The MOSF has announced that a tax amnesty for offshore income and assets came into force with effect from October 1, 2015. The tax amnesty was passed by the National Assembly in December 2014 as part of the amendments to the International Tax Coordination Law. In general, Korean residents or corporations are subject to penalties under the tax laws and foreign exchange regulations of Korea if they do not disclose certain offshore income or assets. This tax amnesty will provide benefits including exemption from penalties (except for the penalty for non-payment at the rate of 0.3% per day) for taxpayers who make voluntary disclosures of undeclared offshore income and assets within a specified period.
The tax amnesty program has already been initiated by 15 OECD member countries including the US, UK, Germany, France, Australia, etc. and was found to be effective in securing tax revenue from offshore income sources. Korea’s tax amnesty is intended to provide taxpayers with a temporary relief ahead of its active participation in tax information exchange arrangements with a number of foreign countries.
To ensure effective implementation of the tax amnesty, the MOSF will form a joint taskforce with the competent government ministries including the Ministry of Justice, the National Tax Service (“NTS”) and the Customs Service, and undertake a subsequent amendment of relevant rules.
Major points of the tax amnesty include:
- Those who want to avail themselves of tax amnesty must make a voluntary disclosure during the six-month period from October 1, 2015 through March 31, 2016.
- The tax amnesty shall apply to Korean resident individuals and domestic corporations, and shall not apply to non-residents and foreign corporations.
- Affected income and assets include undeclared income arising from cross-border transactions or foreign sources which have previously been failed to be declared by the filling due date or have previously been underreported, unless their statute of limitations has expired. However, those which are already under tax audit or related criminal investigation will not be eligible for the tax amnesty.
- The voluntary declaration filings should be submitted to the governing regional tax offices within the voluntary declaration period ending March 31, 2016. Taxes due on the declared income along with the late payment penalty (0.03% per day) should also be paid within the voluntary declaration period.
For those taxpayers who make voluntary disclosures of undeclared offshore income and assets within the voluntary disclosure period, the tax amnesty will provide the exemption from tax penalties (excluding the penalty for non-payment) under the tax laws as well as penalties under the Foreign Exchange Transaction Law. In addition, they will not be subject to fines and certain sanctions such as the public disclosure of their personal information.