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Under Article 164-5 of the Individual Income Tax Law (“IITL”) and Article 216-5 of the Presidential Decree of IITL, domestic corporations and domestic places of business in Korea of foreign corporations shall submit transaction details related to overseas stock-based compensation*1 received by employees from foreign parent companies*2 by March 10*3 of the following year of the taxable period in which the stock-based compensation is exercised or received.
*1. Bonuses received in the form of stock options, stocks, or cash equivalent to the value of stocks
*2. Foreign parent companies who directly or indirectly own 50% or more shares with voting rights
*3. In case of business closure or dissolution, the last day of the second month in which the date of business closure or dissolution falls.
In the past, the Korean tax authorities collected stock-based compensation information by issuing official notice letters to the Korean branch or subsidiary of a foreign company based on their database. However, to streamline the collection process and ensure compliance with income tax reporting requirements, the Korean tax authorities have introduced these new provisions.
The transaction details of overseas stock-based compensation for employees stipulated under the relevant
enforcement regulation of IITL (“the designated transaction details”) require the following information:
(i) Submitter information
(ii) Basic information on overseas stock-based compensation
- Information on foreign parent companies granting or paying overseas stock-based compensation (i.e., company name, country, address, currency, etc.)
(iii) Details of exercise or payment of overseas stock-based compensation
- Personal information of employees concerned (i.e., name, resident registration ID number)
- Category or type (Stock/Monetary, SO/ESPP/RSU/SAR/PSU)
- Details of the grant, exercise, and payment of stock-based compensation (i.e., date, quantity exercised, exercise price, and the market price at the exercise date)
- Profits generated from such exercise and payment
These provisions apply to those who have exercised or received stock-based compensation on or after January 1, 2024, which will result in an obligation to submit the designated transaction details by March 10, 2025.
