Duty to Submit Documents about Overseas Corporations

Date: Apr 3, 2020

I. Introduction

This post will look into a case of a person who acquired a permanent residency of a foreign country and resided in the country but renounced his/her permanent residency and comes back to Korea. Now the person is a resident of Korea and holds stocks and real estate property of a foreign corporation. In this case does he or she have a duty to submit documents about overseas corporations?

 

II. A Case Study

☞ The current law, the Article 165-2, determines the duty to submit documents about overseas corporations based on whether an individual is a resident or non-resident not on whether an individual has a permanent residency

 

☞ If a person with a permanent residency permit issued by a foreign country has no family member who makes a living together in the Republic of Korea and is not deemed to return to the Republic of Korea to mainly reside in the Republic of Korea, in view of his/her occupation or property status, the person shall be deemed to have no domicile in the Republic of Korea.

 

☞ If a person has a domicile in the Republic of Korea or the 183th day after the nonresident acquires a place of residence in the Republic of Korea he or she is deemed a resident

 

☞ Therefore, from the date a person becomes a resident of the ROK is has the obligation to submit the documents about overseas corporations. He or she shall submit the documents during the tax filing period for global income tax.

☞ Provided, That the person should submit documents only when he or she acquires overseas asset property and if he or she does not have rental income from the property or use the property he or she does not have to submit the documents every year.

 

☞ From Jan 1, 2018 where a foreign resident has a domicile in Korea fewer than 5 to 10 years from the end date of taxation period he or she shall be exempt from the duty.

 

III. Related regulations

 

★Article 165-2 (Duty to Submit Documents about Overseas Corporations,etc.)

 

(1)  A resident (excluding foreign residents under the proviso to Article 3 (1)) who  makes an overseas direct investment under Article 3 (1) 18 of the ForeignExchange Transactions Act or who acquires real estate in a foreign country orany rights in such real estate through a capital transaction under subparagraph19 of the said paragraph (hereinafter referred to as "real estate,etc."), shall submit the following documents (hereinafter referred to as"statement of overseas corporations, etc.") to the head of the tax office having jurisdiction over the place for tax payment by the deadline for reporting under Article 70 or 70-2, as prescribed by Presidential Decree:

 

1.  A statement of overseas direct investments;

 

2.  The financial position of the foreign corporation in which the overseas direct investments have been made (including the financial position of other foreign corporations in which the foreign corporation in which the overseas direct investments have been made have made investments);

 

3.  Losses on transactions of residents who have made overseas direct investments (limited to the loss incurred in the transactions with the foreign corporation in which overseas direct investments have been made);

 

4.  Losses on transactions of the foreign corporations in which overseas direct investments have been made (excluding the loss incurred on transactions with residents who have made overseas direct investments);

 

5.  Current conditions of establishment of overseas business offices;

 

6.  A statement of investments in overseas real estate, etc.;

 

7.  Other documents specified by Presidential Decree as relevant to overseas direct investments or real estate, etc. in a foreign country.

 

 

(2)  If a resident under paragraph (1) fails tosubmit a statement of overseas corporations, etc. or submits a false statement of overseas corporations, etc., the head of the tax office having jurisdiction over the place for tax payment may request the resident to submit or supplement the statement of overseas corporations, etc.: Provided, That the foregoing shall not apply, if two years have already passed since the day immediately after the deadline set in paragraph (1).

 

 

(3)  Upon receipt of a request to submit or supplement a document under paragraph (2), the requested person shall submit the document within 60 days from the date of such request.

 

 

★ Article 165-3 (AdministrativeFines Imposed for Non-Performance of Duty to Submit Documents about Overseas Corporations, etc.)

