Global Forum On Transparency and Exchange of Information For Tax Purposes: Peer Reviews: Global Forum On Transparency and Exchange of Information For Tax Purposes Peer Reviews: Republic of Korea 2012

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES
Peer Review Report Combined: Phase 1 + Phase 2

REPUBLIC OF KOREA
Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Republic of Korea 2012
COMBINED: PHASE 1 + PHASE 2
March 2012 (reflecting the legal and regulatory framework as at January 2012)
This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Please cite this publication as: OECD (2012), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Republic of Korea 2012: Combined: Phase 1 + Phase 2, OECD Publishing. http://dx.doi.org/10.1787/9789264168978-en
ISBN 978-92-64-16896-1 (print) ISBN 978-92-64-16897-8 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)
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OECD 2012
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TABLE OF CONTENTS 3
Table of Contents
About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Information and methodology used for the peer review of Korea . . . . . . . . . . . . .11 Overview of Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 A. Availability of information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 23 53 60
B. Access to information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 66 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 75 C. Exchanging information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.1. Exchange-of-information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.2. Exchange-of-information mechanisms with all relevant partners . . . . . . . . C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 77 79 88 90 91 92
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT REPUBLIC OF KOREA OECD 2012
4 TABLE OF CONTENTS Summary of Determinations and Factors Underlying Recommendations. . . . 99 Annex 1: Jurisdictions Response to the Review Report . . . . . . . . . . . . . . . . . .103 Annex 2: List of all Exchange-of-Information Mechanisms in Force. . . . . . . 104 Annex 3: List of all Laws, Regulations and Other Relevant Material . . . . . . 109 Annex 4: People Interviewed During On-Site Visit . . . . . . . . . . . . . . . . . . . . . .112
ABOUT THE GLOBAL FORUM 5
About the Global Forum

The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004, which has been incorporated in the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 plus Phase 2 reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.
EXECUTIVE SUMMARY 7
Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information in Korea as well as the practical implementation of that framework. The international standard, which is set out in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authoritys ability to gain timely access to that information, and whether that information can be effectively exchanged with the jurisdictions exchange of information partners. 2. Korea has a long history in negotiating tax treaties leading to an extensive network of bilateral agreements that provide for exchange of information in tax matters. Korea has 86 exchange of information partners covered by 83 DTCs (Double Tax Conventions) and 3 TIEAs (Tax Information Exchange Agreements). Seventy-eight of them are in force. Korea fully endorses the international standard for transparency and exchange of information for tax purposes. Since 2009, it has actively sought to expand its network of exchange of information (EOI) arrangements and update those treaties which are not to the standard. Over the last three years, Korea has sought to expand its treaty network by signing or initialling DTCs with 11 new jurisdictions, protocols amending conventions with 8 more jurisdictions and 14 TIEAs. The large majority of Koreas agreements are consistent with the international standard. Koreas agreements cover its major trading partners as well as relevant jurisdictions. Korea has not refused to enter into an exchange of information agreement with any Global Forum member seeking to do so. 3. Koreas legal framework ensures that ownership information in relation to all relevant entities is available. This is the result of commercial, civil and tax obligations requiring any company, partnership, trust or foundation to be registered with at least one government authority (either Register Office of a local District Court and/or a District Tax Office). These requirements are supplemented by obligations for entities themselves to make ownership information available and to keep this information updated. Bearer shares can be issued by joint-stock companies. Multiple requirements allow holders of
8 EXECUTIVE SUMMARY
such shares to be known in most cases. Korea must nevertheless make sure that this will be the case in all circumstances. Under Koreas laws, relevant entities are required to keep reliable accounting records along with the underlying documentation for at least five years. Financial institutions are subject to multiple obligations making bank information available in compliance with the international standard. 4. To access information for EOI purposes, Koreas tax authorities can first rely on information directly available in their databases. In Korea, taxpayers are subject to comprehensive tax obligations and third parties are required to automatically provide certain information on income to tax authorities. When information is not already available, Koreas tax authorities have the necessary powers to obtain bank, ownership, identity, and accounting information through multiple means (questionnaires, visits to business premises, interviews) and have enforcement measures to compel the production of such information. No bank secrecy or corporate secrecy provisions exist in Korea that limit the ability of Koreas competent authority to respond to an international request for information. Similarly, taxpayers rights and safeguards do not unduly restrict or prevent the provision of information by Korea to its international partners. 5. Koreas EOI division, located within the International Investigation Division in the National Tax Services headquarters, is the central point of contact for Koreas partners requesting information. Over the last three years, in 27% of cases, incoming requests were processed entirely at the central level, including requests for bank information. In most cases, incoming requests received are passed on to District and Regional Tax Offices who gather information from taxpayers and third parties, usually during visits to business premises. This allows accurate information to be gathered and provided expeditiously. Korea also exchanges information spontaneously and automatically with an increasing number of partners. 6. Since 2009 and the implementation of the international standard, Korea has deeply revised its practices in the field of EOI to improve the level of responses provided within 90 days to its partners. While being in position to answer 19% of its incoming requests in 90 days in 2008, Korea was able to do so in 57% of the cases in 2010, this combined with an increasing number of requests received. To obtain these results, the EOI division now places more importance on the timeliness of answers, which has also become part of the annual evaluation of EOI divisions staff. In practice, the EOI division now closely monitors incoming requests transferred at the local level and ensures ongoing discussions with local officials in charge of collecting information, first to support them during the gathering of information process and second, to make sure that accurate information will be furnished as an answer. In cases where information cannot be provided within 90 days, the
EXECUTIVE SUMMARY 9
EOI Division routinely sends, since 2010, updates of status to its partners. Along with these updates, information already available is also provided as interim replies. 7. In general, inputs received from Koreas exchange of information partners suggest a high quality of answers provided by the Korean authorities, although sometimes with delays. Some partners mentioned not having received any status updates from Korea but this seems to relate to matters prior to 2010 when Korea changed its practices. Peers also mention that Korea has been able to respond to the vast majority of requests it receives in a thorough and comprehensive manner. 8. From the information collected during the peer review process, it appears that Korea is fully committed to the international standard and has substantially improved its administrative practices since 2010 to implement in practice the principles set out by the Terms of Reference.
INTRODUCTION 11
Introduction
Information and methodology used for the peer review of Korea

9. The assessment of the legal and regulatory framework of Korea and the practical implementation and effectiveness of this framework was based on the international standards for transparency and exchange of information as described in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, and was prepared using the Global Forums Methodology for Peer Reviews and Non-Member Reviews. The assessment was based on the laws, regulations, and exchange of information mechanisms in force or effect as at January 2012, Koreas responses to the Phase 1 and Phase 2 questionnaires, other information, explanations and materials supplied by Korea during the on-site visit that took place in Seoul, Korea on 10-13 October 2011, and information supplied by partner jurisdictions. During the on-site visit, the assessment team met with officials and representatives of relevant Korean government agencies, including the Ministry of Finance, the National Tax Service, a District Tax Office, the Ministry of Justice, the Supreme Court of Korea, and the Korean Financial Intelligence Unit (see Annex 4). 10. The Terms of Reference breaks down the standards of transparency and exchange of information into 10 essential elements and 31 enumerated aspects under three broad categories: (A) availability of information; (B) access to information; and (C) exchange of information. This combined review assesses Koreas legal and regulatory framework and the implementation and effectiveness of this framework against these elements and each of the enumerated aspects. In respect of each essential element, a determination is made regarding Koreas legal and regulatory framework that either: (i) the element is in place; (ii) the element is in place but certain aspects of the legal implementation of the element need improvement; or (iii) the element is not in place. These determinations are accompanied by recommendations for improvement where relevant. In addition, to reflect the Phase 2 component, recommendations are also made concerning Koreas practical application of each of the essential elements. As outlined in the Note on Assessment Criteria,
12 INTRODUCTION
following a jurisdictions Phase 2 review, a Rating will be applied to each of the essential elements to reflect the overall position of a jurisdiction. However, this rating will only be published at such time as a representative subset of Phase 2 reviews is completed. This report therefore includes recommendations in respect of Koreas legal and regulatory framework and the actual implementation of the essential elements, as well as a determination on the legal and regulatory framework, but it does not include a rating of the elements. 11. The assessment was conducted by a team which consisted of three assessors and a representative of the Global Forum Secretariat: Ms. Merete Helle Hansen, Senior Adviser in the Ministry of Taxation of Denmark; Mr. Kamlesh Varshney, Director in the Indian Ministry of Finance, Department of Revenue; Mr. Bhaskar Goswami, Additional Commissioner of Income Tax in the Indian Ministry of Finance, Department of Revenue; and Mr. Rmi Verneau from the Global Forum Secretariat.
Overview of Korea
12. The Republic of Korea (hereinafter Korea) is a State in East Asia, located on the Southern part of the Korean Peninsula, bordered by the Democratic Republic of Korea to the North, the Yellow Sea to the West and the East Sea to the East. Korea covers almost 99 000 square kilometres of which 70% are mountains. The population of Korea is around 50 million of which 10 million live in Seoul, the capital city built on the banks of the Han River and 50% live in the Seoul area. The official language is Korean. Koreas currency is the Korean Won (KRW) (KRW 1 560 = EUR 1 as at 30 October 2011). 1 13. Korea has a market economy and is a high-income developed country which ranks 14th in the world with a nominal GDP of USD 1 000 billion (EUR 715 billion). Korea had one of the worlds fastest growing economies from the early 1960s to the late 1990s, and is still one of the fastest growing developed countries. The Korean economy is dominated by services (58%) followed by industry (39%), while agriculture represents less than 3%. Korea has an export-oriented economic strategy (semiconductors, chemical products, ships, steel, cars , etc.), and was in 2010 the sixth largest exporter and tenth largest importer in the world. Koreas main export partners are China, the United States, Japan, Hong-Kong (China), and Singapore while the main import partners are China, Japan, the United States, Saudi Arabia, and
1.
EUR 1 = USD 1.398 as at 30 October 2011. www.xe.com, accessed 30 October 2011.
INTRODUCTION 13
Australia. 2 Korea was one of the few developed economies whose GDP has not decreased during the recent financial crisis with a 0.3% annual growth in 2009 followed by a 6.2% growth in 2010 3. 14. Korea is a member of the Asia Pacific Economic Co-operation (APEC), Group of Twenty (G20), Organisation for Economic Co-operation and Development (OECD), World Trade Organisation (WTO) and the United Nations (UN). Korea is a member of the Financial Action Task Force (FATF) and has been a member of the Global Forum and its Peer Review Group since its beginning.
General information on legal system and the taxation system Legal system
15. The Constitution of the Republic of Korea was enacted on 17 July 1948 and its government was established on 15 August of the same year. Korea is a presidential system with some features of a parliamentary system. 16. The executive branch is headed by the President. The President is elected directly by the people, and is the only elected member of the national executive. The President serves for one five-year term; additional terms are not permitted. The President is head of government, head of state, and commander in chief of the South Korean armed forces. The President is assisted in his duties by the Prime Minister of Korea as well as the Presidential Secretariat. The Prime Minister is appointed by the President and approved by the National Assembly, and has the power to recommend the appointment or dismissal of cabinet minister. At the national level, the legislative branch consists of the National Assembly of Korea, a unicameral legislature. Most of its 299 members are elected from single-member constituencies; however, 54 are elected through proportional representation. The members of the National Assembly serve for four years. 17. At the local level, Korea is divided into 8 provinces (do), 1 special autonomous province (teukbyeol jachido), 6 metropolitan cities with provincial status (gwangyeoksi), and 1 special city, Seoul (Teukbyeolsi). Further, provinces are divided into cities (si), counties (gun), and districts (gu) 18. The Korean judiciary has a three tiered system: (i) the Supreme Court at the top; (ii) Regional Appeal Courts; and (iii) local District, Branch, Municipal, and Specialised Courts (a Family Court, an Administrative Court, and a Patent Court). In addition, the Constitutional Court examines in particular the
2. 3. Statistics provided by the Korea Custom Services (2010 information). See www.oecd.org.
14 INTRODUCTION
constitutionality of laws. In tax matters, litigation is dealt with by the National Tax Tribunal and can be appealed to the Administrative Court. 19. The Korean legal system is based on the civil law system but also contains some characteristics of Anglo-American law. The Korean system was modelled on that of Japan, which in turn has modelled its legal system largely on the German civil law system. The hierarchy of laws in Korea is as follows: (i) the constitution laying down all fundamental rights and duties of Korean citizens and the organisation of the different powers; (ii) acts adopted by the National Assembly; (iii) Presidential Decrees; (iv) ministerial rules. Ministries may also issue binding notices or guidelines in order to provide more guidance. 20. Under the Republic of Koreas Constitution, international treaties and national laws are placed on the same level. However, where there is conflict between the two norms, the international treaty will always prevail over the national law. This principle is recognised in Koreas case law. 21. All treaties signed by Korea, including Tax Information Exchange Agreements must be adopted by the National Assembly (Art. 60 Constitution). When adopted, they are ratified by the President (Art. 73). A recent interpretation of Article 31 of the Act on Coordination of International Tax Affairs (ACITA) allows the Korean authorities to not go to the parliament for ratification of protocols only amending article 26 of DTCs. These agreements may be directly ratified by the President. Korea has not experienced such a ratification procedure yet. A similar solution might be applied to TIEAs in the future. Koreas DTCs and TIEAs are given effect to through Article 31 of the ACITA.
Tax system
22. The administration of Koreas tax system is under the general jurisdiction of the Ministry of Strategy and Finance (MOSF). The Tax and Customs office of the MOSF is in charge of planning and co-ordinating national tax and customs policies. Of its ten divisions dealing with taxes, two are in charge of international matters: the International Tax Affairs and International Tax Treaties Divisions. 23. The National Tax Service (NTS) was established as an external organisation of the Ministry of Finance on 3 March 1966, taking over the Taxation Bureau of the Ministry of Finance. It is mainly in charge of the assessment and collection of national taxes. Headed by the Commissioner, it is responsible for establishing basic policies on tax administration and supporting administration of taxes by directing, supervising, and controlling the Regional, District, and Branch Tax Offices.
INTRODUCTION 15
24. The NTS consists of 11 bureaus at the headquarters level, three affiliated organisations, six Regional Tax Offices, 107 District Tax Offices and 17 Branch Offices. Under the supervision of the National Tax Service, a Regional Tax Office is responsible for the direct guidance and control over the activities of the District Tax Offices. It also has responsibilities for auditing large taxpayers. Local District Tax Offices are the front-line organisation responsible for the assessment, collection, audit, and investigation of all internal taxes. In general, a District Tax Office consists of a Collection Support Division, a Revenue Control Division, and Investigation Divisions. 20 000 officials work for the NTS of whom 16 000 are in District Tax Offices, 3 000 in Regional Tax Offices and 1 000 in the headquarters in Seoul. 25. At the national level, there are ten main taxes of which the most important are the corporation tax, income tax, inheritance and gift tax, real estate holding tax and VAT. Corporation tax, income tax and VAT account for nearly 74% of Koreas State revenue (USD 166 billion / EUR 119 billion in 2010). At the local level, there are in addition some local income taxes as well as local consumption taxes. These taxes are subject to specific sets or rules and collected by separate local administrations. 26. The characteristics of Koreas three main taxes are: corporation tax: any domestic corporation, that is any company incorporated in Korea or having its seat of effective management in Korea, is subject to corporation tax on a worldwide basis. Foreign companies are taxed on their income from Korean source. Two rates are applicable: 10% on the tax base below a KRW 200 million threshold (EUR 128 205) and 22% above. The corporation tax represented USD 37 billion (EUR 26.5 billion) of State revenue in 2010 (22% of the total revenue); income tax: natural persons resident in Korea are subject to income tax on a worldwide basis while non-residents are taxable on income from Korea sources. The scale of rates ranges from 6% to 35% in a progressive manner. Non-incorporated partnerships are flow-through entities usually subject to the rules provided by the Income Tax Act, that is, their income is taxed within the hands of the partners. Income tax accounted for USD 37.4 billion (EUR 26.75 billion) in 2010 (22% of the total State revenue); VAT is levied at 10% on the delivery of goods, supply of services and import of goods. USD 49 billion VAT (EUR 35 billion) was collected in 2010 (30% of total State revenue). 27. A tax identification number (TIN) is attributed to all taxpayers in Korea. Companies, other legal entities and bodies corporate receive TINs upon registration with the NTS. This TIN is kept indefinitely, even when
16 INTRODUCTION
characteristics of the entity are altered. Natural persons receive a resident registration number upon registration of their birth or, for foreigners, when they intend to reside in Korea for more than 90 days. This resident registration number is used as TIN by revenue authorities. 28. Korea also has free-economic zones. 4 A specific tax regime is amongst the incentives to establish a branch or a company in one of the free economic zones. Companies operating within these zones are subject to the same rules, in particular registration rules, as apply to companies not established in a free economic zone.
International exchange of information for tax purposes

