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)