Duty to Submit Documents about Overseas Corporations

Date: June 4, 2021

I. Introduction

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

 

II. A CaseStudy

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

☞ If a person with a permanent residency permit issued by a foreigncountry has no family member who makes a living together in the Republic ofKorea and is not deemed to return to the Republic of Korea to mainly reside inthe Republic of Korea, in view of his/her occupation or property status, theperson 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 183thday after the nonresident acquires a place of residence in the Republic ofKorea he or she is deemed a resident

☞ Therefore, from the date a person becomes a resident of the ROK ishas the obligation to submit the documents about overseas corporations. He orshe shall submit the documents during the tax filing period for global incometax.

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

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

 

III. Relatedregulations

 

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

 

(1)  Aresident (excluding foreign residents under the proviso to Article 3 (1)) whomakes 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 taxoffice having jurisdiction over the place for tax payment by the deadline forreporting under Article 70 or 70-2, as prescribed by Presidential Decree:

 

1.  A statement of overseas direct investments;

 

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

 

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

 

4.  Losses on transactions of the foreigncorporations in which overseas direct investments have been made (excluding theloss incurred on transactions with residents who have made overseas directinvestments);

 

5.  Current conditions of establishment ofoverseas business offices;

 

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

 

7.  Other documents specified by PresidentialDecree 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 supplementthe statement of overseas corporations, etc.: Provided, That the foregoingshall not apply, if two years have already passed since the day immediatelyafter the deadline set in paragraph (1).

 

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

 

 

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

 

(1)  A resident (excluding foreign residents underthe proviso to Article 3 (1)) who makes an overseas direct investment underArticle 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 referredto 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 taxpayment by the deadline for reporting under Article 70 or 70-2, as prescribedby Presidential Decree:

 

1.  A statement of overseas direct investments;

 

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

 

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

 

4.  Losses on transactions of the foreigncorporations in which overseas direct investments have been made (excluding theloss incurred on transactions with residents who have made overseas directinvestments);

 

5.  Current conditions of establishment ofoverseas business offices;

 

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

 

7.  Other documents specified by PresidentialDecree 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 supplementthe statement of overseas corporations, etc.: Provided, That the foregoingshall not apply, if two years have already passed since the day immediatelyafter 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 bedetermined by the objective facts of living relationship, such as the existenceof a family living together in the Republic of Korea and of the propertylocated in the Republic of Korea.

 

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

 

(3)  In any of the following cases, a naturalperson who resides in the Republic of Korea shall be deemed to have his/herdomicile 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 tocontinually reside in the Republic of Korea for at least 183 days in view ofhis/her occupation 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 oraircraft 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/sheusually resides during the period other than duty hours, is located in theRepublic 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 aresident shall be any of the following days:

 

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

 

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

 

 

 

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