29. In Korea, negotiation of tax agreements, including any type of EOI arrangements, is the responsibility of the MOSF. As previously mentioned, there is within the Tax and Customs office a Tax Treaties Division whose functions are: (i) to conclude and interpret tax treaties with foreign countries and promote international co-operation in the tax area; and (ii) to do research on foreign tax systems. Korea has a comprehensive network of EOI agreements currently covering 86 partners, 83 by way of a DTC and 3 by way of TIEAs. Seventy-eight of them are in force. 30. Koreas exchange of information is handled by the NTS, International Investigation Division at the headquarters level. Korea exchanges information on request and spontaneously with all its treaty partners. Automatic exchange of information has also already occurred with 28 jurisdictions. Information on wages, pensions, dividends and interests are in particular the subject of such automatic exchange. As part of its EOI policy, in 2011 Korea sent out letters to 37 of its partners proposing automatic exchange of information. Further, with the aim of identifying and curbing international tax avoidance, Korea participates in the Joint International Tax Shelter Information Centre (JITSIC) along with Australia, Canada, the Peoples Republic of China, France, Japan, the United Kingdom, and the United States.
Overview of the financial sector and relevant professions

31. The financial sector accounts for 7.5% of Korean total GDP. The financial sector of Korea comprises: banks, non-bank financial institutions that provide deposits and lending services on a smaller scale than banks, insurance companies, and financial investment service companies. Banks represent the largest group of financial institutions accounting for the two thirds of the total assets.
4. Incheon, Busan/Jinhae, Gwangyang, Yellow Sea, Daegu/Gyeongbuk and Saemangum/ Gunsan.
INTRODUCTION 17
Financial Institutions Banks Commercial Banks Specialised Banks Non-Bank Financial Institutions Mutual Savings Banks Credit-Specialised Financial Companies Credit Unions Agricultural, Fishery and Forestry Credit Co-operatives Insurance Companies Life Insurance Companies Non-life Insurance Companies Financial Investment Securities Companies Services Companies Asset Management Companies Investment Advisory Companies Futures Companies Merchant Banks Money/Foreign Exchange Brokerage Companies Corporate Restructuring Funds Real Estate Investment trusts Financial Holding Companies National and Regional Banks Foreign Banks
Number (2010) 13 37 5 105 63 962 1392 23 30 62 80 135 9 1 3 55 29 8
32. The principal supervisory authority of the financial sector is the Financial Services Commission (FSC), which is responsible for drafting and amending financial laws and regulations and issuing regulatory licenses to financial institutions. In its supervisory duties, the FSC can rely on: the Securities and Futures Commission (SFC) within the FSC is in charge of supervising financial markets; and the Financial Supervisory Service (FSS) whose role is to carry out examinations of financial institutions. To this extent, the FSS can require any person to provide under request any books, documents and records. 33. Lawyers provide services such as legal representation, advice and consultancy, drafting of contracts and dispute resolution. There were 12 500 lawyers practicing in Korea as at September 2011. Judicial scriveners have a subsidiary role to the work of lawyers. Their main function is to prepare documents for registration. They do not have powers to represent their clients before a court. 6 130 judicial scriveners were registered as at October 2011.
18 INTRODUCTION
34. Notaries prepare deeds and attest documents signed by private persons. They do not perform financial business. Only persons appointed as notaries by the Minister of Justice or legal service corporations established with the approval of the Minister of Justice can provide notary services. Authorised law firms may also provide notary services. There were 347 notaries as at June 2011. Certified public accountants (CPAs) provide audit, tax advisory and business management advisory services. They also provide advices with respect to establishment of companies. There were 14 000 certified public accountants as at August 2011 in Korea. 35. Trust and company services are often provided in Korea by lawyers. In addition, trust institutions were introduced in the early 1990s. In Korea, trust business is conducted through business trust entities. In 2011, there were 57 trust companies licensed by the FSC to perform trust business (20 banks, 21 securities firms, 5 insurance companies and 11 real estate trust companies).
Anti money laundering/combating financing of terrorism legislation

36. The current Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework mainly relies on three separate pieces of legislation: (i) the Act on Reporting and Use of Certain Financial Transaction Information (hereinafter FTRA) amended in 2011; (ii) the AML/CFT regulation passed in June 2010; and (iii) the Act on Real Name Financial Transactions and Guarantee of Secrecy, most recently amended in 2011. 37. The Korean Financial Intelligence Unit (KoFIU), which since 2008 has been integrated into the FSC, is the supervisory and regulatory authorities in the field of AML/CFT. The duties of the FIU, as detailed in the FTRA are to collect, disseminate and analyse financial transactions and take preventive measures for financial institutions. 38. A review of Koreas AML/CFT legal framework was completed by the Financial Action Task Force in 2009. While recognising Koreas political commitment, government agencies engagement, and a legal framework usually in line with the AML/CFT international standard, the FATF report also notes room for improvement, in particular to bring designated non-financial businesses and professions into the AML/CFT system and to strengthen the system of sanctions.
INTRODUCTION 19
Recent developments
39. Since the publication of the FATF report, Korea has taken several steps to remedy the deficiencies of its anti-money laundering/combating financing terrorism framework. In particular, legal requirements for CDD to be performed by financial institutions have been improved with the publication, on 30 July 2010, of a new AML/CFT Regulation. The Korean government plans to review the possibilities of applying AML/CFT obligations on DNFPBs by taking the necessary legislative measures. 40. Since 2009, Korea has started to negotiate TIEAs. Over the last two years, Korea has also engaged in a comprehensive program of DTC negotiations, the purpose of which was, in particular, to bring its existing treaties to the international standard. In addition, in May 2010 Korea signed the Joint CoE/OECD Convention on Mutual Administrative Assistance in Tax Matters and its protocol. Ratification is pending. 41. In March 2011, acts introducing into Korean law limited partnerships (Hapja Johap) and a new type of limited liability companies (Yuhan Chaekim Hoesa) were passed and will take effect from April 2012. Koreas authorities have advised that tax rules applicable to Hapja Johap will be similar to those already applicable to partnerships (see below section A.1.3) and rules applicable to Yuhan Chaekim Hoesa will be similar to those existing for companies (see section A.1.1). Ownership information and accounting records will be available under the same conditions as apply to existing Korean entities.
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 21
Compliance with the Standards
A. Availability of information
Overview
42. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If such information is not kept or the information is not maintained for a reasonable period, a jurisdictions competent authority 5 may not be able to obtain and provide it when requested. This section of the report describes and assesses Koreas legal and regulatory framework for availability of information. It also assesses the implementation and effectiveness of this framework. 43. Koreas legal and regulatory framework ensures the availability of ownership information. This is due to registration requirements for commercial or civil purposes but also to a very comprehensive taxation system requiring any relevant entities to register and/or report on a regular basis to revenue authorities. Based on inputs received from Koreas partners, it is clear that the Korean authorities have been able to provide ownership information, accounting records and bank information on request.
5. The term competent authority means the person or government authority designated by a jurisdiction as being competent to exchange information pursuant to a double tax convention or tax information exchange agreement.
22 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

