When a foreign corporation or non-resident receives Korean source income (interest, dividend, royalty, etc.), they should file an application for lower tax rates in advance pursuant to tax treaties to the relevant withholding agent.
When the above-mentioned income is paid through an offshore investment organization (e.g., offshore fund), the organization should submit an offshore investment organization report to the relevant withholding agent along with an application for lower tax rates and detailed information of beneficial owners.
If the relevant withholding agent or an offshore investment organization can not identify the beneficial owners, the withholding tax rate pursuant to domestic tax law would apply. In a case where a beneficial owner later intends to apply for the lower tax rates pursuant to a tax treaty, it may claim refund of overpaid taxes to the district tax office having jurisdiction over the place of tax payment of the relevant withholding agent within three years from the last day of the month in which the tax amount is withheld. This new regulation will be effective on the tax withholdings to be made on or after July 1, 2012.