2015.10.13

                                                     Mun, Hyun Bae CTA

1. Outline

To find out a procedure after investment registration to the president of foreign exchange bank to establish a branch office and to attain real estate in overseas.

2. Objects and Reporting statement

(1) Object

A resident or domestic corporation who invest directly in overseas according to the [Foreign Exchange Transaction Act] Article 3, clause 1, No. 18.

A resident or domestic corporation who attained real estate in overseas or attained authority according to the [Foreign Exchange Transactions Act] Article 3, clause 1. No. 19.

(2) Breakdown to report.

① Breakdown for overseas direct investment.

② Financial condition of foreign corporation in Korea which got direct investment from overseas.

③ Profit and Loss of domestic corporation which invest directly in overseas.

④ Profit and Loss transaction of foreign corporation in Korea which got direct investment from overseas.

⑤ Present condition of overseas branch office.

⑥ Investment breakdown of overseas real estate.

(3) Reporting period

Corporation : within 3 months from taxation termination.

Personal : At the end of May next year.

3. Penalty and applied period for non reporting.

(1) In the case of overseas direct investment.

① Penalty : Below KRW 10,000,000

② Applied period : Corporation : from 2010.

                  Personal : from 2014.

(2) In the case of overseas real estate ;

① Penalty : below 1 % from attained real estate amount ( limit is KRW 50,000,000)

② Applied period : both corporation and personal from 2014.

* Penalty will be below KRW 10,000,000 only in 2014.

Corporate Tax Act 121. Clause 2 / The income Tax Law 165, Clause 2.

[ Duty to report documents on foreign branch] (2014.12.23. topic revised).

① A domestic corporation ( resident ) which invest directly in overseas according to the [Foreign Exchange Transaction Act] Article 3, Clause 1, No. 18. Or attained real estate in overseas or attained authority with capital transaction according to the [foreign Exchange Transactions Act] Article 3, Clause 1. No. 19. Should submit documents to the head of a district tax office in the place of tax payment by a presidential decree as follows;(2014. 12.23 revised)

1. Breakdown of foreign direct investment (2014.1.1 established)

2. Financial condition of foreign corporation which got overseas direct investment. (2014.1.1 established)

3. Profit and Loss of domestic corporation which invest directly to the overseas.

This profit and loss is limited to the transaction with foreign corporation which got direct investment. (2014.1.1 established)

4. Profit and Loss transaction of foreign corporation which got overseas direct investment. ( The profit and loss is excluded from the transaction with domestic corporation which invest directly to the overseas. (2014.1.1 established)

5. Present condition of overseas branch office (2014.1.1 established)

6. Investment breakdown of overseas real estate. ( 2014.12.23 revised)

7. Besides documents related to the real estate in overseas or overseas direct investment by a presidential decree.

② According to the clause 1 if domestic corporation doesn't submit document of breakdown of overseas branch office or submit false document, a head of a district tax office in the place of tax payment can request submitting or complement documents for overseas branch office.

If 2 years is passed from next day its period according to the clause 1, it is not applied. (2010. 12.30 revised).

③ According to the clause 2, if you are requested documents submitting or complement, you should submit within 60 days. (2010.12.30 revised)

Corporate Tax Act 121 clause 3 / The income tax law 165. Clause 3 [Penalty on unimplement duty to report documents on overseas branch office etc.]

(2014.12.23 topic revised)

① According to the Article 121 Clause 2 if a corporation which has duty to report on breakdown of overseas branch office is in the case of as follows it should pay penalty under KRW 10,000,000. But if there is a justifiable cause not to submit document by a presidential decree, penalty will be excluded. (2014.12.23 revised).

●     A corporation : According to the 121. Clause 1. If a company invest directly overseas which should have above 10/100 from issued total shares or total investment amount.

●     Breakdown of overseas branch office : According to the corporate 121. Clause 1. No 6 documents on investment breakdown of overseas real estates and same law No.7 documents on real estate in overseas are excluded.

Case 1: According to the 121. Clause 2. No. 1 if breakdown of overseas branch office is not submitted by period or falsely submitted. (2014.1.1. revised)

Case 2 : Accrding to the 121 clause 2 No. 2. and clause 3, when documents are not submitted or falsely submitted.

② If breakdown of overseas real estate (according to the 121. Clause 2, clause1. No 6 )and documents related to real estate in overseas (according to the same clause No 7) are not submitted by a corporation which has duty to report them, penalty will be requested as follows ;

Penalty : below 1/100 of attained amount from overseas real estate. But if document submitting is impossible with justified reason by a presidential decree, penalty will not be requested. (2014.12.23 establisehd).

Two cases for penalty.

Case 1 : When investment breakdown of overseas real estate is not submitted by end date according to the law 121.clause 2 No.1 or falsely submitted.

Case 2 : According to the law 121 clause 2. No. 2 document submitting and complement are requested by the date according to the law clause 3 but it was not implemented or falsely submitted. (2014. 12.23 established)

③ Penalty according to the clause 1,2 by a presidential decree should be submitted to the head of a district tax office in the place of tax payment. (2104.12.23 revised)