South Korea: Relief at source – amendment of tax laws relating to Overseas Investment Vehicle and Overseas Public Collective Investment Vehicle
Clearstream Banking1 informs customers that effective
1 January 2020
if an overseas investment vehicle (OIV) or an overseas public collective investment vehicle (OPCIV) is a corporation and meets the two conditions below, the OIV or OPCIV that wishes to be treated as beneficiary of domestic source income can submit Form 72-2 (Application for Entitlement to Reduced Tax Rate on Domestic Source Income for Foreign Corporation) and Form 72-5 (Declaration of overseas investment vehicle (B)) to obtain relief at source on South Korea domestic debt securities and equities.
The Ministry of Economy and Finance (MOEF) proposed draft amendment of tax laws (Revised Corporate Tax Act effective from 1 January 2020 (Article 93-2 of the Corporate Tax Act)) which includes revision relating to OIV and OPCIV.
In case the OIV or OPCIV is a corporation and meets the two conditions below, the OIV or OPCIV which wishes to be treated as beneficiary of domestic source income can submit Form 72-2, Form 72-5 and their supporting documents to Clearstream Banking to obtain relief at source.
The two conditions are as follows:
- The OIV/OPCIV is liable to tax in its residence country.
- The OIV/OPCIV should not be established for purposes of unduly reducing the amount of personal income tax or corporate income tax with respect to domestic source income.
Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.
Impact on customers
If the OIV/OPCIV meets the two conditions above, the OIV/OPCIV is considered the substantive owner (beneficiary) under the relevant tax treaty. In order to be qualified for a reduced rate of withholding tax in accordance to their country of residence, the OIV/OPCIV must submit the following documents:
- Application for Entitlement to Reduced Tax Rate on Domestic Source Income for Foreign Corporation (Form No.72-2);
- Declaration of overseas investment vehicle (B) (Form No.72-5);
- Certificate of Residence (COR) issued by the competent authority of the country of residence. The original COR should be submitted;
- Copy of document which verifies registration with or approval by the relevant financial supervisory authority as a collective investment vehicle;
- Copy of the prospectus.
The forms are valid for three years from the date of submission (that is, the “filing date”) to our local depository (unless there is a change in the beneficial owner’s details).
The evidence documents should be issued within the year of the date of submission of tax forms.
The Market Taxation Guide – South Korea will be updated in due course.
For further information, customers may contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or their Relationship Officer.
1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.