Korean owners of overseas bank and securities accounts will face heavier penalties if they fail to report their assets abroad

2013-08-19 18:54

Overseas tax evasion faces heavier fines

By Choi Kyong-ae
Owners of overseas bank and securities accounts will face heavier penalties if they fail to report their assets abroad, the National Tax Service (NTS) said Monday.
This is part of the government’s follow-up measures unveiled Monday to crack down on overseas tax evasion and bolster its tax revenue.
Currently, those with overseas financial accounts worth more than 1 billion won (about $900,000) have to pay up to 10 percent in penalties of the amount they underreport or fail to report.Under the new measures, the overseas account holders will face an additional penalty tax of 10 percent of the amount deposited in bank accounts starting from 2015 if they refuse to make clear why they didn’t report their overseas accounts or underreported their value, the NTS said in a statement.
For example, if an overseas bank account holder fails to report depositing 6 billion won in an account and fails to clarify their reasons as well, the holder will face a fine of 990 million won — 390 million won in penalty taxes for failing to report and 600 million won for failure to clarify.
Giveven this, tax evaders will be  levied with additional penalties, which could make them pay up to 17 percent of the unreported assets as fines.
The current rule only imposes a 6.5 percent fine for unreported overseas accounts with assets worth 6 billion won as it does not require penalties for failure to clarity.
“We decided to introduce stricter rules with an aim to block all possible attempts to evade tax, and we believe it will work positively,” Kim Yeon-geun, assistant commissioner for NTS International Taxation, told The Korea Times by telephone.
Kim said the number of those reporting their overseas assets has been on the rise in the past three years when the obligation was adopted in 2011.
The value of reporting jumped to a total of 18.6 trillion won last year from 11.5 trillion won a year earlier, he said.
The move comes as the Park Geun-hye government is stepping up efforts to access untapped tax resources buried deep in the so-called “shadow economy,” which experts expect will help raise the 135 trillion won in funding needed to execute costly welfare and other presidential pledges over the next five years.
Currently, individuals who own an overseas bank or brokerage account totaling over 1 billion won ($900,000) are obliged to report in June 2015 what they have and how much they run in overseas financial companies for the whole of 2014, said the statement.
On Tuesday, the NTS plans to announce the corresponding figure for the year of 2013.
In a separate move to fatten its coffers, the government is planning to take a closer look at earnings reports submitted by individuals and companies who run businesses overseas, including tax havens where certain taxes are levied at a low rate or not at all.
“Some business operators may submit fake losses in order to pay less in taxes. So the move is to distinguish what is a real loss from a fake one,” Jung Byungsik, director of the International Tax Division at the Ministry of Strategy and Finance, said.
Up until now, some individuals and companies have been criticized for submitting fabricated loss reports to the tax office to cover up their attempts in avoiding tax..
The two measures will take effect from the year 2014 if they get approval from the National Assembly in December.