Foreign Shares in collective safe custody: Disclosure of names for dividend payments subject to reduced South Korean taxation rate
The names of final beneficiaries for the dividend payment on Samsung Global Depository Receipts (GDRs) with ISINs US7960502018 and US7960508882 must be disclosed to Clearstream Banking1 no later than
12 January 2017, 10:00 CET.
Due to the different taxation treatment of dividend income for the above-listed securities kept in collective safe custody, final beneficiaries must be reported to Clearstream as per record date 30 December 2016
to obtain a reduced taxation rate.
Please note that failure to disclose names by the above date results in the dividend being paid with a tax deduction of 22%, that is, as of 1 January 2009, the standard rate of South Korean withholding tax. In this case, Clearstream Banking assumes that the names of final beneficiaries are not allowed to be disclosed.
In order to benefit from the reduced rate of withholding tax provided for under the terms of a Double Taxation Treaty (DTT) with South Korea, all customers holding South Korean American and Global Depository Receipts (ADRs and GDRs) are now required to disclose the name, complete street address and personal identification (ID) number of each respective beneficial owner and to comply with the certification requirements inherent to their status plus entity type, holding and tax rate to apply.
This is further to our Announcement A13183, dated 11 December 2013.
Personal identification (ID) number
The personal ID number to be provided depends on the beneficial owner’s country of residence, as follows:
- In jurisdictions such as the U.S.A., where a Taxpayer Identification Number (TIN), such as an SSN or EIN, is issued, the TIN is the number that must be provided as the personal ID number.
- For jurisdictions such as Japan, where TINs are not issued, a valid personal ID number must be used in place of a TIN. For these jurisdictions, valid personal ID numbers include, but are not limited to, (for individuals) date of birth, passport number, driving licence number; and (for entities) resident registration number and date of establishment or date of registration.
In addition, entities that have no legal or fiscal personality (such as partnerships, trusts, Regulated Investment Companies (RICs) and limited liability companies, with the exception of incorporated funds - for example, mutual funds, pension funds) are now required to disclose their underlying beneficial owners.
The South Korean National Tax Service (NTS) has taken the position that partnerships, limited liability companies, unit trusts, holding companies and mutual funds are generally considered to be Overseas Investment Vehicles or Overseas Public Collective Investment Vehicles (OIVs/OPCIVs).
Customers deemed to be OIVs are required to provide an original Form 29-13 and Annex to Form 29-13 at the time of submission.
Customers deemed to be OPCIVs are required to provide an original Form 29-13 at the time of submission.
For each dividend season Clearstream requires an original Form 29-13. If a customer holds further positions in South Korean GDRs/ADRs in Clearstream, copies of the original can be used.
OIVs/OPCIVs are required to provide, per respective dividend payment period, an original Form 29-13 plus a copy of the original per participant with positions in each Korean ADR and GDR ISIN. For example, a customer holding December record date positions in 10 South Korean ADR and GDR ISINs will submit one original and nine copies for that cycle. Similarly, a customer holding four South Korean ADR and GDR ISINs in June will submit one original and three copies.
Entity types that the NTS generally does not consider to be OIVs/OPCIVs include, but are not limited to, individuals, corporations (not investment fund corporations), government pension schemes (including public employees retirement plans), other pension plans whose participants are all resident in the treaty country in which the pension plan has been formed, and charitable entities (foundations, endowments, educational or religious institutions) that have sole discretion over the use of their profits.
Pension/non-profit organisation requirements
Customers deemed to be pension/non-profit organisations are required to furnish original supporting documents substantiating the fact that the applicant is:
- A pension fund established under the laws of a country that has entered into a DTT with South Korea and whose pension plan is deemed equivalent to a South Korean pension plan; or
- A non-profit organisation, established under the laws of a country that has entered into a DTT with South Korea, that does not distribute its profits to its members; or
- An OIV recognised as a beneficial owner (opaque entity) under the terms of the DTT. Supporting documentation that qualifies as evidence includes, but is not limited to, a certificate of residence (Form 6166 for U.S. residents) and a Form 72-2.
These documents may remain valid for up to three years provided that the underlying holders of the OIV do not change during that time. A new original Form 29-13 and Annex to Form 29-13 are required when the underlying holders of the OIV change for a specific record date.
Each taxpayer should consult with its own independent tax advisor to determine its status for South Korean tax purposes within the meanings subscribed to by the NTS. Moreover, all ADR and GDR holders opting for a favourable withholding tax rate will continue to be exempt from submitting Form 29-12.
