South Korea: Relief at source for dividend payments of DRs in foreign collective safe custody - Update
Note: This announcement, originally published on 20 September 2022, has been updated to change the date for the submission of the original documentation from 4 October to 29 September 2022. 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:
- 3 October 2022 at 10:00 CET, for the upload of the BO list and submission of scanned copies of documents to the email address firstname.lastname@example.org; and
- 29 September 2022 10:00 CET, for the submission of the original documentation.
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 September 2022 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.
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);
Important note: One original Form 29-13 must be submitted before the dividend season. Copies of Form 29-13 will be accepted for the subsequent elections customers might make for the same beneficiary during the same dividend cycle.
Customers undertake to notify promptly 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 longer accurate and therefore may not apply,
- Any information contained in Form 29-13, or any documentation related to this certificate, which becomes untrue or incomplete.
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 owner(s) mentioned in Form 29-13; and that the scanned copies of Form 29-13 provided are still valid.
Customers appoint Clearstream Banking to request a reduced rate of Korean DR withholding tax based on it. Clearstream Banking cannot be held liable for any action taken by it in relying upon those scanned copies and the customer undertakes to fully indemnify Clearstream Banking for any damage, claim, loss, penalty, or any costs whatsoever incurred by Clearstream Banking as a result of having relied upon those scanned copies.
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.
Customers should note that the original documentation/DTCC notice is available on the DTCC website (CUSIP/security name can be used to retrieve the notice) and DTCC eligibility matrix with full requirements and beneficial owners’ eligibility is available via email request to email@example.com, quoting “TAX ELECTION KOREA FALL 2022” in the email’s subject.
Customers are strongly encouraged to obtain the DTCC notice and DTCC eligibility matrix 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
Scanned copies can be submitted by email to firstname.lastname@example.org specifying in the subject line: Account number, ISIN code and corp. ID (that should be “CASCADE” for CASCADE events).
Note: Copies of the previously provided documentation and of all the supporting documentation (including prospectuses, trust agreements etc.) need to be printed and sent per post to the above address.
All supporting documentation must either be in English or Korean to be accepted by the Korean authorities”.
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.