South Korea: Relief at source for dividend payments of DRs in foreign collective safe custody - Update
Note: this Announcement, originally published on 26 March 2021, has been updated with the change of record date and applicable deadline to submit documentation. Changes have been highlighted.
Clearstream Banking1 informs customers that for Samsung Depository Receipts (DRs) with ISINs US7960502018 and US7960508882 a taxable dividend payment was declared. The following documents must be submitted to Clearstream Banking no later than
2 July 2021, 10:00 CET
Due to the different taxation treatment of dividend income for the above-listed securities kept in collective safe custody, the below-described documents must be submitted to Clearstream Banking as per record date 30 June 2021 to obtain a reduced tax rate or exemption from South Korean withholding tax.
Customers should note that failure to submit the documents by the above-mentioned date results in the dividend being paid with a tax deduction of 22%, that is, the standard rate of South Korean withholding tax.
How to instruct
Upload of BO list
Customers must submit a BO List via Clearstream Banking’s Upload Beneficial Owner List application. Customers must upload the BO List using the new template and submit all required data.
Note: Customers must mention “CASCADE” in the required CORP ID field on the “File Upload Information” page, section “Payment Details” of the Upload Beneficial Owner List application.
Important note: BO lists that are modified, altered, do not fit the template provided or with incorrect data will be rejected by Clearstream Banking.
Note: For OIVS/OPCIVs, the BO list must be associated to a valid electronic instruction. The BO list does not constitute a valid instruction without a valid electronic instruction.
Electronic instruction for OIVS/OPCIVs ONLY
OIVs/OPCIVs must provide Clearstream Banking with an electronic instruction via Xact Web Portal, CreationOnline, SWIFT MT565, MT568 or MT599. One electronic instruction must be submitted per tax rate.
The electronic instruction must include:
- Corporate Action ID (For CASCADE events, customers should use “CASCADE” as the Corporate Action ID);
- Account number;
- Elected option;
- Instructed quantity (please refer to the eligible balance on the account);
- Applicable tax rate (to be specified in the SWIFT field :92a::TAXB or for Xact Web Portal and CreationOnline in the Tax Rate field);
- Customer’s full contact details;
- The BO List reference (to be specified in the SWIFT field INST or for Xact Web Portal and CreationOnline in the beneficial owner details);
- The following wording in SWIFT field INST or for Xact Web Portal and CreationOnline in the CORPORATE ACTIONS NARRATIVE field:
- “We, Account number _____ (insert account number) confirm that the underlying holders of the OIV/OPCIV (delete as appropriate) have not changed since the date of the form submitted.”
Important note: Any missing information might result in a rejection of the electronic instruction.
Additional documentation required
In addition, holders deemed to be OIVs, OPCIVs, pension funds, non-profit organisations, government entities or world-exempt entities are requested to provide Clearstream Banking with the following forms:
- For OIVs:
- Report of Overseas Investment Vehicle (Form 29-13, section 2);
- Schedule of Beneficial Owners (Annex to Form 29-13).
- For OPCIVs:
- Report of Overseas Investment Vehicle (Form 29-13, section 1);
- Documents evidencing that the OPCIV is registered as an investment vehicle to its country of residence (for example, certificate of incorporation);
One original Form 29-13 must be submitted before the dividend season.
Customers undertake to notify Clearstream Banking via authenticated means of communication before the applicable deadline for relief at source, of any holding of securities for which the data included in Form 29-13 is no more accurate and therefore may not apply. In the absence of such notification, customers irrevocably authorise Clearstream Banking to consider by default, on each relevant income payment date the entire holding of securities as being beneficially owned on behalf of the eligible beneficial owners mentioned in Form 29-13 and customers appoint Clearstream Banking to request a reduced rate of Korean withholding taxed based on it.
Copies of the Form 29-13 will be accepted for the subsequent elections customers might make for the same beneficiary during the same dividend cycle. However, in order for the copies to be accepted, the above electronic instruction must be submitted.
If the electronic instruction confirming there is no change in the underlying holders of the OIV/OPCIV is not received, copies of Form 29-13 will not be accepted.
For OIVs/OPCIVs considered as the beneficial owner under the new tax act:
- Declaration of OIV/OPCIV treated as the beneficial owner of Korean source income (Form No.72-5);
- Certificate of Residence (COR), Form 6166 (must contain Tax ID);
- Documents evidencing that the OIV/OPCIV is registered as an investment vehicle to its country of residence (for example, certificate of incorporation).
For pension funds, non-profit organisations and government entities that are deemed to be the beneficial owner:
- Certificate of Residence (COR) must specify a law of establishment to be valid, or if Form 6166, must include relevant IRS code: 457(g), 457(b), 401(a), 501(a), 501(c)(3) or 81-100 (if unable to provide a proper COR, customers must submit documentation requirements for OIV/OPCIV considered as the beneficial owner).
Form 72-2 is no longer accepted.
For final beneficial owners that have already submitted a Form 72-2, the form remains valid until its expiry date of three years after its issuance date, if there is no change in circumstances.
- For world-exempt entities:
Form 29-2 and supporting documents to prove the world-exempt status and COR (the tax year must match year of payment date).
- For U.S. beneficial owners:
In order for U.S. beneficial owners to receive a reduced tax rate an original W9 is required for each dividend season.
- For Korea-domiciled beneficial owners:
In order for Korea-domiciled beneficial owners to receive a reduced tax rate or exemption from withholding tax, a verifiable identification number is required, a copy of the form (passport, driver's license, or resident registration number for individuals, copy of company/business registration ID for entities) must be submitted by the end of Clearstream Banking’s deadline. Korean legal entities must submit an original COR (must state the year of the payable date).
Japanese individuals must provide the personal identification number or birth date in the BO List.
Japanese corporations must provide a corporate tax identification number in the BO list.
Luxembourg SICAVs, SICAFs and FCPs may be eligible to benefit from a reduced tax rate in accordance with the Double Taxation Treaty (DTT), such vehicles may fall under the OIV/OPCIV category and are required to submit the appropriate Form 29-13.
Customer should note that the original documentation/ DTCC notice with the full requirements is available on the DTCC website. Customers are strongly recommended to obtain the original DTC notice to ensure they are aware and comply with the full requirements for this event.
All documentation must be submitted and received for processing at the following address before the end of Clearstream Banking’s deadline:
Clearstream Operations Prague s.r.o.
Attn: PTS - Tax Services
Futurama Business Park Building B
CZ-18600 Prague 8
Copies can be submitted by email to email@example.com specifying in the subject line: Account number, ISIN code, corp. ID (that should be “CASCADE” for CASCADE events) and electronic instruction reference.
Please be aware that it remains the sole responsibility of the customer to provide complete, accurate and up to date documentation. Clearstream Banking is not in a position to validate the information before transmitting to the National Tax Service (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 favourable rate and the default rate as well as potential penalties and interest.
Clearstream Banking hereby reserves its rights in such an event and customers hereby acknowledge such risk, and agree to be fully liable towards Clearstream Banking for the payment of the amount claimed by the NST and the debit by Clearstream Banking of the amount claimed by the NST on their account with Clearstream Banking, for a period up to five years after the dividend payment date.
Please refer to DRs - Double Taxation Treaties concluded by South Korea and currently in force for an overview of taxation rates of individual countries.
For further information, customers may contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or their Relationship Officer.
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.