South Korea: Revised DTT Protocol impacting ADRs, GDRs and disclosure requirements
Luxembourg FCPs, SICAVs and SICAFs1 may be eligible to benefit from reduced tax rates in accordance with the Double Taxation Treaty (DTT) for income proceeds from South Korean American and Global Depository Receipts (ADRs and GDRs) held at the Depository Trust Company (DTC) on or after 4 September 2013.
This is further to our Announcements A13087, dated 24 June 2013, and A13139, dated 20 September 2013.
Background
The Korea Ministry of Foreign Affairs and Trade (MOFAT) announced the conclusion of a protocol amending the DTT between South Korea and Luxembourg, effective 4 September 2013, allowing Luxembourg SICAVs and SICAFs eligibility to benefit from reduced tax rates in accordance with the DTT for income proceeds from South Korean ADRs and GDRs held at the DTC.
Both governments agreed to amend the DTT between them, including the deletion of Article 28 and the reduction of the DTT rate, as follows:
| Previous withholding tax regime | Amended treaty withholding tax regime (effective 4 September 2013 onward) | ||
| Dividend | |||
| - | General: 15% | - | General: 15% (unchanged) |
| - | Investor is an institution other than partnership and holding 25% or more of shares: 10% | - | Investor is an institution other than partnership and holding 10% or more of shares: 10% |
| Interest | |||
| - | General: 10% | - | General: 10% (unchanged) |
| - | Interest paid to government: 0% | - | Interest paid to government: 0% (unchanged) |
| - | Interest paid to a bank: 5% | ||
| Royalties | |||
| - | General: 15% | - | General: 10% |
| - | Royalties paid in connection with the use of, right to use, or information concerning industrial, commercial, or scientific equipment: 5% | ||
Impact on customers
Luxembourg residents are no longer required to provide a certificate of residence to benefit from favourable treaty rates of withholding tax.
Luxembourg corporations that are not FCPs, SICAVs or SICAFs will only be required to disclose their name, complete street address and personal identification (ID) number.
Luxembourg FCPs, SICAVs and SICAFs and similar vehicles that fall under the OIV/OPCIV category are now required to submit appropriate documentation (Form 29-13).
N.B.: Customers are fully responsible for determining their type of institution (OIV, OPCIV, Luxembourg FCP, SICAV or SICAF or Luxembourg corporation) and are recommended to consider consulting their tax advisor to make the appropriate determination.
For each distribution period, Clearstream Banking2 requires an original Form 29-13 (and copies if the customer holds multiple positions in other South Korean ADRs) within the deadline mentioned in the event pre-notification.
Disclaimer
It remains solely the 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 it to the local tax authorities and will not take any responsibility in that matter.
The local tax authorities reserve the right to review the tax claims and documentation received for a period up to five years starting from the dividend payment date and may reject the documentation presented, request further information or decide to cancel the reduced rate claimed and request a repayment of the difference between the favourable rate and the default rate as well as potential penalties and interest.
Clearstream Banking hereby reserves its rights in such cases and customers hereby acknowledge such risk and agree to be fully liable towards Clearstream Banking for a period up to five years after the dividend payment date.
These details are provided solely for information purposes. It is not intended to constitute specific advice and customers should consult their own legal, tax or other advisors as appropriate. Clearstream Banking may provide updates as further information becomes publicly available but will not be responsible for doing so. Clearstream Banking has no responsibility for any loss occasioned as a result of the use of the information herein provided.
Further information
Attached below are:
- Revised English Forms (for reference and for customers' convenience);
- Benefical owner spreadsheet for completion and upload;
- Related documents.
For further information, customers may contact the Clearstream Banking Tax Help Desk on:
| Luxembourg | Frankfurt | |
| Email: | tax@clearstream.com | tax@clearstream.com |
| Telephone: | +352-243-32835 | +49-(0) 69-2 11-1 3821 |
| Fax: | +352-243-632835 | +49-(0) 69-2 11-61 3821 |
or Clearstream Banking Customer Service or their Relationship Officer.
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1. Sociétés d’investissement à capital variable and Sociétés d’investissement à capital fixe.
2. Clearstream Banking refers to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).
Appendix A: Reminder on the general certification requirements
We hereby remind customers that, in order to claim the treaty benefits on South Korean ADRs/GDRs, the following certification requirements must be met:
- The beneficial owners for which treaty benefits are being sought must be diclosed, along with all the mandatory information (Account Number, ISIN, Record Date, BO Name, BO Country of Residence, BO Street, BO City and Postal Code, BO Personal ID Number, Holding, Tax Rate to apply).