44. Koreas Commercial Act allows for four types of companies: jointstock companies, limited liability companies, limited partnership companies and general partnership companies. Companies, either domestic or foreign companies, are required to register for commercial purposes with the Registry Office of the District Court having jurisdiction over the seat (or the registered office) of the company. Limited liability companies, general partnership companies and limited partnership companies are required to disclose the identity of their members in their articles of incorporation, to provide this information to registration authorities and to further keep it updated. While joint-stock companies are not covered by this obligation, they are required to keep share registers, an obligation that also applies to limited liability companies. Any company incorporated under the Commercial Act must further register with revenue authorities and provide for registration a list of stockholders. 45. Under Koreas commercial legislation, joint stock companies are allowed to issue bearer shares. Ownership information in relation to such shares is in almost all situations available due to multiple requirements: (i) deposit of the bearer instruments with the company to exercise rights in the company, in particular rights to dividends; (ii) obligation for profit making companies to maintain a share register for tax purposes where all shareholders owning more than 1% of the companys capital or having a participation whose value is above KRW 5 million (EU 3 205) must be reported; and (iii) prohibition of bearer shares for joint-stock companies that are listed. Korea must nevertheless ensure that this information will be available in all circumstances. 46. While there is no general obligation to register for civil purposes, partnerships and trusts are subject to comprehensive tax obligations. The identity of any partners in partnerships must be reported to the revenue authorities upon registration and on an annual basis. This information is also available and kept updated at the partnership level. Trustees, whether trustees of personal or business trusts, must maintain records pertaining to the identity of settlors and beneficiaries. They must also report on an annual basis to the National Tax Service the identity of any person to whom income accruing from trusts has been paid. Trustees of business trusts are also subject to further customer due diligence requirements under which they must have knowledge of the identity of business trusts beneficiaries. Finally, in Korea, foundations can only be set up for charitable purposes and individual beneficiaries are not allowed. 47. All Korean relevant entities are subject to obligations to retain reliable accounting records together with supporting underlying documentation for at least five years. This is the result of obligations flowing from the Commercial Act, the Civil Act, the financial legislation as well as additional
detailed requirements provided by the relevant tax laws. Finally, Koreas legal and regulatory framework ensures that accurate bank records are kept for at least five years by financial institutions. 48. All obligations to make ownership information, accounting records and bank information available are supplemented by effective sanctions ensuring that these legal requirements are respected. It also results from information provided by Koreas partners that in no instances was Korea not in position to provide the requested information because it was not available.
A.1. Ownership and identity information

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.
Korean registers
49. In Korea, registration of companies is regulated by the Commercial Registration Act dated 3 August 2007 and most recently amended in January 2011. This Act provides that the competent Registry Office for companies is the District Court or its Branch Court having jurisdiction over the location of a place of business of the company concerned. According to this Act, a set of six registers is maintained by registration authorities. This includes (s. 5): a trade name registry, unlimited partnership company registry, limited partnership company registry, stock company registry, limited liability company registry, and foreign company registry. 6 While maintained and updated at the local level, there is one single register at the national level and any entry in this register can be consulted by any Registry Office. Any registration can be done electronically (article 3 (6) CRA) although only 2.5% of new companies chose this possibility in 2010. 50. The same District Court Registry Office also maintains a foundation register. Foundations have to be registered with the District Court having jurisdiction over the foundations main office. This register is separate from the register maintained for commercial purposes. As for the commercial register, there is one single foundation register in Korea, although maintained and updated at the local level. 51. There is no register in Korea where trusts have to be reported. However, given the public policy rules applicable in Korea, each time Koreas laws provides for registration of assets to make them enforceable against third parties, registration must be done also when those assets are transferred to trusts. This means that trust deeds are registered when pertaining to specific
6. This set of registries will be hereinafter named commercial register.

types of assets such as real estate, intellectual property, or or securities and bonds. As a result of Koreas laws, trust deeds do not have to be registered with a registration authority when the asset concerned is not legally required to be registered (actually only transfers of cash are in that situation. 52. For tax purposes, and pursuant to art. 109 (1) of the Corporation Tax Act, any domestic corporation that is (art. 1 (1) of the Act) any corporation with its headquarters, main office or actual business management place located in Korea, must be registered for tax purposes and provide ownership information upon registration. Foreign corporations, i.e. (art. 1 (3)) corporations whose actual business place or headquarters or main office is abroad, with a place of business in Korea are subject to the same requirement (art. 109 (2)). The same applies to foundations when they have profit making activities. In that case, foundations must file an application for registration with revenue authorities (art. 110 CTA. See further details below). Partnerships are also subject to registration for tax purposes under the Income Tax Act and the Special Tax Treatment Control Act. Once registered for tax purposes, any relevant entity receives a Tax Identification Number which will be allocated until the entity is liquidated.
Companies (ToR 7 A.1.1)

53. Article 169 of the Korean Commercial Act provides that the term company as used in this Act means an association incorporated for the purpose of engaging in commercial activities and any other profit-making activities. Further, art. 170 specifies that companies are categorised into four kinds, namely, partnership companies, limited partnership companies, stock companies and limited liability companies: Jusik Hoesa (Joint-Stock Company), articles 288 et seq. of the Commercial Act. A Jusik Hoesa comprises an unlimited number of shareholders whose liability is limited to the amount of their contributions. Jusik Hoesas shares are freely transferable. Articles of incorporation of a Jusik Hoesa must be notarised where at the time of the incorporation the total capital is above KRW one billion (EUR 641 026). 740 000 Jusik Hoesa were registered in Korea as at July 2011. Yuhan Hoesa (Limited Liability Company), articles 543 et seq. of the Commercial Act. A Yuhan Hoesa is a closely held company with less than 50 members. The liability of its members is limited to their contributions to the companys capital. Transfer of Yuhan Hoesas shares is not free and subject to approval of the other members during
7. Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information.
a general meeting of members. Articles of incorporations must be notarised if the capital is above KRW 1 billion (EUR 641 026). There were 42 000 Yuhan Hoesa incorporated in Korea in July 2011. Hapmyong Hoesa (General Partnership Company), articles 178 et seq. of the Commercial Act, where all the members have an unlimited liability. A Hapmyong Hoesa comprises at least two partners, which have the authority to represent the company unless otherwise provided by the articles of incorporation. Transfer of rights in a Hapmyong Hoesa is subject to the approval of other members. 2 600 Hapmyong Hoesa were registered in Korea as at July 2011. Hapja Hoesa (Limited Partnership Company), articles 268 et seq. of the Commercial Act. A Hapja Hoesa comprises at least one partner with unlimited liability and one partner whose liability is limited to his(her) contribution. Unlimited partners have the authority to represent the company while limited partners do not have any authority to participate in the management. Transfer of limited partners interest in a Hapja Hoesa is subject to approval of all unlimited partners. There were 15 000 Hapja Hoesa in Korea as at July 2011.
Registration requirements
54. Pursuant to Articles 2 and 3 of the Commercial Registration Act (CRA) and article 34 of the Commercial Act, any merchants, defined by the Commercial Act (CA) as persons engaged in commercial activities or any company whatever its activities, must be registered in the Commercial Register. This registration must be made with the District Court having jurisdiction over the main office of the company. Koreas authorities have also clarified that companies established in free economic zone are subject to the same registration requirements as applied to other companies under Korean law and that ownership information is available in the same conditions. 55. For registration purposes, the following information must be provided: for joint stock companies (article 80 CRA): an application form and, amongst other things, the articles of incorporation, the document appointing directors, auditors or the members of the audit committed (if already appointed at the time of registration) and the minutes of the inaugural general meeting. No ownership information has to be provided by joint-stock companies upon registration. for limited liability companies (article 104 CRA): an application form and amongst others, the articles of incorporation and the document appointing auditors (if done at the time of registration). Pursuant to Article 543 of the CA, articles of incorporation of limited liability

companies must include inter alia, the name, resident registration number and domicile of each member. for general partnership companies and limited partnership companies (article 56 and 77 CRA): an application form and the articles of incorporation of the company. Articles 179 and 270 of the CA, specifically provides that the articles of incorporation of these companies must include, amongst others, the name, resident registration number and domicile of each members. 56. For registration, the local registry office checks the identity of any persons mentioned as company shareholder or member in the companys articles of incorporation or application form. This is done based on an identification document issued by a government authority (such as an identification card or a driving license, both specifying the RRN) for natural persons, or a registration document for legal entities. Official documents identifying directors and managers are also requested. Furthermore, the information provided is checked against other public sources of information such as the database maintained by the Ministry of Public Administration and Security (this system enables information streams to be shared between Koreas administrations but considering the professional secrecy rules applicable in tax matters, information available to revenue authorities is not shared with other administrations and is not available in this system 8). 57. Article 317 of the CA specifically provides that registration of joint stock companies must take place within two weeks after the inaugural general meeting. The same timeframe applies to limited liability companies, which must register within two weeks after payments of contributions to the companys capital (article 549 CA). While no timeframe is clearly provided for limited and general partnership companies, article 37 of the CA states that matters required to be registered shall not be effective as to any third person acting in good faith without registering them. Koreas authorities have also advised that without being registered for commercial purposes, companies cannot be registered for tax purposes 9 and consequently run a business. 10 In practice, Koreas registration authorities have mentioned that the level of
8. Information contained in this system (amongst others): certified copy of Resident registration, vehicle registration register, certified copy of building registration, certificate of foreigner registration, certificate of company registration, certificate of immigration records, etc. According to Form No 73 of the Corporation Tax Act, a company that applies for registration with the NTS under Art. 109 of the CTA must submit a copy of its certificate of incorporation as a prerequisite for registration for tax purposes. Running a business requires a tax identification number to be able to issue proper invoices.
9. 10.
compliance with registration requirements is high considering the necessity to be registered to start any activity. The main registration deficiencies noticed by registration authorities relate to failure to update the address of companies representatives or the composition of companies executives and not to the registration itself. 58. Pursuant to articles 183, 270, 317 and 549 of the CA, respectively applicable to general partnerships, limited partnerships, joint stock companies and limited liability companies, any amendments made to matters registered by the Commercial Register, articles of incorporation included, must be provided within two weeks of amendments to registration authorities. 59. Pursuant to article 5 of the CRA, all registers maintained by commercial registration authorities as well as any entries in these registers, must be preserved permanently. Any documents pertaining to entries in these registries and submitted by the companies themselves are kept for five years (art. 26 of the Commercial Registration Regulation). The same rule applies to liquidated companies: the entry in the register is kept permanently while any other document is kept for five years 60. Once a company is registered, registration authorities do not further check the information provided upon registration but ensure the accuracy of the entries in the register through an ongoing monitoring. In practice, any company from which no information has been received over the last five years will receive a letter from registration authorities to ensure that it is still in existence. If no answer is received, the company will be considered as dormant for one more year and after one year will be liquidated if still silent. Nevertheless, in these situations, information in relation to these companies will remain available. In practice, registration authorities have advised that only a small number of companies do not respond to the letters sent after five years. 61. In sum, Koreas authorities have indicated that the current registration system ensures accurate information to be kept and updated for commercial law purposes.
Information held by companies

62. Pursuant to article 352 CA, joint stock companies must maintain a share register where the names and addresses of any holder of registered shares, class of shares held, as well as the date of acquisition of each share must be entered. The same holds true for limited liability companies which are required, under article 557 and 566 CA, to maintain a register of members including the name, address and number of units of contributions held by each members and any transfer relating to such contributions. Pursuant to articles 396 and 566 CA, joint stock companies and limited liability

companies must keep their share registers and registers of members at their principal office which must be in Korea. This register can be retained under an electronic format (art 352-2). 63. The Commercial Act requires information in the share register to be updated but there is no specific timeframe under Korean laws to do so. Shareholders bear responsibility to ask companies to alter entries in share registers. Although there is no specific penalty for shareholders not asking the company to alter the entry, the transfer of shares is not definitive as long as the transferee is not registered meaning that this transfer cannot be enforced against the company and third persons unless the transfer has been registered in the register of members. When requested, the company concerned must update immediately the share register or face a fine. Upon request by the shareholder concerned, the sanction is applied by companies supervisory authorities and can be up to KRW 5 million (EUR 3 205) and can be repeated multiple times until the entry is finally altered. Koreas authorities have advised that there is no rule under law to fix the sanction but in practice, its amount is between KRW 3 and 4 million (EUR 1 923 to 2 564) depending of the companys size. In practice, in 2010, this sanction was applied in 34 cases by supervisory authorities. 64. Koreas commercial legislation also provides that any interest in general partnership companies, limited partnership companies and limited liability companies is not freely transferable but subject to approval of all other companys members. These transfers must also be registered in the articles of incorporation of the company (respectively articles 197, 269, 276, and 556 CA). This makes ownership information available at any time within the company itself (article 566 CA requires managers and directors of these companies to keep copies of the articles of incorporation and the minutes of the general members meetings at the principal office). For limited liability companies, besides the obligation to keep a register of members, this is another means of ensuring that ownership information is available and kept updated.
Disclosure of major shareholdings in listed companies

65. Upon reaching a shareholding of 5% or more of the total shares in a listed company, a shareholder must file a report with the Financial Service Commission (FSC) and the Korean stock exchange within five days (art. 147 of the Financial Investment Services and Capital Markets Act FSCMA). Any further change leading to a 1% or more change in the total shares of the company must also be reported. 66. Within 90 days from the end of each fiscal year, stock listed companies must prepare and submit an annual business report (art.159 FSCMA) containing detailed information on major shareholders to the FSC and the Korean exchange market (art.168 (2) of the Enforcement Decree to the FSCMA).
Tax requirements Registration with revenue authorities

67. Under the Corporation Tax Act (CTA), any corporation with its headquarters in Korea must be registered for tax purposes (article 109 CTA). This requirement applies to joint-stock companies, limited liability companies, limited partnership companies and general partnership companies. 68. Particulars to provide upon registration are the following: names of the corporation and its representative, location of its headquarters, main office or actual business management place, purpose of business (art. 109 (1) CTA). Art. 152 (2) 3 of the Enforcement Decree provides that a list of stockholders must be provided upon registration. This list includes the names, addresses and shares held by each stockholder (art. 74 Ministerial Decree). Any amendments made to the initial report made to revenue authorities must be reported to the District Tax Office having jurisdiction over the place of tax payment within 15 days from the date of such change (art. 109 (3) CTA). 69. Upon registration, general partnership companies and limited partnership companies can opt for the partnership taxation regime (see Special Tax Treatment Control Act, art. 100-14 to 100-26). Under this regime, taxation of business income is imposed on the companys members and not at the partnership company level. To ensure this taxation, identity of companys members must be provided to revenue authorities upon registration and updated on annual basis, making then ownership information available to revenue authorities. This regime and its implications are further described under section A.1.3 of the report. 70. In all cases the NTS will check the information provided by a company upon registration, in particular against information already available. This can be done easily as the resident registration number (which is also used as tax identification number by the NTS) must be provided for any individuals whose identity must be disclosed for registration. 71. Any information provided to revenue authorities for registration must be kept as long as it is necessary for tax purposes, and at least for five years considering the five years statute of limitation that prevails in Korea (see art. 85-3 of the Framework Act on National Taxes). 72. Once the company is registered, a tax identification number (TIN) is issued by the NTS and is made available to the company on its certificate of registration. This TIN will be allocated to the company until its liquidation. 73. To ensure that companies are compliant, the NTS will check its database (in particular provision of an annual tax returns and quarterly VAT returns). When it results that a company does not fulfil its obligations,

besides application of fines, the NTS will verify that the company is still in existence, in particular through visits at the business place and interviews with the companys representative. When a company is clearly no longer in existence, it is deregistered and the tax identification number is cancelled. Nevertheless, this company, while deregistered, will still appear under its original TIN number in the NTS database as a liquidated company (relevant business data are also kept available in the database). 74. The revenue authorities have clarified that for registration the main deficiencies noticed relate to failures to report changes of business place, companies representatives or closing of business but also that the level of compliance is generally very high. Likewise, this information is provided by companies on their returns and can then be updated by revenue authorities.
Annual tax returns

75. Pursuant to article 60 CTA, any corporation with a duty to pay taxes must file an annual tax return to the District Tax Office having jurisdiction over the companys headquarters, main office or business management place, within three months from the last day of the month to which the closing date of each business year belongs. This report must include a balance sheet, profits and losses accounts as well as other accounting information. 76. Article 118 CTA explicitly sets out that domestic corporations must keep, for tax purposes, a register of their shareholders or members detailing their names, addresses and resident registration numbers. This share register must contain particulars relating to the all shareholders in companies, Art. 119 provides that any change of shareholders occurring during the business year in relation to the most important shareholders must be reported by limited liability companies and joint stock companies to the revenue authorities as an enclosure to the annual tax return. This obligation applies to: (1) in the case of listed companies, shares held by the majority shareholder (who owns at least 1% of shares issued by a company and is the largest shareholder thereof (including shares held by his associated persons); and (2) in the case of other companies, shareholders who own more than 1% or KRW 5 million (EUR 3205)(Art. 43 para. 7 and 8, Art. 50 para.2, Art. 161 para.4 of the Enforcement Decree to the CTA). 11. This reporting is a snapshot in time and reflects the situation at the end of the business year.
11.
Any information reported to revenue authorities, including information in relation to shareholders, must be information on persons who really receive the income and not nominal owners if there are some (article 14 of the Framework Act on National Taxes).
77. In practice, information provided by companies in this shareholder report is checked against other sources of information such as information provided upon registration or annual reporting obligations companies distributing dividends have.
Foreign companies Branches of foreign companies

78. Article 614 CA sets out that a foreign company (company being defined in section 170 of the CA as also covering partnership companies) intending to engage in business in Korea must appoint a representative and establish a business office in Korea. Furthermore, and pursuant to the same article, this branch must apply for registration with the District Court having jurisdiction over the place of the business office. The rules for registration of a foreign company are those applicable to a similar Korean company, or if no similar form of Korean company exists, that with the closest features. 79. In addition to information provided upon registration (see above for information domestic companies must provide to this extent), a foreign company must report the governing law under which it has been incorporated as well as the name and address of its representative in Korea (art. 614 (3)). Under art. 112 CRA, the articles of incorporation of the company, including its main characteristics, must also be provided. Further, any information maintained by the registration authorities must be updated under the same conditions and same timeframe as apply to domestic companies (article 615 CA).
Foreign companies with their seat situated abroad and their place of effective management in Korea
80. When a foreign company (company being defined in section 170 of theca as also covering partnership companies) has its registered seat abroad but a sufficient nexus with Korea, by reason of having its place of effective management (or place of business management) in Korea, article 617 CA provides that this company is subject to the same registration requirements as a similar company incorporated under the law of Korea. 81. All rules applicable to domestic companies (i.e.: joint stock companies, limited liability companies, general partnership companies and limited partnership companies) and described above therefore apply under the same conditions to foreign companies having their place of effective management in Korea. Consequently, besides registration requirements, these companies have to keep a share register for commercial purposes.
Tax requirements
82. Under the Corporation Tax Act (CTA), any foreign company having a place of effective management or a branch in Korea must be registered for tax purposes (article 109 CTA). This requirement applies to all types of companies. A foreign company with a place of effective management in Korea is treated as domestic company for tax purpose and consequently, the conditions under which this registration has to be made are the same as for domestic companies. Foreign companies with a branch in Korea have to furnish the name of the person responsible for the management or administration of the business in Korea along with name of the company and representative thereof, location of headquarters, purpose and type of business conducted in Korea, type and location of assets in Korea (art. 109 (2) CTA). 83. Once the company is registered, a tax identification number (TIN) is issued by the NTS and is made available to the company on its certificate of registration. This TIN will be allocated to the company until its liquidation. 84. Foreign companies maintaining a branch in Korea are taxed on their Korean income while foreign companies with a seat of management in Korea are taxed in Korea on a worldwide basis. To this extent, and pursuant to article 60 CTA, this corporation must file an annual tax return to the District Tax Office having jurisdiction over the companys main office or business management place, within three months from the last day of the month to which the closing date of each business year belongs. This report must include a balance sheet, profits and losses accounts as well as other accounting information. 85. Foreign companies considered as Korean domestic companies (that is, pursuant to article 1 CTA, companies with their main office or business management place in Korea) have to keep the register of members provided by article 118 CTA. If they take the form of a limited liability company or a joint stock companies, these foreign companies must submit a detailed statement on change of stocks, as an enclosure of the annual tax return.
Ownership information held by service providers and nominees Anti-money laundering requirements
86. In Korea, anti-money laundering requirements are set out in three different pieces of legislation: (i) Act on reporting and Use of Certain Financial Transaction Information (FTRA); (ii) AML/CFT regulation; and (iii) Act on Real Name of Financial Transactions and Guarantee of Secrecy. 87. Obligations to perform customer due diligence flow from both FTRA and AML/CFT Regulation. Pursuant to art. 5-2 (1) FTRA, financial
institutions must identify and verify the identity of their customers. While there are detailed CDD and anti-money laundering requirements for financial institutions, designated non-financial businesses and professions (DNFPBs) 12 are not subject to these CDD obligations. Koreas authorities have advised that a risk assessment is being conducted to assess the AML/CFT risks in relation to DNFPBs and determine the CDD requirements these professionals will be subject to in the future. 88. Representatives of accountants have issue a Code of Ethic requiring accountants to perform enhanced customer due diligence on a voluntary basis. 13 As commercial businesses, accountants must also keep all their records for at least five years (art. 33 Commercial Act).
Nominee ownership
89. Korea law does not recognise the concept of nominee ownership found in many common law jurisdictions, but this activity is not prohibited. Shareholders must register their own names in order to exercise voting rights or to receive dividends. Under the Real Name, Financial Transactions and Guarantee of Secrecy Act, financial institutions must perform financial transactions with customers under their real name (art. 3 of the Act). To date, Korean authorities have no experience with nominees. 90. For tax purposes, if shareholders can transfer economic benefits derived from dividends on a contractual basis, companies are required to pay dividends subject to taxation to beneficial owners (art. 14 of the Framework Act on National Taxes). 14 As regard the obligation to maintain a share register for tax purposes (art. 118 Corporation Tax Act), companies are required, under the Framework Act on National Taxes, to keep information on legal owners but
12. 13. E.g. lawyers, accountants, notaries or business service providers, with the exceptions of trusts transactions performed by financial institutions, Before accepting a new client relationship, a professional accountant in public practice will determine whether acceptance would create any threats to compliance with the fundamental principles for instance when the client is involved in illegal activities such as money laundering, dishonesty or questionable financial reporting practices. Unless the threat in question is clearly insignificant, the professional accountant will apply safeguards such as obtaining knowledge and understanding of the client, its owners, managers and those responsible for its governance and business activities, or securing the clients commitment to improve corporate governance practices or internal controls. Any information reported to revenue authorities, including information in relation to shareholders, must be information on persons who really receive the income and not nominal owners if there are some (article 14 of the Framework Act on National Taxes).
14.

also on beneficial owners. Art. 14 (1) of this Act provides that it is the beneficial owner of income or property that is liable to tax and not the nominal owner. This provision ensures that companies keep information on both legal and beneficial owners of shares. 91. Moreover, Koreas tax authorities have powers to request information from any Korean resident, whether this relates to Korean taxes or foreign taxes, to respond to an international request for information (as further described under Part B) and these could be used to obtain information from a person believed to be acting as a nominee. 92. None of Koreas peers have reported having requested information in relation to nominee ownership over the last three years.
Conclusion
93. In sum, Koreas legal framework provides the following requirements to make ownership information in relation to companies available: joint stock companies are required neither to provide detailed ownership information upon registration nor to mention it in their articles of incorporations. However, they are required to keep a share register where particulars relating to holders of registered shares must be reported and further updated. These companies can also issue bearer shares (see below further developments); limited liability companies, general partnership companies, and limited partnership companies are required to mention the identity of any companys members in their articles of incorporation. Further, this information must be provided to the local District Court upon registration and must be updated continuously. This information is kept by registration authorities indefinitely. The obligation to receive the approval of all the companys members for any transfer of companys interest ensures that ownership information is available within these three types of companies. Finally, limited liability companies are also required to keep a register of members where all members particulars must be reported and keep updated in a timely fashion; foreign companies have the same requirements that apply to similar Korean companies i.e. to register and for limited liability companies, general partnership companies and limited partnership companies to make ownership information available upon registration. Foreign companies that have their registered office abroad but their seat of effective management in Korea are considered as Korean companies under Korea law and must keep a share register;
all companies in Korea are subject to tax requirements, in particular to register for tax purposes and to provide upon registration a list of stockholders. Joint-stock companies and limited liability companies incorporated in Korea (or having their place of effective management in Korea whatever their country of incorporation) must keep a share register of all shareholders for tax purposes and file with the revenue authorities, and together with the annual tax return, an annual tax report on shareholders detailing the identity of the majority shareholder in the case of a listed company and, for non listed companies, any person holding more than 1% or KRW 5 million (EUR 3 205) of the companys capital. Information reported in this register must be on beneficial owners. Information on beneficial owners of companies is available when companies are required under the law to keep a share register for tax purposes. 94. None of Koreas partners has reported having encountered any difficulty to receive requested ownership information.
Bearer shares (ToR A.1.2)

95. Under article 357 of the Commercial Act (CA), joint stock companies are allowed to issue bearer shares when it is so provided by the articles of incorporation. Koreas exchange market authorities have advised that listing of bearer shares is not allowed 15 and therefore that only non-listed companies would issue bearer shares in Korea. In addition, the Korean authorities have reported that according to several studies 16, and for the purpose of management stability, Korean companies do not issue bearer shares because managers and directors would not want to lose control of the companys management. It has not been possible to measure that impact on bearer shares issuance. 96. Koreas legal framework nevertheless includes mechanisms ensuring ownership information in relation to bearer shares to be known.
15. 16.
In practice, listed companies are subject to specific requirements under the Securities Market Listing Regulation, in particular to do a qualitative review of their stocks, requirements they cannot meet if they have issued bearer shares. See New Study on Company Law (Kiwon Choi, Professor at Seoul National University); Lecture on Commercial Act(I) (Chanhyung Jung, Professor at Korea University); Lecture on Company Law (Cheolsong Lee, Professor at Hanyang University) (unofficial translation of titles and authors names).
Deposit of bearer shares instruments

