Obligation to Submit Data on Overseas Subsidiaries

I. Introduction

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

II. Who should report?

☞ every domestic corporation that makes an overseas direct investment or right in such property through a capital transaction.

III. What should be reported?

① A detailed statement of the overseas direct investment

② The financial position of the foreign corporation in which the overseas direct investment has been made

③ Losses incurred in transactions to the domestic corporation that has made the overseas direct investment

④ Losses incurred in transactions to the foreign corporation in which the overseas direct investment has been made

⑤ The status of overseas branch offices;

⑥ A statement of investments 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, from 2014 for individuals

★ Overseas real estate

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

② Imposition of fines: from 2014 both for corporations and individuals

VI. Related Regulations

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

(1)  Every domestic corporation that makes an overseas direct investment pursuant to Article 3 (1) 18 of the Foreign Exchange Transactions Act or acquires real estate in a foreign country or right in such property (hereinafter referred to as "real estate, etc.") through a capital transaction defined by Article 3 (1) 19 of the aforesaid Act, shall submit the following documents (hereinafter referred to as "statements, etc., on overseas subsidiaries") to the head of the tax office having jurisdiction over the place of tax payment by the deadline specified by Article 60 (1) or 76-17 (1), as prescribed by Presidential Decree:

1.  A detailed statement of the overseas direct investment;

2.  The financial position of the foreign corporation in which the overseas direct investment has been made 

(including the financial position of the foreign corporation in which investment is made by the foreign corporation in which the overseas direct investment has been made);

3.  Losses incurred in transactions to the domestic corporation that has made the overseas direct investment 

(limited to the losses incurred in transactions with the foreign corporation in which the overseas direct investment has been made);

4.  Losses incurred in transactions to the foreign corporation in which the overseas direct investment has been made

(excluding the losses incurred in transactions with the domestic corporation that has made the overseas direct investment);

5.  The status of overseas branch offices;

6.  A statement of investments in overseas real estate, etc.;

7.  Other documents specified by Presidential Decree as relevant to overseas direct investments or real estate, etc., in a foreign country.

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

(3)  A person 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 the request.

★ Article 121-3 (Administrative Fines for Non-Performance of Obligation to Submit Data on Overseas Subsidiaries, etc.)

(1)  In either of the following circumstances, a corporation obligated to submit statements, etc., on overseas subsidiaries pursuant to Article 121-2 (excluding a statement on investment in overseas real estate, etc., referred to in Article 121-2 (1) 6 and documents related to real estate, etc., in a foreign country referred to in Article 121-2 (1) 7; the same shall apply hereafter in this paragraph) shall be subject to an administrative fine not exceeding 50 million won (this clause shall apply only where a domestic corporation that has made overseas direct investment under Article 121-2 (1) directly or indirectly owns at least 10/100 of the total number of outstanding stocks of, or total amount of investment in, the invested corporation): Provided, That the foregoing shall not apply where it is found impracticable for a corporation to submit documents by the deadline or where a corporation has any other just ground specified by Presidential Decree: