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Korea, US Sign an agreement on Automatic Exchange of Tax Information
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2014-08-20
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Korea, US Sign an agreement on Automatic Exchange of Tax Information

 

The Ministry of Strategy and Finance (“MOSF”) announced that Korea signed an agreement on the automatics exchange of tax information with the US in the recent inter-governmental meeting.

 

If ratified by both countries, the agreement will mandate the tax authorities to collect from financial institutions data on interest, dividends and other income subject to withholding and provide the collected data to governments where the non-residents are located every September beginning in 2015. In addition, the agreement will require the automatic exchange of information on financial accounts held by corporations. The coverage of the agreement will include US withholding tax-associated accounts held by US corporations in Korea if the outstanding balance exceeds USD 250,000(no limits for new accounts opened the enforcement of the agreement).

 

Financial institutions covered by the agreement will include banks, investment banks, insurance companies, etc. However, the agreement shall not apply to government entities, central banks international organizations and public pensions and annuities. When the government comes into force, Korean financial institutions under the US Foreign Account Tax Compliance Act (“FACTA”) and exemption from the withholding obligation as required in the FACTA.

 

(Summary of Korea US Agreement)

 

 

USA -> Korea

Korea -> USA

Reporting

Entity

Individual

. Financial Accounts if the annual interest is over USD 10.

. Other financial account related to US sourcing income

. Financial Accounts if over USD 50K. (The existing saving insurance : over 250K)

 

Corporation

. Financial account related to US sourcing income

. Financial Accounts if over USD 250K.

Reporting Financial information

. Interest, Dividend and other US sourcing income

. Interest, Dividend, other Korea sourcing income and balance of accounts

Reporting Financial Institutions

. Banks, investment banks, insurance companies, etc

. Excluded government entities, central banks international organizations and public pensions and annuities

Timing of exchange

. The end of September each year for the last year financial information.

. Effective form CY2015

 

 

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