South Korea: Draft of the new tax law
Reference
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The Korean Ministry of Strategy and Finance (MOSF) has proposed a draft of the new tax law according to which foreign investors wishing to benefit from a reduced rate of withholding tax in accordance with a Double Taxation Treaty (DTT) between their country of residence and South Korea will be required to submit documentation as follows:
- An “Application of Reduced Tax Rate under a Double Taxation Treaty” to the local tax withholding agent (that is, the subcustodian bank in South Korea;
- If the foreign investor is a collective investment fund (that is, an overseas investment vehicle (OIV)), a “Report of OIV” with a complete list of the beneficial owners attached.
In addition, beneficial owners of the South Korean income comprising the OIV will need to complete an “Application of Reduced Tax Rate under a Double Taxation Treaty” and submit it to the OIV for completion by each beneficial owner of the South Korean income.
The details of the “Application of Reduced Tax Rate under a Double Taxation Treaty” form or “Report of OIV” form are unavailable at this proposal stage.
The proposed new tax law is expected to be approved by the National Assembly in early 2012 and be effective on interest and dividend income paid on or after 1 July 2012.
We will continue to monitor the progress of the proposal for new developments and will provide more information as it becomes available.