Korean Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB) – rates, eligibility, availability of relief etc. – South Korea
Withholding tax
Standard rate of withholding tax | 15.4% | Trading prerequisite | Yes | Holding restriction/ requirement | Yes |
The standard rate of withholding tax on income payments from Korean Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB) securities is 15.4% in Clearstream Banking.
Trading prerequisite
In order to access the South Korean market, Clearstream Banking clients must be in possession of an Investment Registration Certificate (IRC) or a Legal Entity Identifier (LEI).
Relief or exemption from withholding tax on income from South Korean securities is only available to eligible IRC or LEI holders.
Holding requirement
In Clearstream Banking, IRC or LEI holders are non-individuals for domestic South Korean securities.
For Overseas Investment Vehicles, “OIV” (non-public OIV) and “OPCIV” (public OIV) with beneficial owners, the IRC or LEI holders are the “OIV” and the “OPCIV”.
Who can obtain relief at source?
Non-residents and foreign investors investing in Korean Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB) can benefit from tax exemption on interest and redemption (“income”) payments and capital gains derived from KTB and MSB.
Standard refund of withholding tax on income payments from KTB and MSB is not available through Clearstream Banking.
Clearstream Banking does not assist with tax exemption on capital gains derived from KTB and MSB. Clients should consult their tax advisor for further information.
| Korean Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB) | Holding | Trading prerequisite | Withholding | Relief | Quick | Standard |
Yes | Yes | 15.4% | ||||
| Overseas Investment Vehicle “OIV” (public or private) that is a "foreign corporation" | Yes | No | No | |||
Overseas Investment Vehicle “OIV” (public or private) that is not a "foreign corporation" | Yes | No | No | |||
Central or local government or public institution | Yes | No | No | |||
Pension fund | Yes | No | No | |||
Other corporate entity | Yes | No | No | |||
Eligible beneficial owners
Exemption from withholding tax on income payments from KTB and MSB is available through Clearstream Banking for eligible beneficial owners as follows:
- Overseas Investment Vehicle (public or private) that is a “foreign corporation” under Article 2 subparagraph 3 of the Corporate Tax Act. The overseas private investment vehicle is deemed a beneficial recipient of the income or an overseas public investment vehicle.
Note: An “overseas public investment vehicle” is an overseas investment vehicle (“OIV”) similar to a “collective investment scheme” defined in the Financial Investment Services and Capital Markets Act. It is an OIV which is either legally recognised as a public investment vehicle under the laws of the country in which it was incorporated, or one which has recommended at least 50 investors abroad to subscribe to the acquisition of securities in preparation of an investment prospectus or a similar matter. - Overseas Investment Vehicle (public or private) that is not a “foreign corporation” under Article 2 subparagraph 3 of the Corporate Tax Act. The overseas private investment vehicle is deemed a beneficial recipient of the income or an overseas public investment vehicle. An “overseas public investment vehicle” is an Overseas Investment Vehicle (“OIV”), similar to a “collective investment scheme” defined in the Financial Investment Services and Capital Markets Act. It is an OIV which is either legally recognised as a public investment vehicle under the laws of the country in which it was incorporated, or one which has recommended at least 50 investors abroad to subscribe to the acquisition of securities in preparation of an investment prospectus or a similar matter.
- Central or local government or public institution;
- Pension fund;
- Financial institution;
- Other corporate entity.
Documentation requirements
To obtain exemption from withholding tax on income payments from KTB and MSB, the documentation must be provided to Clearstream Banking before the respective deadlines (see “Deadlines for receipt of documents” below):
Overseas Investment Vehicle (public or private) that is a “foreign corporation”, central or local government or public institution, pension fund, financial institution, other corporate entity
- One-Time Certificate for South Korea Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB);
- Application for tax exemption on interest income from investment in Government Bonds and Monetary Stabilisation Bonds (for foreign corporations) Form 72-6;
- Certificate Of Residence (COR);
- Per-payment breakdown (when applicable)
Overseas Investment Vehicle (public or private) that is not a “foreign corporation”
- One-Time Certificate for South Korea Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB);
- Application for tax exemption on interest income from investment in Government Bonds and Monetary Stabilisation Bonds (for non-residents) Form 19-13(1);
- Certificate Of Residence (COR);
- Per-payment breakdown (when applicable).
The per-payment breakdown must be provided by the Clearstream Banking client, before the prescribed deadline (see “Deadlines for receipt of documents” below) via Swift (formatted MT565) or Xact Web Portal message, using the following template:
- Clearstream client’s account number;
- ISIN;
- Payment date;
- Corp. event ID;
- Total holding for the event;
- The breakdown of holding per beneficial owner(s) with the respective tax rate to be applied;
- IRC or LEI number;
- Full name of the beneficial owner(s) (as per IRC or LEI);
- Full address of the beneficial owner(s) (complete street address including postal code, city, country) (as per IRC or LEI).
The One-Time Certificate for South Korea Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB), Form 72-6, Form 19-13(1) and the COR are valid until revoked (unless there is a change in the Clearstream client's and/or final beneficial owner’s details).
The tax breakdown is to be provided on a per-payment basis. The per-payment breakdown submitted for one income payment date is valid only for a given income payment date and is not valid for any subsequent income payment date related to the KTB and MSB securities.
Deadlines
The deadlines for the submission of the documentation exemption from withholding tax on income payments from KTB and MSB are as follows:
Documents | Deadlines for receipt of documents |
One-Time Certificate for South Korea Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB). | Ten business days before the first income payment date, by 10:00 CET. |
Application for tax exemption on interest income from investment in Government Bonds and Monetary Stabilization Bonds (for foreign corporations) – Form 72-6 | Ten business days before the first income payment date, by 10:00 CET. |
Application for tax exemption on interest income from investment in Government Bonds and Monetary Stabilization Bonds (for non-residents) – Form 19-13(1). | Ten business days before the first income payment date, by 10:00 CET. |
Certificate of Residence | Ten business days before the first income payment date, by 10:00 CET. |
Per-payment breakdown | Three business days before each income payment date, by 10:00 CET. |