Savings, Stocks, and Funds Also Subject to Reporting
Penalties and Criminal Charges for Non-Reporting
[Asia Economy Reporter Kwangho Lee] June is the month for reporting overseas financial accounts.
The National Tax Service (NTS) announced on the 3rd that residents and domestic corporations holding overseas financial accounts with a total balance exceeding 500 million KRW as of last year must report them by the 30th.
Residents refer to individuals who have an address in Korea or have stayed for more than 183 days, and domestic corporations refer to corporations whose head office, main office, or actual place of business management is located in Korea.
The reporting target includes accounts opened with overseas financial companies for financial transactions, and all assets held in overseas financial accounts such as cash, stocks, bonds, collective investment securities, and insurance products must be reported.
Foreign business establishments of domestic corporations are included, but domestic business establishments of foreign corporations are excluded.
In the case of nominee accounts, both the nominal holder and the actual owner have reporting obligations, and for joint accounts, all joint holders have reporting obligations. It is important to note that the nominal holder and actual owner, or each joint holder, must calculate whether the reporting threshold is exceeded by considering the entire account balance as held by each of them individually to determine whether reporting is required.
Especially since last year, the reporting threshold has been lowered from 1 billion KRW to 500 million KRW, so it is necessary to carefully check whether reporting is required.
The reporting method can be easily and conveniently done through the NTS Hometax system by the 30th. Although it is possible to submit the overseas financial account report directly to the tax office with jurisdiction over the taxpayer instead of electronic reporting, the NTS has requested to use the non-face-to-face reporting method via Hometax as much as possible to prevent COVID-19.
After this reporting period ends, the NTS plans to conduct a thorough verification of proper reporting based on various information sources such as intergovernmental financial information exchange data and data collected from other agencies.
If found to be unreported, a penalty of up to 20% of the unreported amount will be imposed, and if the unreported amount exceeds 5 billion KRW annually, criminal punishment and public disclosure of the list may apply. From 2011 to 2019, penalties totaling 100.1 billion KRW were imposed on 364 individuals. Forty-nine were criminally prosecuted, and seven were publicly disclosed.
Those who provide important information on unreported overseas financial accounts can receive rewards up to 2 billion KRW, and if the report includes specific tax evasion suspicions or hidden assets of delinquent taxpayers, rewards can be up to 8 billion KRW.
Meanwhile, since the overseas financial account reporting system was implemented in 2011, the number of reporters and the reported amounts have steadily increased. From 525 individuals and 11.5 trillion KRW in 2011, it rose to 2,165 individuals and 61.5 trillion KRW last year.
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