Obligation to Submit Data on Overseas Subsidiaries

Date: Apr 23, 2021

I. Introduction

This post will look into a case of obligationto submit data on overseas subsidiaries. When an individual wants to establisha corporation and acquire real estate overseas how he or she should report tothe head of a foreign exchange bank and what steps should he take afterreporting?

II. Whoshould report?

☞Every domestic corporation that makes an overseas direct investment or right insuch property through a capital transaction.

III. What should be reported?

① A detailed statementof the overseas direct investment

② The financialposition of the foreign corporation in which the overseas direct investment hasbeen made

③ Losses incurred intransactions to the domestic corporation that has made the overseas directinvestment

④ Losses incurred intransactions to the foreign corporation in which the overseas direct investmenthas been made

⑤ The status ofoverseas branch offices;

⑥ A statement ofinvestments in overseas real estate, etc.;

IV. Filing Due Date

☞ Corporations: within 3 months from the date of taxation

☞ Individuals:by the end of May of the following year of the relevant taxable period

V. Administrative Fines for being unreported

★ Direct overseas investment

① Administrative fines: KRW 10 million or less

② Imposition of fines: from 2010 for corporations, from2014 for individuals

★ Overseas real estate

① fines: 1 percent or less of the acquisition priceof overseas real estate with a maximum of KRW 50 million

② Imposition of fines: from 2014 both forcorporations and individuals

VI. Related Regulations

★Article 121-2 (Obligation to Submit Data on OverseasSubsidiaries, etc.)

(1)  Every domestic corporation that makes anoverseas direct investment pursuant to Article 3 (1) 18 of the Foreign ExchangeTransactions Act or acquires real estate in a foreign country or right in suchproperty (hereinafter referred to as "real estate, etc.") through acapital transaction defined by Article 3 (1) 19 of the aforesaid Act, shallsubmit the following documents (hereinafter referred to as "statements,etc., on overseas subsidiaries") to the head of the tax office havingjurisdiction over the place of tax payment by the deadline specified by Article60 (1) or 76-17 (1), as prescribed by Presidential Decree:

1.  Adetailed statement of the overseas direct investment;

2.  Thefinancial position of the foreign corporation in which the overseas directinvestment has been made (including the financial position of the foreigncorporation in which investment is made by the foreign corporation in which theoverseas direct investment has been made);

3.  Lossesincurred in transactions to the domestic corporation that has made the overseasdirect investment (limited to the losses incurred in transactions with theforeign corporation in which the overseas direct investment has been made);

4. Losses incurred in transactions to the foreign corporation in which theoverseas direct investment has been made (excluding the losses incurred intransactions with the domestic corporation that has made the overseas directinvestment);

5.  Thestatus of overseas branch offices;

6.  Astatement of investments in overseas real estate, etc.;

7.  Otherdocuments specified by Presidential Decree as relevant to overseas directinvestments or real estate, etc., in a foreign country.

(2) Where a domestic corporation referred to in paragraph (1) fails tosubmit a detailed statement, etc., of overseas subsidiaries or submits a falsedetailed statement, etc., of overseas subsidiaries, the head of the tax officehaving jurisdiction over the place of tax payment may request the domestic corporationto submit or supplement it: Provided, That the same shall not apply where twoyears pass from the following day of the filing deadline referred to inparagraph (1).

(3)  Aperson in receipt of a request to submit or supplement data pursuant to paragraph(2) shall submit the relevant data within 60 days from the receipt of therequest.

★ Article121-3 (Administrative Fines for Non-Performance of Obligation to Submit Data onOverseas Subsidiaries, etc.)

(1)  In either of the following circumstances, acorporation obligated to submit statements, etc., on overseas subsidiariespursuant to Article 121-2 (excluding a statement on investment in overseas realestate, etc., referred to in Article 121-2 (1) 6 and documents related to realestate, etc., in a foreign country referred to in Article 121-2 (1) 7; the sameshall apply hereafter in this paragraph) shall be subject to an administrativefine not exceeding 50 million won (this clause shall apply only where adomestic corporation that has made overseas direct investment under Article121-2 (1) directly or indirectly owns at least 10/100 of the total number ofoutstanding stocks of, or total amount of investment in, the investedcorporation): Provided, That the foregoing shall not apply where it is foundimpracticable for a corporation to submit documents by the deadline or where acorporation has any other just ground specified by Presidential Decree:

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