of Credit Information Act
*5. Persons related to foreign financial accounts
Account ownership |
Persons related to foreign financial accounts |
When the nominal owner and the actual owner of an account are different |
The nominal and actual owners |
When an account is jointly owned |
Each of the respective joint owners of the account |
(Q) What are the foreign financial accounts subject to reporting?
(A) The following foreign financial accounts are subject to reporting
|
Matters to be reported |
Accounts subject to reporting |
Any of the following accounts opened at a foreign financial company:
① An account opened for banking services such as a savings account
② An account opened for trading securities (including overseas securities)
③ An account opened for trading derivatives (including foreign derivatives)
④ Other accounts opened for financial transactions |
Assets to be reported |
All assets including cash, securities (including depository receipts), bonds, collective investment securities, insurance policies, etc. held in foreign financial accounts subject to reporting should be reported.
* Collective investment securities are limited to those of collective investment vehicles established overseas that are not registered at the Financial Services Commission. |
Amount to be reported |
Where the sum of the assets subject to reporting exceeds KRW 1 billion on any last day of each month of the year subject to reporting, the highest amount of the remaining balance should be reported. |
(Q) How should I file a report?
(A) Taxpayers subject to reporting should file the「Report of Foreign Financial Accounts」to the competent tax office in June of the following year.
* e-filing is also available through Hometax (http://www.hometax.go.kr/)
(Q) Are there penalties for not reporting foreign financial accounts?
(A) Non-reporting or under-reporting of foreign financial accounts will result in a fine of up to 10 percent of the unreported amount. If the unreported amount exceeds KRW 5 billion, the account owner's personal information (e.g., name, address) can be disclosed and he/she shall face imprisonment of not more than two years or a fine of up to 10 percent of the unreported amount.
☞ For more information, please contact the International Tax Resource Management Office of the National Tax Service (82-44-204-2888~90).
