Date:2016.07.12.

Written by: Selim tax-accounting firm

1.  Purpose of introduction

◦ In order to collect offshore financial information to prevent off-shore taxevasion and  improve  taxation equality

-The system already implemented in countries such as the USA, UK, and France

- Details of the notification subjects and method of declaration are delegated tothe enforcement decree

2. Amendment

◦  Residents who have overseas financial accounts over a certain amount.However, the domestic corporate must report it by the 30th of the followingyear

- If non-reporting (or underreporting)amount exceeds 5billion KRW: Fine is charged under 20%

- Expense-based insurance accounts are notsubject to notification

- In the case of a domestic parent company that directly or indirectly controls aforeign corporation 100%, the obligation to report the foreign financialaccount held by the foreign corporation

- Excluded from the report obligation when holding foreign financial account inthe name of money trust business, start-up investment association, Koreanventure investment association

- Strengthening the requirements for exemption of overseas residents'obligation (Reporting 2016 retention account in 2017)

Domestic residency period 2 years before theend of reporting subject year was shortened from 1 year or less to maximum 183days  

3. Reporting subject

◦ If the total balance of accounts held overseas is over 1 billion won on any dayof the month, the company is obliged to make a report

◦ Foreign financial institutions that are subject to the notification will berequired to report to the financial institution under the Act on Real NameFinancial Transaction and Guarantee of Secrecy.

◦ The foreignfinancial account subject to the notification shall be the account (cashaccount) established in connection with the banking business and the securitiestrading account pursuant to the "Capital Market and Financial InvestmentBusiness Act"

◦ If the account holder and the actual owner are different, both are obliged toreport. However, if the relevant person in the foreign financial account (theactual owner, joint name, etc.) provides the information of the personconcerned and the taxation authority can confirm the possession of the overseasfinancial account,

◦ Financialinstitutions under the Act on Real Name FinancialTransaction and Guarantee of Secrecy can be managed and supervised separately.

◦ However, in the case of financial holding companies, etc., it is not afinancial institution under the Financial Real Name Act, but it is supervisedby the Financial Supervisory Service.

4. Report details

◦ Those who are required to report overseas financial accounts: Those who areresidents and domestic law holders as of the end of the reporting period

◦ How to Calculate Balance of Accounts with Foreign Financial Accounts: