‘Overseas Investment Tax Savings of 12 Billion Won Annually’ National Pension Service Receives Audit Board Chairman’s Commendation

The National Pension Service received an award from the Board of Audit and Inspection in recognition of its achievement in reducing taxes related to U.S. investments by more than 12 billion won annually.

On the 29th, the National Pension Service announced that the Fund Management Headquarters' Operation Support Office, Fund Management Department, received the ‘Chairman of the Board of Audit and Inspection Commendation’ at the 75th anniversary ceremony of the Board of Audit and Inspection held on the 28th.

This is the first time the Fund Management Headquarters has received an award from the Board of Audit and Inspection.

Since 1982, the Board of Audit and Inspection has been discovering and rewarding exemplary cases annually in areas such as budget savings, improvement of unreasonable regulations, and enhancement of administrative efficiency to foster a proactive public service culture.

The Board of Audit and Inspection highly evaluated the National Pension Service’s achievement in obtaining Qualified Foreign Pension Fund status, which exempts capital gains from U.S. real estate, contributing to the financial stabilization of the National Pension Service.

In 2015, the U.S. enacted a law granting Qualified Foreign Pension Fund status to overseas pension funds from countries meeting certain requirements, such as the proportion of retirement benefit payments, exempting capital gains from real estate.

By obtaining Qualified Foreign Pension Fund status, the National Pension Service can save related amounts by not paying the 21% tax on capital gains from real estate through REITs and other means.

The Fund Management Department, recognizing the related details through the New York office and the Real Estate Investment Office at the early legislative stage, began reviewing the applicability; however, at that time, due to regulatory requirements such as eligibility criteria not being met, it was difficult to be designated as a Qualified Foreign Pension Fund.

Subsequently, as the scope of tax exemption was expanded through legal amendments in 2018?2019, the Fund Management Department actively demonstrated the fund’s eligibility for Qualified Foreign Pension Fund status to the U.S. Internal Revenue Service through advisory services, resulting in the first recognition of such status among domestic institutions in November last year.

By acquiring Qualified Foreign Pension Fund status, the National Pension Service was able to reclaim 35 billion won paid between 2016 and 2018 and reduce annual taxes exceeding 12 billion won from 2019 onward.

A Fund Management Department official stated, “The annual savings of 12 billion won is equivalent to the effect of 1,000 beneficiaries receiving a monthly pension of 1 million won every year,” and added, “The scale of tax savings is expected to increase further in line with the National Pension Service’s trend of expanding overseas investments.”

This case is expected to provide tax refund opportunities to other domestic public pension funds and help prevent the outflow of national wealth.

Seowonju, Fund Director of the National Pension Service, said, “By establishing a favorable investment structure based on Qualified Foreign Pension Fund status when investing in U.S. real estate, tax savings have become possible,” and added, “We will continue to do our best to actively discover tax-saving opportunities in investment countries and contribute to increasing fund returns.”