Submission of information
The list of beneficial owners including the name, complete street address and personal identification (ID) number of each respective beneficial owner (and not the original Form 29-13 and the annex thereto) must be submitted to Clearstream Banking in the specific Excel spreadsheet “South Korean Depository Receipts”, via the Upload BO List facility on our website under Asset Services / Tax Services / Upload BO List / Beneficial Owner List / South Korea / South Korean Depository Receipts, followed by the completion of step 3, 4 and 5.
Note: Individuals are not OIVs and will continue to disclose - as in the December 2013 and June 2014 South Korean dividend season - the name, complete street address and personal identification (ID) number of each respective beneficial owner and be exempt from submitting Form 29-12. Please kindly be advised that one original form 29-13 must be submitted for each dividend season. Copies of this form will be accepted for further dividend dates you might make for the same beneficiary during the same dividend cycle.
Luxembourg residents are no longer required to provide certificates of residence. For further information, please refer to Announcement A13183, dated 11 December 2013.
Luxembourg corporations that are non FCPs, SICAVs or SICAFs are only required to disclose the name, complete address and personal identification (ID) number of each respective beneficial owner and are exempt from submitting Form 29-12.
Customers are recommended to consult an independent tax advisor to determine their tax status in South Korea.
Please be aware that it remains the sole responsibility of the customer to provide complete, accurate and up to date documentation. Clearstream is not in a position to validate the information before transmitting to the NTS and will not take any responsibility in that sense. Please also be advised that the NTS reserves the right to review the tax claims and documentation received for a period up to five years starting from the dividend payment date.
This means that up to five years after the dividend payment date, the NTS may reject the documentation presented, request further information or decide to cancel the reduced rate claimed and request a repayment of the tax difference between the favorable rate and the default rate as well as potential penalties and interest.
Clearstream hereby reserves its rights in such an event and customers hereby acknowledge such risk, and agree to be fully liable towards Clearstream for the payment of the amount claimed by the NST and the debit by Clearstream of the amount claimed by the NST on their account with Clearstream, for a period up to five years after the dividend payment date.
Any disclosure of names must include the following details:
- ISIN of the respective security;
- Four-digit CASCADE account number at Clearstream Banking;
- Record date;
- Name and address (country of residence) of final beneficiary;
- Personal ID number of final beneficiary;
- Entity type (Individual, Non-Individual or Undisclosed);
- Quantity of securities (Holding);
- Taxation rate to apply.
Customers are kindly requested to return the details on their final beneficiaries using only the Excel files (one file per ISIN) made available by Clearstream Banking on their website. This Excel file must be submitted exclusively via the “upload” function on Clearstream's website (as described above).
Customers are reminded of the following conditions and requirements before transmitting the data:
- The attached “South Korea Beneficial Owner Template” must be used and its format remain unchanged.
- For each holder, one of the following options must be chosen: Undisclosed, individual or legal entity (non individual)
- Only one beneficial owner must be entered per line.
- Transparent entities such as partnerships, trusts, mutual funds and limited liability companies (LLCs) must disclose the full information of their underlying members using form 29-13 and Schedule Of Beneficial Owner form.
- Pension funds, government organisations, charities etc. are required to submit form 72-2s or an original 6166s to verify their status.
- Korean individuals must provide a personal identification number such as passport, driving license or resident registration number.
- Korean institutions must provide copy of their registration number. Beneficial owners acting under a trustee agreement may be asked for a certificate of residency to prove their tax status.
- Japanese individuals must provide a personal identification number or birthdate.
- Japanese and Korean corporations must provide their corporate tax identification number.
- Residents of Luxembourg no longer need to provide certificate of residences (CORs) for treaty benefits, but must disclose their name, address, postal code, country and tax identification number.
- Luxembourgish SICAVS/SICAFs/FCPs must submit appropriate documentation for a transparent entity structure.
- Non-transparent / Non-pension type holders are required to disclose their name, complete address including street, postal code, country and tax identification number.
Please refer to ADRs - Double Taxation Treaties concluded by South Korea and currently in force for an overview of taxation rates of individual countries.
1. This Announcement is published by Clearstream Banking AG (CBF), registered office at Mergenthalerallee 61, 65760 Eschborn, Germany, registered with the Commercial Register of the District Court in Frankfurt am Main, Germany, under number HRB 7500.