97. Article 358 of the CA provides that owners of bearer shares must deposit their share instruments with the company to exercise their rights in this company, that is participation in the companys management and rights to dividends. In practice, unless holders of bearer shares would not receive any dividends in relation to their participations, the identity of these shareholders will be known to the company.
Share registers
98. As previously mentioned, the CA provides for a share register to be maintained by joint-stock companies (art. 352 CA). All holders of registered shares must be reported as well as holders of bearer shares who want to exercise their rights in the company (art. 358 CA). Furthermore, for tax purposes, joint stock companies are also required to specifically prepare and keep stockholder registries (art. 118 CTA) detailing the names, addresses and resident registration numbers of all stockholders. When changes in shareholding occur during a specific business year, unlisted companies must provide a detailed statement on changing of stocks reflecting the situation at the end of the business year. This must be done with regards to all shareholders owning more than 1% of the joint-stock companys capital or shares whose value represents more than KRW 5 million (EUR 3 205).This must be submitted together with the annual tax return to the local District Tax Office. 99. Dividends are subject to a 14% withholding tax in Korea and companies distributing dividends are required consequently to report to the revenue authorities the name of any person that has received such income. This obligation covers holders of registered shares as well as holders of bearer shares. 100. In both cases, and pursuant to article 14 of the Framework Act on National Taxes, information detailed in these reports must be information on the beneficial owners of shares.
Conclusion
101. While bearer shares are allowed in Korea, there are multiple mechanisms ensuring that ownership information relating to holders of such shares is known by the company itself but also from Koreas revenue authorities. There is however no mechanism ensuring that this information will be available in all circumstances e.g. on an ongoing basis or when the holder of bearer shares would not be interested in claiming a dividend or participating in the management of the company.
Partnerships (ToR A.1.3)

102. Koreas legislation provide for two types of partnerships: Johap (simple partnership), art 703 et seq. of the Civil Act. A Johap is an association of two or more persons that have agreed to carry on a joint business by making mutual contributions in the form of cash or kind. Once made, the contribution belongs to all the partners jointly. A Johap does not have any legal personality and cannot hold property in its own name. Each partner has an unlimited liability for the obligations of the partnership and all partners jointly run the business. Ikmyong Johap (silent partnerships), art 78 et seq. of the Commercial Act. Pursuant to article 78 of the CA, an Ikmyong Johap is formed when the parties thereto agree that one of them shall make a contribution towards the business of the other and they shall divide any profits accruing from such business. An Ikmyong Johap does not have any legal personality. They have no income or credits for tax purposes, do not carry on business and cannot be compared to a limited partnership. Therefore, these arrangements are not under the scope of the Global Forums Terms of Reference. Ikmyong Johap are, however, obliged to submit to the tax authorities distribution records which include the names and addresses of the silent partners (precisely, the tax requirements for Ikmyong Johap are similar to those existing for Johap and below described).
Registration for commercial purposes

103. Simple partnerships are not required to be registered for commercial purposes. Neither the Civil Act nor the Commercial Act requires specific information to be mentioned in the articles of association of these partnerships.
Tax requirements
104. Partnerships 17 in Korea do not file tax returns or pay taxes as they do not have distinct legal personalities and are treated as pass-through arrangements for Korean tax purposes. However, although not directly taxed on the income received, partnerships have reporting obligations for tax purposes. 152 000 partnerships are registered in Korea for tax purposes.
17.
Partnership in this section means simple partnership.
Registration with revenue authorities

105. As regards taxation of income received, partnerships are automatically placed under the Joint Business Taxation Regime, provided for by articles 43, 87 and 168 of the Income Tax Act (ITA). Since 2009, partnerships (as well as general partnership companies and limited partnership companies) can also opt for the Partnership Taxation Regime (PTR) provided for by articles 100-16 to 100-26 of the Special Tax Treatment Control Act (STTCA). The PTR was introduced in 2009 to treat as a flow through entity for tax purposes an entity in which ties among members are strong (i.e. an entity established for conducting joint business by at least two members who contribute money or other forms of assets or labor. Those members bear unlimited liability while being responsible for the management of the entity), regardless of the existence of legal personality. Under both regimes, partners in partnerships are taxed on the basis of the profits or losses allocated to them under the partnership agreement (unless otherwise decided by the partners and duly reported to revenue authorities). 106. Partnerships placed under the Joint Business Regime provided by the ITA must, when starting their activities, file a business registration form with revenue authorities (art. 168 ITA) containing information on the partnership itself (e.g. name, location), partners identity (art. 87-4 ITA) and the profit allocation ratio for each partner (art. 43 (2) and 87 (4) ITA). Any change in the information subject to registration must be reported to revenue authorities within 15 days from the end of the business year to which they relate (art. 87 (5) ITA and 150 (4) of its Enforcement Decree). 107. A partnership opting for the PTR must, to benefit from this regime, file an application with the locally competent District Tax Office containing information on the partnership itself (name, location, representatives name, type of industry, date of establishment) and each of the partners (name, date of birth, address, phone number) (see art. 100-17 STTCA and 100-16 of its Enforcement Decree). This has to be done within one month from the start of the tax year where such partnership asked for the benefit of this tax regime (art. 100-16 Enforcement decree to STTCA). The ratio of profits/losses allocation between partners must also be reported to revenue authorities on an annual basis (art. 100-18 and 100-23 STTCA and 100-17 of its Enforcement Decree). 108. As previously mentioned, upon registration, the NTS check the information provided by the partnership, in particular against information already available to revenue authorities. This can be done easily as the resident registration number (which is also used as tax identification number by the NTS) must be provided for any individuals whose identity must be disclosed for registration. 109. Once registered, partnerships receive a tax identification number.
Annual tax returns

110. Partnerships placed under the Joint Business Regime are not required as such to file an annual return with revenue authorities. However, the partnerships manager must, along with its own personal tax return report to revenue authorities the allocation of profits to partners (art 43 ITA and 150 (6) of the Enforcement Decree). 111. Partnerships subject to the PTR must file an annual return containing information on the partnership and the type/amount of profit allocated to all partners, new partners included (see form STTCA 107-1) and whether gains or losses incurred during the period considered ((art. 100-23 para 2 of the STTCA). This return must be filed with revenue authorities the 15th day of the third month following the end of the business year. (art. 100-23 of the Act and 100-24 of its Enforcement Decree). 112. Considering the relevance for tax purposes of information on partners, revenue authorities keep this information as long as the statute of limitation period has not expired, that is for 5 years (see art. 26-2 of the Framework Act on National Taxes providing for the status of limitation for any taxes).
Information held by the partnership or partners

113. There is no explicit requirement in Koreas Civil Act or Commercial Act for partnerships to maintain information on the identity of their partners. However, knowledge of the identity of the partners is required given the joint and several liability that rests on the partners of a partnership (see in particular art. 704, 705 and 712 Civil Act regarding rights and liabilities of partners). Furthermore, a partnership must know who its partners are in order to make partnership distributions (art. 711 Civil Act) and to fulfil its statutory tax disclosure obligations (i.e. when a distribution is made) under the Income Tax Act or the Special Tax Treatment Control Act.
Information held by service providers

114. Rules above described under section A.1 apply similarly to partnerships.
Conclusion
115. Although partnerships are not subject to any registration requirements for commercial or civil purposes under Koreas legal and regulatory framework, there are detailed reporting obligations for tax purposes ensuring that partnerships ownership information is available in Korea: when starting a business, partnerships must file an application form with revenue authorities disclosing some information on the

partnership itself but also the identity of all partners and the profits/ losses allocation ratio; any change in the initial report, and in particular in the allocation ratio must be provided to revenue authorities at the end of each business year; identity of the partners is known at any moment by the partnership itself, and in particular by its manager, as the liabilities for the partnerships debts rely on each partners interest in the partnership. 116. None of Koreas peers raised issues in relation to the provision of ownership information on partnerships.
Trusts (ToR A.1.4)

117. It is possible, under Koreas Law to set up trusts under the Trust Act (hereinafter TA). The TA equally applies to personal trusts and business trusts. Business trusts activities are in addition specifically regulated under the Financial Investment Services and Capital Markets Act (hereinafter FSCMA). 118. Although Korea is not a signatory of the Hague Convention on the law applicable to trusts and their recognition, nothing prevents foreign trusts either to operate in Korea, to be managed from Korea or to have beneficiaries resident in Korea. In such cases, the TA is also applicable as its scope is not limited to trusts specifically entrusted under Korean law but to any trust. This view has been confirmed by the Korean authorities. 119. Art. 1 (2) TA broadly provides that under the law, a trust is a legal relation where a person who creates the trust (the settlor) transfers a specified property to a person (the trustee) who accepts the trust in order to manage such property in the interest of a specified person (beneficiaries). Given the provision of art. 2 TA, a trust can be set up either by agreement between the settlor and the trustee or by settlors will. It is prohibited under Korean law for a settlor to be at the same time a trustee. As there is no single registration authority for trusts in Korea, it is not possible to precisely know the number of personal trusts. 120. Business trusts under the FSCMA are trusts the purpose of which is to manage assets of investors. These trusts are managed by business trust entities, which must be banks or other financial institutions. Such institutions, whether resident of Korea or not, must, to operate, receive a license from the Financial Service Commission, Koreas bank and finance supervisory authority.
121. At the end of June 2011, there were 57 entities engaged in trust business: 20 banks, 21 securities firms, 5 insurance companies and 11 real estate trust companies.
Registration requirements/information held by government authorities Personal trusts

122. There is no registration authority in Korea responsible for the registration of personal trusts. However, when the general principles of Koreas law provide for the registration of certain assets and such assets are transferred to a trust, the trust arrangement must be filed with registration authorities by the settlor or, in the case of a trust created by will, the executor of this will. This obligation directly comes from: Art. 3 (1) of the TA providing for registration of any right to property to make rights to the assets transferred to a trust enforceable against a third person; and Art. 3 (2) providing that with respect to securities, the trust may be enforceable against a third party by entering on the securities the fact that the securities are subject to trust and, with respect to stocks and bonds, by registering the same information in the shareholders register or corporate bond register. 123. From these rules, it follows that trust deeds pertaining for instance to real estate, intellectual property or securities and bonds must be registered in Korea. In cases where registration is required, registration is done with government authorities competent for such properties or rights e.g. District Court for real estate, Korean Intellectual Property Office for intellectual property or Korean Securities Depository for bonds. For instance, the Real Estate Registration Act mentions in its art. 81 that when applying for a trust registration, an applicant must provide the name and address of settlor, trustee and beneficiaries and that any change in information provided to registration authorities must be immediately updated in the real estate register. As a result of Koreas laws, trust deeds do not have to be registered with a registration authority when the asset concerned is not legally required to be registered (actually only transfers of cash are in that situation) though all particulars relating to trusts are nevertheless reported to the NTS (see para 134 below). (see para 134 below). 124. In addition, considering the civil rights pertaining to property in Korea and the fact that the TA makes enforceable against third party any property transferred to a trust, it is necessary to update any information in relation to beneficiaries immediately (see for instance art. 86 of the Real Estate

Registration Act). Koreas real estate registration authorities met during the on-site visit have advised that in practice, this information is always kept up-to-date. 125. The authorities competent for real estate registration have advised that information available in the register is the following: real estate concerned, transfer of ownership, trustees identity information, serial number of the trust contract. The trust contract must be submitted under an electronic format and the contract is kept available with the register entry. This information will be kept indefinitely by registration authorities. 126. Korean real estate registration authorities have also mentioned that all information registered in the real estate register is automatically provided to the NTS making this information, and in particular information in relation to trustees, available to revenue authorities.
Business trusts
127. A bank or another financial institution wishing to start activities as a business trust entity must file an application to obtain a license from the Financial Service Commission (FSC) (art. 13 FSCMA). Information contains in the application includes, amongst others (art. 17 of FSCMA Enforcement Decree): (i) trade name; (ii) domiciles of head office and branches; (iii) matters concerning the assets; (iv) matters concerning the major shareholders. It must be accompanied by, inter alia: (i) articles of incorporation; (ii) minutes of the inaugural general meeting; (iii) financial statements for the preceding three years; (iv) a business plan on estimated revenue and expenditure for three business years after the commencement of business; (v) a document stating the names of unit holders holding more than 1% of outstanding units as at the application date. 128. This application is examined by the FSC within three months of receiving it. If information is missing, the applicant must file a corrective report. Once the authorisation is granted, it is gazetted in Koreas official gazette. 129. For supervision, and to ensure that a business trust entity manages the business trusts assets in a proper manner, a quarterly report must be submitted to the supervisory authorities (art. 33 FSCMA and 36 of its Enforcement Decree). This report must contain information on the type of investments, operations, transactions, etc.
Information maintained by trustees or other persons Personal trusts