To submit the list of beneficial owners, customers are strongly encouraged to use our e-business online service, which is available on our website, and to fill in all mandatory information in order to avoid any rejection of instructions. - There are additional certification requirements according to the type of beneficial owner, as follows:
| Documentation requirements | Validity of the documentation | |||
| OPCIV (Overseas Public Collective Investment Vehicle) | ||||
| - - | List of Beneficial Owners Form 29-13 | One original 29-13 form must be submitted for each dividend season. Copies of this form will be accepted for any subsequent elections for the same beneficiary during the same dividend cycle. | ||
| OIV (Overseas Investment Vehicle) | ||||
| - - - | List of Beneficial Owners Form 29-13 Annex to form 29-13 | One original 29-13 form must be submitted for each dividend season. Copies of this form will be accepted for any subsequent elections for the same beneficiary during the same dividend cycle. | ||
| Pension fund and non-profit organisation | ||||
| - - | List of Beneficial Owners Form 72-2, a certificate of residence, Form 6166 for U.S. holders | One original form must be submitted for each dividend election. | ||
| Luxembourg FCP, SICAV, SICAF | ||||
| - - | List of Beneficial Owners Form 29-13 | One original 29-13 form must be submitted for each dividend season. Copies of this form will be accepted for any subsequent elections for the same beneficiary during the same dividend cycle. | ||
| Korean institutions | ||||
| - - | List of Beneficial Owners Copy of the company / business registration ID | One form per dividend election. | ||
| Korean inidividuals | ||||
| - - | List of Beneficial Owners Copy of the passport / ID card for individuals | One form per dividend election. | ||
Important note:
Clearstream Banking does not warrant or guarantee the accuracy or completeness of the above matrix and makes no undertaking to update or amend this information or data.
This matrix is for information purposes only and the official certification requirements will be sent via the SWIFT network in a notification for each event.
Appendix B: Upcoming December 2013 season
Although no dividend payments have yet been announced on the market, the following securities may propose a dividend for the upcoming December 2013 season.
| ISIN code | Issue name |
| US23373A2078 | GDR DAEWOO SHIPBUILDING |
| US38911N1072 | SHS GRAVITY CO. LTD (1ADR/4SHS) |
| US4491875096 | GDS HYUNDAI MOTOR |
| US4491877076 | HYUNDAI MOTOR CO. |
| US4560361028 | GDR IND.BK.KOREA (144A) |
| US48241A1051 | ADR KB FINANCIAL GROUP |
| US48268G1004 | GDR KT & G CORP. (144A)(GDR1/5SHS) |
| US48268K1016 | KT CORP (1ADR/0.5SHS) ADR |
| US4937384059 | KIA MOTORS GDS |
| US5006311063 | KOREA ELECT.POWER CORP |
| US50125M2052 | KUMHO TIRE CO INC |
| US50186Q1031 | LG ELECTRON.INVEST |
| US50186Q2021 | LG ELECTRON.INVEST. |
| US50186V1026 | LG DISPLAY CO |
| US5019552075 | GDR LG CHEMICAL LTD 144A REG |
| US54569T1060 | LOTTE SHOPPING |
| US5560822042 | MACQUARIE KOREA INFRA FUND |
| US67085U2096 | GDR OCI COMPANY LTD (NEW) |
| US6934831099 | POSCO (1ADR/4SHS) ADR |
| US72582A2015 | ADR PIXELPLUS CO LTD |
| US78392B1070 | GDR SK HYNIX INC REG 1GDR/1SHS |
| US78440P1084 | SK TELECOM CO LTD |
| US7960502018 | SAMSUNG ELECTRON. |
| US7960508882 | SAMSUNG ELECTR. |
| US7960531066 | GDS SAMSUNG |
| US7960532056 | GDS SAMSUNG CO (1/2 VOTING SHS-DTC) |
| US7960542030 | SAMSUNG LTD |
| US8245961003 | ADR SHINHAN FINANCIAL |
| US94846M1027 | ADR WEBZEN INC. |
| USY384721251 | GDR HYUNDAI MOTOR |
Important note:
Clearstream Banking does not warrant or guarantee the accuracy or completeness of the above list and makes no undertaking to update or amend this information or data. The official dividend announcement will be released in a notification via the SWIFT network.
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