Overseas Investment (2)

Date: January 22, 2021

I. Duty to report

Where a resident or domestic corporation makesan overseas investment it is mandate to report to financial institutions andtax authorities. Otherwise, it is subject to fines.

(1) Report to financial institutions

Foreign currency exchange law stipulates thatoverseas investors have obligations to report to financial institutions fortheir investment in foreign countries as a post-management methods. There aresanctions against non-compliance with such obligations including suspension offoreign transactions and fines.

① Remittance (investment)report: right after making remittance (investment)

② Foreign currency securityacquisition report: within six months after paying in capital funds (loan)

③ Annual reports on profit andloss: before May after completion of accounting period

④ liquidation of direct foreigninvestment and claimable assets withdrawal: right after collection ofliquidation fund (principal and interest)

(2) Report to the tax authorities

① Investors who acquirereal-estate or make an investment in foreign countries are obliged to submit a‘statement of international transactions' within filing deadline for income andcorporate tax return in addition to report to the financial institutions.Non-compliance or violation of the obligation is subject to fines.

☞ Foreign direct investment statement

☞ Statement of financialposition of the foreign corporation

☞Loss transaction statement of the foreign corporation

☞ Present condition ofestablishment of the foreign corporation

☞ Overseas real-estateinvestment statement

② Where a domestic corporation has transactions with a foreign-relatedparty submission of statement of international transactions and incomestatement of the foreign-related party is required to monitor whether there isprofit transfer caused by transfer price within income tax and corporate taxdeadlines. Non-compliance or violation of it is subject to fines.

③ Submission of a country bycountry report is an obligation for those who engage in cross-bordertransaction. The report varies depending on the size of the transaction withforeign-related parties; integrated report, individual business report, andcountry by country report. Non-compliance or violation of it is subject tofines

II. Off-shore account notification

Offshore account notification system hasintroduced in 2011 to prevent offshore tax evasion. Where off-shore bankaccounts of an individual or corporation have a total balance exceeding KRW1billion on any day among the last day of each months it is subject to submissionof off-shore account details to the National Tax Service and the submissionshould be completed by the end of June of the next year to the National TaxService.

① A resident or domesticcorporation holding an overseas financial account at an overseas financecompany:

A resident who has address in Korea formore than 183 days.

A foreigner who has address in Korea formore than 10 years or has more than 5 years of having address in Korea.

② Standard amount for notification

In case of holding more than one account)as at the last day of any month of the relevant year exceeds 500 million won.

③ Subject of notification

The balance of the account of a personrequired to file a report under Article 34 (1) of the Act (hereinafter referredto as "person required to report") as at the last day of each monthshall be calculated by aggregating the amounts calculated according to thefollowing classification as to the assets of each overseas financial accountheld by the person required to report after converting them respectively at theexchange rate (referring to a daily base or arbitrated exchange rate under theForeign Currency Exchange Transactions Act) of the relevant nominal currencies.In such cases, if at least two persons jointly inherited an overseas financialaccount in the decedent's name in such cases, only the portions that each jointheir inherited, out of the balance of the account, shall be converted andaggregated

the amount prescribed by PresidentialDecree, shall report the following information to the head of the tax officehaving jurisdiction over the place for tax payment from June 1 to 30 of thefollowing year

④ Penalty tax

Non-reporting or underreporting:

Below 2 billion won: 10%

2 billion ~ 5 billion won: 15%

   ~      Above 5 billion: 20%

III. Overseas real estate

When a resident or domestic corporationacquires or transfer real estate overseas which values higher than 200 millionwon it is subject to report within 6 months from the last day of business yearthrough investment statement of real estate overseas. If it is failed 10percent of penalty tax shall be imposed.

Learn more about Korean tax system by visiting our website

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