130. In Korea, trustees of personal trusts have statutorily prescribed duty towards beneficiaries of trusts under the TA. In particular, the trustee must manage the trust property in accordance with the principal objective of the trust (art. 28 TA). A trustee cannot enjoy any benefit of the trust (art. 29) and must manage separately the assets from the trust from its own asset (art. 29). The trustee must keep books and clarify the management of the trust affairs (art. 33) and leave these books opened for inspection by any interested person (art. 34(1)). The settlor and beneficiaries can also inspect all records and documents pertaining to the management of the trusts and ask for explanations on the handling of the trust affairs (art. 34(2)). In the case the trustee destroys, loses or reduces the trust property or manages the trust property in contravention with the principal objective of the trust, any beneficiary can ask for compensation for damages (art. 38). 131. From the above, it follows that any trustee managing a personal trust under the conditions statutorily prescribed by law should be aware of the identity of any settlors and beneficiaries of trust (i.e.: settlors and beneficiaries are allowed under art. 34(2) of the Trust Act to ask for explanations on the handling of the trust affairs meaning that the trustee must be aware of the identity of the settlor and beneficiaries to fulfil this duty).
Business trusts
132. When administering a business trust, a business trust entity must provide information upon application for a license and registration (see above details on information to provide). Further, the FSCMA provides that the Financial Supervisory Service can request the provision of the trust agreement from the trustee to ensure that all necessary particulars (identity of the settlor included) are contained in such document (art. 419 para 1 and 5). Records in relation to the business trust maintained by the business trust entity can also be audited by the FSS acting as supervisory authority. For tax purposes, the trustee is required to report to the NTS any payment made to business trusts beneficiaries. To respect this obligation, the trustee must therefore have knowledge of any beneficiarys identity (see further development below). 133. Considering the multiple requirements to which trustees of business trust are subject, information on the settlor and beneficiaries of such trusts is maintained by trust business entities and can be further accessed by revenue authorities (see section B.1 of the report).
Tax requirements
134. There is no obligation for trust and trustee to be registered for tax purposes. However, when a settlor has designated another person as a beneficiary of property placed in trust, this transfer is considered as a gift under the Inheritance Tax and Gift Tax Act (art. 33 of the Act) and must be reported to the revenue authorities. More broadly, and to ensure the correct application of the Gift and Inheritance Taxes, articles 82 (4) of the Inheritance and Gift Tax Act in conjunction with article 84 (4) of its Enforcement Decree provides that persons handling trust matters must submit the particulars of the trust concerned to the revenue authorities by the end of the month following the quarter during which the trust agreement is concluded. This obligation covers all trust arrangements managed by a trustee resident in Korea, even when no beneficiaries, settlors or assets are located in Korea. 135. Information to be provided on these occasions covers identities of settlors and beneficiaries of trusts. When property is entrusted, the value of the assets must be disclosed to ensure the correct calculation of the gift tax. Any change in beneficiaries of trusts must be reported in the same timeframe to revenue authorities (art. 84 (4) of the Enforcement Decree to Act). 136. It is conceivable that a trust could be created which has no connections with Korea other than the settlor chooses the trust to be governed by Koreas laws. In that event, the provisions of the Inheritance and Gift Tax Act also requires all particulars pertaining to the trust to be provided to the NTS.
Personal trusts
137. Income accruing from trust property is directly attributed to the beneficiaries. Classification and further taxation of the income is based on the type of property rights that have been transferred to the trust. The tax is withheld at the time the income is attributed to the property (art. 5 (1) of the Corporation Tax Act; art. 2-2(6) of the Income Tax Act). The trustee is responsible for withholding and paying the tax to the District Tax Office concerned. When paying the withholding tax, the trustee must file a statement of payment with revenue authorities detailing the names of the beneficiaries.
Business trusts
138. Only authorised banks or financial institutions can act as trustees of business trust and these professionals fall under the general tax registration requirements applicable to any companies (see. Art. 109 CTA). Consequently, all business trust entities are registered for tax purposes in Korea. 139. Income from business trust is treated in the same manner as income from personal trust as described above except for income from business trust
taking the form of investment trust 18 which is treated as dividends under Korean tax law and is subject to a 14% withholding tax (art.73 CTA and 17 ITA). Given this, a business trust entity acting as trustee is responsible for withholding taxes corresponding to the income paid to beneficiary and to further file with revenue authorities, by the end of February, an annual statement of payment containing identity information of both the trustee and beneficiaries (art.127 and 164 of the Income tax Act art 73 and 120 of the Corporate Tax Act). In such case, article 14 of the Framework Act on National Taxes is also applicable, meaning that this report must contain the identity of the ultimate beneficiaries of the trust.
Identity information maintained by service providers

140. In Korea, anti-money laundering requirements are set out in three different pieces of legislation: (i) Act on reporting and Use of Certain financial Transaction Information (FTRA); (ii) AML/CFT regulation; and (iii) Act on Real Name of Financial Transactions and Guarantee of Secrecy. 141. Pursuant to art. 5-2 (1) FTRA in conjunction with art. 20 to 27 of the AML/CFT Regulation, financial institutions must identify and verify the identity of their customers in the case of financial transactions which include, in particular, transactions pertaining to trusts. In relation to trusts, customer is defined as covering all beneficiaries. 142. In Korea, only banks and financial institutions can act as business trust entities, that is trustees of business trusts. These professionals are specifically under the scope of the different laws providing for customer due diligence obligations in Korea. Given this, business trust entities must have knowledge of their clients, and in particular of any beneficiary of a business trust. This obligation relates to both identification and verification of beneficiaries identity based on reliable identification documents. 143. Further details on the CDD obligations, implementation and supervision in practice of the AML/CFT requirements by Koreas supervisory authorities can be found below under section A.3 of the report.
Conclusion
144. Business trust entities acting as trustees of business trusts are required to report to revenue authorities any payments made to beneficiaries of such trusts and to perform customer due diligence under Koreas AML/ CFT framework making ownership information in relation to these trusts available in Korea.
18. Under the FSCMA, investment trust is defined as an arrangement where the settlor is an authorized asset management company.

145. Koreas legal and regulatory framework ensures the availability of ownership information pertaining to settlors and beneficiaries of personal trusts in all situations. Trust deeds must already in many situations be filed with government authorities. Reporting obligations with revenue authorities, in particular under the Gift and Inheritance Tax Act, makes trust ownership information available and kept updated in a timely fashion. In addition, the statement of income payments made to the beneficiaries submitted by the trustee ensures periodical reporting of the identity of trusts beneficiaries to revenue authorities whether these beneficiaries are resident of Korea or not. 146. None of Koreas partners have reported having requested information in relation to trusts, either personal or business trusts, to the Korean authorities.
Foundations (ToR A.1.5)

147. Koreas legal framework provides for two types of foundations either considered as non-profit corporations regulated by the provisions of articles 32 et seq. of the Civil Act (CA) or public benefit corporations placed under the provisions of the Act on the Establishment and Operation of Public Service Corporations (AEOPSC). Non-profit corporations includes private schools, universities, hospitals, research institutions or religious organisations and public benefit corporations foundations, the provision of student grants, research grants, or other academic/charitable business in order to contribute to the general interest. 148. Foundations in Korea are typically non-profit organisations. They can nevertheless carry on limited business activity for achievement of their purposes. Benefits flowing from this secondary activity can only be used for non-profit purposes and cannot be distributed as such to private persons. Although not being relevant entities under the Terms of Reference, Koreas legal and regulatory framework ensures ownership information relating to foundations is kept.
Information held by government authorities

149. In any case, before coming into existence, foundations must be recognised and approved by Korean governmental authorities (art. 32 CA). To this extent, foundations, when requesting such recognition must provide their article of associations containing the following particulars (art. 3 AEOPSC, 40 and 43 CA): objectives; name; location of office;
type and value of assets at the time of incorporation; minutes of the first members meeting; matters concerning the method of administration of accounts. 150. The Regulation on Establishment and Supervision by the Board of Audit and Inspection also provides that when a foundation requests a permission to operate, it must, together with its articles of association, submit an application form containing the name, resident registration number, address and personal background of the founder and the same particulars relating to its directors (art. 3). This Regulation also requires the disclosure of any change in relation to directors and an administrative approval of these changes (art. 8). 151. Foundations are further supervised by public authorities (art. 37 CA and 14 of AEOPSC). It is clarified that foundations can alter their articles of association only when their objectives cannot be achieved. In that case, a further authorisation of Korean authorities must be received (art. 43 CA).
Registration of foundations
152. When the foundation is authorised, it must register within three weeks of the date of this authorisation (art. 49 (1) CA). This must be made with the District Court competent for the seat of the foundation. The following information is maintained by registration authorities (art. 49 (2) CA): objective; name; office; date of authorisation; total value of assets; full names and domiciles of directors. 153. Any alteration to this information is reported to registration authorities within three weeks of changes. Any entry in the register is, as for companies, kept indefinitely (art. 5 CRA) while documents submitted upon registration or updates are kept for five years (art. 26 of the Commercial Registration Regulation). 154. For registration purposes, identity of directors is checked by Korean authorities on the basis of identification documents issued by Koreas governmental authorities such as an identity card or driving license.

155. As purely non-profit organisations, foundations do not have beneficiaries named in their articles but the class of beneficiaries is known from the purpose of the foundation.
Tax law
156. When a founder decides to set up a foundation, the Civil Act specifically provides that, for tax purposes, if the incorporated foundation is formed by a disposition inter vivos, tax provisions relating to gifts will apply while if formed by will, provisions relating to testamentary gifts will apply (art. 47 CA). Similarly, provisions on gift or inheritance taxes will apply to such transfers of assets. To this extent, details of the assets transferred must be provided to tax authorities to ensure that all gifts made to a foundation will be free of taxes. 157. As previously mentioned, foundations may maintain limited business activity to achieve their missions. In case such secondary business activities are developed, foundations have to register with revenue authorities and submit within two months of commencement of profit-making business, a report to the District Tax Office having competence over the seat of the foundation (art 110 Corporation Tax Act in conjunction with art. 3 (3)). 158. The report must contain, inter alia, the name of the foundation, its location, name of the representative, and the person responsible for management, the type of profit-making business concerned, and the place of business. When having this limited profit making business, a foundation will constitute a taxable trader under the VAT Act and will be required to register with the revenue authority by submitting details on basic information on the trader, reason for registration, documents showing financial conditions, and in the case of business required to be statutorily approved, certificate for such approval (any trader registered as VAT taxable trader is considered as fulfilling registration obligation under the CTA). Once registered, the foundation is also subject to an obligation to further update the initially registered information. 159. Foundations do not have any general obligation to file annual tax returns but have specific reporting requirement deriving from the Inheritance Tax and Gift Tax Act (see below section A.2). When foundations maintain a secondary making-profit sector, data in relation to this sector must also be reported to revenue authorities. As Korean foundations do not have any individual beneficiaries, there is no obligation to report information in relation to beneficiaries to the NTS.
Conclusion
160. As foundations can only be set up either for charitable purposes or for public benefit purposes and are, consequently, carefully monitored and scrutinised by Korean authorities, Koreas legal and regulatory framework ensures ownership information in relation to foundations is available. Identity of founders and donors as well as information on directors is available to government authorities, supervisory authorities, District Courts or revenue services. As non-profit making entities, foundations have classes of beneficiaries, which are known from the purposes undertaken by the foundation. 161. Korea does not have any experience regarding exchange of information in relation to foundations. Reporting from Koreas peers shows that no information on foundations was asked in the past to Korea.
Enforcement provisions to ensure availability of information (ToR A.1.6) Sanctions tied to registration requirements
162. Pursuant to the Commercial Act (CA), directors and managers of companies who fail to accomplish any registration requirements, including obligations to update information required to be so, may be subject to a fine up to KRW 5 million (EUR 3 205) (art. 635 (2) 1 CA). Failure to mention in the articles of incorporation any particulars required by law is sanctioned by the same penalty (art 635 (2) 9 CA). 163. Registration authorities do not have powers to apply directly this fine. It must be done by the District Court of Justice having jurisdiction over the address of the companys director or manager. Where it appears that such person has not complied with the requirements to update information maintained by the register, the case is referred by the Registry Office to the District Court of Justice which will impose the fine to this person (art. 250 of the Non-Contentious Case Litigation Procedure Act). The manager or director has the right to appeal this notification within one week from the date of receiving the notification. 164. When personal trusts are not registered, in contravention with art.3 of the Trust Act, the criminal sanction provided for by Article 228 of the Criminal Code may apply. This could lead to a fine up to KRW 10 million (EUR 6 410) or an imprisonment up to 5 years. As for business trust entities, a person who has engaged in a financial investment business without receiving a prior authorisation (including authorisation for changes) in violation with Article 11 FSCMA or a person who has obtained authorisation under Article 12 FSCMA by falsity or in a fraudulent way may be sentenced to imprisonment for not more than five years or to a fine not exceeding KRW 200 million (EUR 128 205).

165. Directors or auditors of foundations may be liable to a criminal fine up to KRW 5 million (EUR 3 205) where, amongst others, they have neglected to effect any of the registration requirements or have obstructed inspection and supervision prescribed by the Civil Act (art. 97 CA). For foundations placed under the scope of the Act on the Establishment and Operation of Public Service Corporations, additional sanctions are provided: imprisonment sanctions up to three years or a fine not exceeding KRW 10 million (EUR 6 410) for directors and the foundation itself.
Sanctions tied to information to be kept by other persons

166. In the case a shareholder may not report its shareholdings to the supervisory authorities and the stock exchange market, in contravention of article 147 of the Financial Investment Services and Capital Markets Act (FSCMA), the person concerned could not exercise its rights in respect of the unreported portion of shares above the 5 % threshold. The sanction is up to a 3 years imprisonment and KRW 100 million (EUR 64 102) in case of failure to report. When incorrect information in relation to this report is provided to the relevant authorities, this shareholder may be subject to an imprisonment up to 5 years and a fine up to KRW 200 million (EUR 128 205). Failure to provide the business report provided by art. 159 FSCMA is sanctioned by fine up to KRW 2 billion (EUR 1 282 051). 167. Failure to enter any change of holders in the share register maintained by joint stock companies and limited liability companies without justifiable reason (art. 635 (2) 7 CA) or failure to detail in the share or member register any particulars required to be reported is also sanctioned with a fine up to KRW 5 million (EUR 3 205). This sanction applies at the level of the company which has not reported in the share register the amendments in relation to the transfer of shares. When it appears that these amendments were not reported, the shareholder concerned will reiterate its request to the company and if still not done, will ask the Ministry of Justice for application of the sanction. Koreas authorities have advised that this sanction was applied in 34 cases in 2010. The fine usually applied is between KRW 3 and 4 million (EUR 1 923 to 2 564), depending of the size of the company concerned.
Sanctions tied to tax requirements

168. There are no specific sanctions when a company (either being a company or partnership companies) fails to register for tax purposes. An entity not registered for tax purposes could not have any activity as it would not be
in position to properly invoice 19. Koreas authorities have indicated that in practice, all relevant entities comply with this obligation to register. 169. In the most serious offences, when it appears that an entity registered for tax purposes does not file its tax returns as provided under Koreas laws, the NTS after checking whether this entity has a substance can deregister it. This means that this entity will no longer be in position to operate. 170. When a taxpayer fails to file its tax return with revenue authorities, the Framework Act on National Taxes provides for a range of sanctions including: a 20 % surcharge when the return is not submitted, or an amount equivalent to the revenue avoided multiplied by 7/10 000 (the most important fine will be charged). A 10 % sanction is also applicable when the return has been submitted but the amount of taxes understated. 171. Partnerships placed under the Joint Business Taxation Regime must be registered under sanction equivalent to 0.5% of the total income earned during the period of non-registration or 0.1% in the case of missing or false information (art 81 (7) Income Tax Act). A 20% sanction apply when not filing the annual tax return (art. 47-2 of the Framework Act on National Taxes) 172. In the case a partnership has opted for the PTR provided for by the Special Tax Treatment Control Act and would not submit its annual tax report to the NTS, sanctions that apply represent 4% (non-reporting) or 2% (under reporting) of the amount unreported or under reported, as the case may be (art. 100-25 of the Act). There is no sanction in the case the partnership is not registered: opting for the PTR regime means provision of a detailed report to the tax authorities otherwise the partnership will automatically be taxed under the rules of the ITA. 173. In case a company would not submit to the NTS its return with the list of shareholders provided by art 119 of the Corporation Tax Act or would omit some information in this list, art. 76 of the same Act provides for an administrative fine equal to 2% of the value in relation to shares. 174. If any particulars in relation to property transferred to trusts are not reported to tax authorities, sanctions amounting to 2/10 000 of the total assets unfiled will be collected by the tax authorities (art. 78 (12) of the Inheritance Tax and Gift Tax Act). When the trustee omits to reverse the withholding tax due to revenue authorities, an amount equivalent to the greater of 5% of the uncollected tax or 3/10000 multiplied by the number of days from the next day of tax due date to payment date multiplied by the uncollected tax will be charged in addition to the tax due (Art. 76 (2) CTA).
19. To be in position to properly issue invoices and in capacity to do business with clients, invoices must contain specific information such as the tax identification number, requiring a prior registration with the NTS before starting an activity.

175. The NTS prosecute taxpayers for the most serious violations of tax laws. Prosecution is made pursuant to the Punishment of Tax Evaders Act in case of tax evasion, destruction of books and records, lack of sincere returns, breach of obligations imposed by the tax laws such as obligation to issue tax invoices. Over the last three years, 1 500 audits on fraudulent tax invoice traders and between 350 and 460 criminal tax investigations were conducted per year. 176. The NTS has also provided statistics regarding its audit activity. In 2010, 3 600 audits of individuals, 4 430 audits of corporate taxpayers and 4 700 VAT audits were performed. Tax collected following these audits amounted to USD 0.5 billion (EUR 357 million) for individuals and USD 3.5 billion (EUR 2.5 billion) for corporate taxpayers.
AML/CFT legislation
177. In the case of failure to comply with CDD provided for by article 5-2 of the FTRA or the AML/CFT Regulation, there are no sanctions that could be directly applied. However, in its supervision duty, and when failure to comply with CDD is detected, the Commissioner of the KoFIU may require any financial institutions to take necessary measures to remedy the deficiencies (art. 17 FTRA). Any financial institutions that would not comply with these orders will be sanctioned by fine up to KRW 10 million (EUR 6 410). This fine will be applied for each CDD violation detected. Koreas authorities have advised that in the process of improving the AML/CFT framework following the FATF 2009 report, the current legislation will be amended to allow for the application of direct fines. See section A.3 below for further information.
Conclusion
178. There is a variety of sanctions under Koreas laws to ensure that information required to be maintained is, in fact, maintained. The penalties appear to be proportionate and dissuasive enough to ensure compliance. Most of Koreas laws provide a range of penalties, including monetary fines depending on the level of infraction and imprisonment in egregious cases. In addition, the tax authority is able to respond to requests for ownership and identity information for all types of legal entities and arrangements. Information received from partner jurisdictions with an exchange of information relationship with Korea confirms this.
Determination and factors underlying recommendations

Phase 1 determination The element is in place but certain aspects of the legal implementation of the element needs improvements. Factors underlying recommendations Identity of holders of bearer shares is not available in all situations in Korea. Recommendations Korea should make sure that information pertaining to holders of bearer shares is available to its authorities in all circumstances.
Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.
A.2. Accounting records

Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.
179. The Terms of Reference sets out the standards for the maintenance of reliable accounting records and the necessary accounting record retention period. It provides that reliable accounting records should be kept for all relevant entities and arrangements. To be reliable, accounting records should: (i) correctly explain all transactions; (ii) enable the financial position of the entity or arrangement to be determined with reasonable accuracy at any time; and (iii) allow financial statements to be prepared. Accounting records should further include underlying documentation, such as invoices, contracts, etc. Accounting records need to be kept for a minimum of five years.
General requirements (ToR A.2.1) Companies

180. The obligation for companies to keep accounting records is mainly set forth in the Commercial Act (CA). Pursuant to articles 29 to 33 of this law in order to make clear the situation of property, profits and losses in the business, any merchant (this includes in particular and according to article 4 CA, any company) must prepare an account book and a balance sheet. In the account book, all transactions and other particulars must be entered. At the

time of the commencement of the business and at least once a year, a merchant must prepare a balance sheet based on the account books. 181. Joint stock and limited liability companies must in addition prepare for the settlement of accounts, an income statement and statements of appropriation of retained earnings or statements of disposition of deficit (respectively art. 447 and 579 CA). Directors must also prepare a business report to be approved by the board of directors (respectively art. 447-2 and 579 CA). Directors shall submit to auditors these documents six weeks before the day of the ordinary general meeting in a case of joint stock companies or four weeks prior to that date for limited liability companies (see CA articles 447-3 and 579). 182. In case of failure to prepare accounting records, to make accurate statements or to maintain accounting records required to be kept, directors, managers and auditors of companies may be subject to a fine up to KRW 5 million (EUR 3 205) (art 32 and 635 (2) 9 and 21 CA). 183. For tax purposes, the Framework Act on National Taxes states in its Article 85-3 that any person shall prepare and keep faithfully books and documentary evidence related to all transactions under the conditions prescribed by each tax-related Act. Under the Corporation Tax Act (CTA), all type of companies must retain accurate accounting records. Article 112 CTA expressly states that corporations with a tax liability must keep double entries books and preserve the documentary evidence relating to such accounts. 184. Any corporation is also required to file an annual tax return within three month after the closing date of business year (art. 60 CTA) and must join to its report a balance sheet and a profits and losses account. This obligation applies whether the company has profits, losses or no income. 185. Pursuant to the Punishment of Tax Evaders Act (art. 8), any person who incinerates, destroys or conceals books or documentary evidence prescribed by any tax laws (documents to be kept under art. 85-3 of the Framework Act on National Taxes included) may be punished by imprisonment up to two years or by fine not exceeding KRW 20 million (EUR 12 820). 186. As previously mentioned, 4 430 audits of corporate taxpayers and 4 700 VAT audits were performed in 2010. Tax collected following these audits amounted to USD 0.5 billion (EUR 357 million) for individuals and USD 3.5 billion (EUR 2.5 billion) for corporate taxpayers.
Partnerships
187. Neither the Civil Act nor the Commercial Act provides for record keeping obligations for partnerships in Korea. Under both Special Tax Treatment Control Act (STTCA) and Income Tax Act (ITA), there are however detailed obligations for partnerships to keep such information: under the Framework Act on National Taxes, any person, partnerships including, must keep all books and records as detailed by each tax-related Act; under art. 100-23 STTCA, any partnership, whether it has taxable income or not, must report on an annual basis to the revenue authorities details of calculation and allocation of its income. Pursuant to Article 100-24 of the Enforcement Decree to this Act, this report must contain a balance sheet prepared by applying business accounting standards, a profits and losses statement and other relevant documents. To fulfil this obligation, partnerships must keep accurate accounting records. In addition, under art. 100-26 STTCA in conjunction with article 100-27 its Enforcement Decree, any provisions applicable to companies, in particular article 112 CTA, similarly apply to partnerships under the PTR, unless otherwise provided by law. This requires partnerships under the PTR to keep reliable records. under art. 87(3) ITA, partnerships placed under the Joint Business Taxation Regime are required to keep books where all transactions relating to the business must be entered (art. 160 (1) ITA). The Enforcement Decree to this Act (art. 208) provides that the books under art. 160 (1) ITA must be kept under double entries form and show the full assets of the business as well as its profits and losses. 188. Pursuant to the Punishment of Tax Evaders Act (art. 8), any person who incinerates, destroys or conceals books or documentary evidence prescribed by any tax laws (documents to be kept under art. 85-3 of the Framework Act on National Taxes included) may be punished by imprisonment up to two years or by fine not exceeding KRW 20 million (EUR 12 820).
Trusts
189. Art. 33 of the Trust Act provides that the trustee of a personal trust must keep books and clarify the management affairs and accounts pertaining to each trust it manages. In addition, the trustee must at least once a year prepare the inventory of each trust. 190. Art. 114 of the Financial Investment Service and Capital Market Act provides for accounting records pertaining to business trusts to be kept by business trust entities including, a list of the trust property, financial

