Over 500 Million Won in Overseas Financial Accounts Must Be Reported... Bitcoin Included Starting This Year

Up to 20% Penalty Imposed on Unreported Amounts of Cash, Stocks, Bonds, Funds, and Virtual Assets in Overseas Financial Accounts Subject to Reporting

If the total balance of cash, stocks, funds, and other assets in overseas financial accounts exceeds 500 million KRW on any single day last year, it must be reported to the National Tax Service (NTS) by the end of this month. Starting this year, accounts opened at overseas virtual asset exchanges as well as wallets opened with overseas wallet service providers are included.

The NTS announced on the 1st that residents and domestic corporations must report information on all overseas financial accounts held in 2022 if the total balance of these accounts exceeded 500 million KRW on any day at the end of each month, by the 30th of this month. The overseas financial account reporting system has been in effect since June 2011 to prevent illegal outflow of domestic capital and offshore income tax evasion in advance.

The balance of accounts held at the end of each month should be calculated by asset type within the account, converted into Korean won by applying the exchange rate of the respective currency, and then summed. For virtual assets, even if prices differ across exchanges, the reporting obligation requires the account holder to verify the final price on the last day of each month at the overseas virtual asset exchange where the virtual asset account was opened and calculate the balance accordingly.

A resident is defined as an individual with an address in Korea or who has stayed in Korea for 183 days or more. A domestic corporation refers to a corporation whose head office, main office, or place of substantial business management is located in Korea.

If an overseas financial account is jointly held or if the account holder and the actual owner differ, such as in overseas nominee accounts, all joint holders, account holders, and actual owners are obligated to report the overseas financial account information. However, foreign residents and overseas Koreans who have had a combined address or residence in Korea for five years or less during the 10 years prior to the end of the reporting year (2013?2022) are exempt from the reporting obligation.

Obligated reporters must declare all cash, stocks, bonds, collective investment securities (funds), insurance products, virtual assets, and other assets held in all overseas financial accounts opened for financial transactions with overseas financial companies and virtual asset transactions. Overseas financial companies include overseas branches of Korean banks, securities firms, and virtual asset exchanges, but exclude domestic branches established by foreign banks.

Due to the rapid increase in virtual asset transactions, 'overseas virtual asset accounts' included in the reportable overseas financial accounts for the first time this year refer to accounts opened with overseas virtual asset service providers. This includes accounts opened at overseas virtual asset exchanges for trading virtual assets as well as wallets opened with overseas wallet service providers for storing virtual assets.

The NTS estimates that the amount of virtual assets transferred from domestic virtual asset service providers to overseas virtual asset service providers between July and December last year was 19.9 trillion KRW (65% of the total transfer amount), indicating a significant scale of virtual asset holdings not only domestically but also through overseas virtual asset service providers.

Obligated reporters can file overseas financial account reports electronically via the NTS Hometax website or the Hometax mobile app, SonTax. If electronic filing is difficult, they may visit the tax office with jurisdiction over their tax payment location to submit the report in person.

If the reportable accounts are not reported within the deadline or are underreported, a penalty of up to 20% of the relevant amount may be imposed. If the unreported amount exceeds 5 billion KRW, criminal penalties such as imprisonment for up to two years may apply, and personal information including name, occupation, address, and violation amount may be disclosed following deliberation by the National Tax Information Committee.