 

 

(1)  A resident (excluding foreign residents underthe proviso to Article 3 (1)) who makes an overseas direct investment under Article 3 (1) 18 of the Foreign Exchange Transactions Act or who acquires realestate in a foreign country or any rights in such real estate through a capitaltransaction under subparagraph 19 of the said paragraph (hereinafter referred to as "real estate, etc."), shall submit the following documents (hereinafter referred to as "statement of overseas corporations,etc.") to the head of the tax office having jurisdiction over the placefor tax payment by the deadline for reporting under Article 70 or 70-2, as prescribed by Presidential Decree:

 

 

1.  A statement of overseas direct investments;

 

 

2.  The financial position of the foreign corporation in which the overseas direct investments have been made (includingthe financial position of other foreign corporations in which the foreign corporation in which the overseas direct investments have been made have madeinvestments);

 

 

3.  Losses on transactions of residents who have made overseas direct investments (limited to the loss incurred in the transactions with the foreign corporation in which overseas direct investments have been made);

 

 

4.  Losses on transactions of the foreign corporations in which overseas direct investments have been made (excluding the loss incurred on transactions with residents who have made overseas direct investments);

 

 

5.  Current conditions of establishment of overseas business offices;

 

 

6.  A statement of investments in overseas realestate, etc.;

 

 

7.  Other documents specified by Presidential Decree as relevant to overseas direct investments or real estate, etc. in aforeign country.

 

 

(2)  If a resident under paragraph (1) fails tosubmit a statement of overseas corporations, etc. or submits a false statementof overseas corporations, etc., the head of the tax office having jurisdictionover the place for tax payment may request the resident to submit or supplement the statement of overseas corporations, etc.: Provided, That the foregoing shall not apply, if two years have already passed since the day immediately after the deadline set in paragraph (1).

 

 

★ Article 2 (Determination onDomicile and Place of Residence)

 

 

(1)  A domicile defined in Article 1-2 of theIncome Tax Act (hereinafter referred to as the "Act") shall be determined by the objective facts of living relationship, such as the existence of a family living together in the Republic of Korea and of the property located in the Republic of Korea.

 

 

(2)  A place of residence defined in Article 1-2of the Act means a place where a person has lived for a long time besides his/her domicile, and in which there is no general living relationship as close as a domicile.

 

 

(3)  In any of the following cases, a natural person who resides in the Republic of Korea shall be deemed to have his/her domicile in the Republic of Korea:

 

 

1.  Where the person has an occupation whichusually requires him/her to continually reside in the Republic of Korea for atleast 183 days

 

 

2.  Where the person has a family member whomakes a living together with him/her in the Republic of Korea and is deemed to continually reside in the Republic of Korea for at least 183 days in view of his/heroccupation or property status.

 

 

(4)  If a person living or working abroad with thenationality of a foreign country or a permanent residency permit issued by aforeign country has no family member who makes a living together in theRepublic of Korea and is not deemed to return to the Republic of Korea tomainly reside in the Republic of Korea, in view of his/her occupation orproperty status, the person shall be deemed to have no domicile in the Republicof Korea.

 

 

(5)  In cases of a crew member of a vessel or aircraft serving an overseas route, if a place of residence of his/her familyliving together with the relevant crew member, or a place in which he/she usually resides during the period other than duty hours, is located in the Republic of Korea, the domicile of the relevant crew member shall be deemed tobe located in the Republic of Korea; and when such place is located overseas,the domicile of the relevant crew member shall be deemed located overseas.

 

 

★ Article 2-2 (Time when PersonBecomes Resident or Nonresident)

 

 (1)  The time when a nonresident becomes a resident shall be any of the following days:

 

 

1.  The day when the nonresident acquires a domicile in the Republic of Korea;

 

 

2.  The day when an event, based on which the nonresident shall be deemed to acquire or have a domicile in the Republic ofKorea under Article 2 (3) or (5), occurs;

 

 

3.  The 183th day after the nonresident acquiresa place of residence in the Republic of Korea

 

 

(2)  The time when a resident becomes a nonresident shall be any of the following days:

 

 

1.  The next day of the date when he/she leavesKorea to move his/her domicile or place of residence outside Korea

 

 

2.  The next day of the date when an event, based on which he/she shall be deemed to have no domicile in the Republic of Korea or to have a domicile outside the Republic of Korea pursuant to Article 2 (4) or(5), occurs.

 

 

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