statements and accompanying statements and a full statement of management of the trust property (art. 115 of the Enforcement Decree). In addition, an auditor must audit all trust business entities accounts within two months of the end of the fiscal year and the audit report is made available to beneficiaries and supervisory authorities (art. 118 of the Act). Art. 113 of the same Act also clarified that any beneficiary of such trust may inspect all account books and documents related to trust property or ask the business trust entity to issue a certified copy or abstract of such account books and documents. Business trust entities themselves must also keep reliable accounting records in accordance with the principles prescribed by both Commercial Act and Corporation Tax Act. 191. Failure to comply with those requirements may be sanctioned by a criminal fine of up to KRW 100 million (EUR 64 103) and imprisonment up to three years or administrative fine up to KRW 50 million (EUR 32 051). As regards sanctions provided by the Commercial Act and Corporation Tax, see developments on companies.
Foundations
192. Obligations for foundations to keep accounting records can be found in both Civil Act and Act on the Establishment and Operation of Public Service Corporations. Art. 55 of the Civil Act requires a foundation to prepare an inventory of assets at the time of the establishment, to furnish an annual report to supervisory authorities and to keep this inventory at its registered office. Under the Regulation on the Establishment and Supervision by the Board of Audit, it is further clarified that a foundation must submit to supervisory authorities a result of business performance, a settlement of accounts, explanation for any increase or decrease of assets and an inventory of assets within two months of the end of the business year (art. 19 of the Regulation). 193. Public benefit foundations have more detailed obligations, as they must in particular appoint two auditors. These foundations must file with supervisory authorities a result of business performance and a settlement of accounts after the close of every business year (art 12 (2) AEOPSC) with financial statements and attachments. Likewise, the Enforcement Decree to this Act details that public benefit foundations must keep books on revenues and expenditures and documentary evidences thereon as well as ledgers on properties and liabilities (art. 19). 194. A public benefit corporation (i.e.: a foundation) must prepare books on contributed property and operation of the intended public benefit projects by taxable or business year (art. 51 Inheritance Tax and Gift Tax Act). Foundations are also required to publish on the NTS website accounting
records (including amongst other a balance sheet, profit/loss statement) within four months from the close of the taxable or business year concerned (art. 50-3 of the Act). The value of property transferred to a public benefit corporation (i.e. foundations) is not subject to gift and inheritance tax (art. 48 of the same act). To this extent, foundations records must be inspected annually by two independent auditors and the result of the report be provided to the competent District Tax Office within four months from the close of taxable year (art. 50 para 1 and 2 of the Act). 195. Finally, when foundations have a secondary profit making business, they must, for this sector, keep accounting records in accordance with the rules provided for by the Corporation Tax Act (art. 112) and the Framework Act on National Taxes (Art. 85-3) as above detailed. In accordance with these rules, they must also submit a tax return for the matters relating to this secondary business sector. 196. When accounting records are not kept by foundations, sanctions are provided for by the Civil Act and the Act on the Establishment and Operation of Public Service Corporations. Under art. 97 of the CA, if accounting records are not kept, any directors may be subject to a criminal fine up to KRW 5 million (EUR 3 205) when false statements are made in the inventory of assets. The AEOPSC also states that in the case accounting records would not be maintained or false statements would be made, an imprisonment of up to 1 year or a fine up to 3 million KRW (EUR 1 923) may be pronounced. In addition, at any time, government authorities in their supervisory duties can request a foundation to provide its books and related documents and to inspect them (art 14. AEOPSC and 11 of its Enforcement Decree). 197. The Inheritance Tax and Gift Tax Act provides that when books and records are not kept in accordance with art. 51 of the Act, the competent District Tax Office will collect the inheritance or gift tax from the foundation. The same holds true when the annual audit report prepared in accordance with art. 50 para 1 & 2 is not provided to revenue authorities. In addition, when accounting records are not kept in accordance with art. 50-3 para 1 of the Act, the Commissioner will first give one month to the foundation to address the negligence (art. 50-3 para 2). If not done within one month, a fine equivalent to the property of the foundation multiplied by 0.005 will be imposed. As for sanctions provided by the Commercial Act and Corporation Tax Act and applicable to the secondary making-profit sector, see developments on companies.
Conclusion
198. From the above, it follows that Koreas law requires relevant entities, wheher companies, partnerships, trusts, or foundations to keep accurate and reliable accounting records that correctly explain all transactions, enable the financial position of any entity or arrangement to be determined with reasonable accuracy at any time and to allow financial statements to be prepared. These requirements are supported by sanctions ensuring the availability of such information. 199. From the information received from Koreas partners, it appears that Korea has in the past always been able to provide the requested accounting records, although the provision has sometimes been delayed.
Underlying documentation (ToR A.2.2)

200. Art. 33 CA provides that any company must preserve, in addition to its trade books, all important documents relating to its business. Likewise, art 116 (1) CTA states that any company shall maintain documentary evidences including credit card sales slips, cash receipts, or tax invoices (as provided for by the Value-Added Tax Act or the Income Tax Act). 201. Partnerships, whether under the PTR or Joint Business Taxation Regime must keep underlying documentation supporting any records entered in books. Art. 160 ITA provides that all supporting documents needed to calculate any income amount must be kept while partnerships under the PTR are, pursuant to art. 100-26 STTCA in conjunction with art. 100-27 of its Enforcement Decree, required to comply with art. 116 CTA and therefore to keep underlying documentation. 202. Business trusts entities, besides obligations flowing from the FSCMA, must keep reliable underlying documentation in accordance with article 33 CA and 116 CTA. As for personal trusts, article 33 of the Trust Act provides that a trustee must keep books and clarify the management and accounts pertaining to each trust. Any interested person, settlor or beneficiary can request an inspection of any documents in addition to books showing how the trust has been managed or explanation thereof (art. 34). The Korean authorities have reported that these documents include any underlying documents containing information on any transactions conducted regarding the trust e.g. contracts, receipts , etc. While Korea reports no issue regarding the availability of ownership information for trusts, Koreas legal framework should clearly provide that underlying documentation in relation to personal trusts is maintained in all circumstances.
203. Foundations are, under the Civil Act, in conjunction with the AEOPSC and its Enforcement Decree, required to keep all documentary evidence to justify records mentioned in books of revenues and expenditures. 204. Finally, entities liable to VAT are required to prepare and keep at their place of business books where all transaction records in relation to VAT to be paid or refunded must be recorded (VAT Act Art. 31 para.1). To correctly describe transactions subject to VAT, these entities are further obliged to keep those books and related tax invoices or receipts (which they have issued) for 5 years (VAT Act Art. 31 para.3). When these entities are already required to keep books and underlying documents under the CTA (Art. 112) or the ITA (Art. 160), they are considered to having respected the obligations to keep accounting records provided by the VAT Act (Enforcement Decree of the VAT Act, Art. 79 para.4). 205. Koreas legal framework therefore ensures that accounting records are supported by underlying documents detailing all sums and money received and expanded, all sales and purchases and other transactions, and the assets and liabilities of any relevant entity or arrangement.
Document retention (ToR A.2.3)

206. Art. 33 CA provides for a ten years retention period for books and five years for the underlying documentation. For tax purposes, accounting records must be kept for at least five years after the submission of the annual tax return (art. 116 CTA). Partnerships under the PTR are also subject to the same requirement as principles detailed in article 116 CTA apply to them. The Framework Act on National Taxes (art. 85-3) also provides for a record keeping retention period of five years after the elapse of the legal return term of the national tax for the taxable period in which relevant transactions are made. This ensures records pertaining to all partnerships to be kept for at least five years. 207. Business trust entities acting as trustees of business trusts must keep their accounting records as well as the related documentation for at least 10 years (art. 62 Enforcement Decree to the FSCMA). This supplements other obligations already provided by the Commercial Act and the Corporation Tax Act. Under the Trust Act (article 38 and 39), the trustee is liable for compensation for damages resulting from its management and has liabilities relating to any losses in the trust property. Under the Civil Act (art. 162), there is a ten years prescription for these matters and the trustee must be in position, during that period, to justify any facts resulting from its management, of the trust property. To this extent, the trustee has to retain its records for ten years, including its accounting records. Foundations must also keep accounting

records for at least 10 years (art. 10 of the Enforcement Decree to AEOPSC). Under the Inheritance and Gift Tax Act, records must be kept for ten years. 208. Koreas applicable laws make accounting records available for at least five years as required under the Terms of Reference. Korea should nevertheless monitor the record keeping requirement for personal trusts to ensure that accounting records are kept in compliance with the standard in all instances. Koreas partners have not encountered difficulties in receiving accounting records for at least five years.
Phase 1 determination The element is in place. Factors underlying recommendations For trustees of personal trusts, Koreas legislation does not clearly prescribe that underlying documentation must be maintained. Recommendations For trustees of personal trusts, Koreas legal framework should clearly provide that underlying documentation must be maintained.
Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.
A.3. Banking information

Banking information should be available for all account-holders.
209. Obligations for financial institutions to keep accurate bank information mainly derive from the Act on Reporting and Use of Certain Financial Transaction Information (hereinafter FTRA), the AML/CFT regulation published in June 2010, the Act on Real Name, Financial Transactions and Guarantee of Secrecy, the Commercial Act (CA), and the Corporation Tax Act (CTA). 210. The supervision of the financial sector is performed by the FSC (Financial Service Commission) which has the authority to draft and amend financial laws and regulations and issue regulatory licences to financial institutions. The KoFIU (Korean Financial Intelligence Unit) is part of the FSC since 2008 and is in particular involved in the fight against anti-money laundering and financing terrorism. Within the FSC, the FSS (Financial Supervisory Service) is in particular in charge of auditing the implementation of AML/CFT obligations by financial institutions.
Record-keeping requirements (ToR A.3.1) Customer Due Diligence

211. According to the Act on Real Name, Financial Transactions and Guarantee of Secrecy, financial institutions, in particular banks, investment trading businesses, or insurance companies, must perform financial transactions with customers under their real names (art. 3) thereby prohibiting anonymous accounts and accounts under fictitious names. Pursuant to art. 5-2 (1) FTRA in conjunction with art. 20-27 of the AML/CFT regulation, financial institutions must identify and verify the identity of their customers in the following situations: when the customer opens a new account (that is, concludes a contract with financial institutions. See art. 10-2 (1) Enforcement Decree to FTRA) when the customer is engaged in occasional financial transactions that is in a single financial transaction above USD 10 000 (EUR 7 153) when the transaction is made in a foreign currency or KRW 20 million (EUR 12 820) in other cases (see. Art. 10-3 Enforcement Decree); when the customer is likely to engage in money laundering or financing terrorism or where there are any suspicion as to whether the customer is the actual party to the financial transaction. 212. The identification and verification of the customer must be done using reliable documentation and be made in compliance with two different pieces of legislation. First, identification and verification will be based on the following information (art. 10-4 Enforcement Decree as detailed in the AML/ CFT regulation): for individuals: real name, date of birth, identification number (i.e. resident registration number but also identification number mentioned on other reliable documents issued by the government (e.g. medical insurance registration number , etc.), address, contact information (phone number and e-mail address); for a profit making legal person: real name, business category, location of principal office and business place, legal representatives real name; for non profit legal person: real name, purpose of its establishment, location of principal office, legal representatives real name;

for a foreign organisation: real name, business category, location of principal office and business place, nationality, location of domestic residence or office, legal representatives real name. 213. Second, the Enforcement Decree to the Act on Real Name, Financial Transactions and Guarantee of Secrecy also provides that the identification of customers is to be made: In the case of an individual, by his name and resident registration number recorded on his resident registration card, or in case of a Korean citizen residing abroad or a foreigner, his name and passport number recorded in his passport. Another official document delivered by another governmental authority must also be provided as well as a utility bill to check the customers address; In the case of a legal person (including an unincorporated association considered as a juristic person pursuant to the Framework Act on National Taxes), by the title and registration number recorded on the business registration certificate which is issued pursuant to the Corporate Tax Act. 214. As a principle, pursuant to art. 32 of the AML/CFT regulation, financial institutions must perform CDD before the completion of the financial transaction requiring CDD to be performed. Financial institutions are also required under art. 34 of the Regulation to perform an ongoing CDD. 215. Koreas Financial Intelligence Unit representatives have advised that 1 701 audits were performed in 2010 to ensure that financial institutions comply with their AML/CFT obligations. During these audits, 490 violations were noted and orders to make corrections were notified by the FSS. In 159 cases, violations related to the requirement for financial institutions to train their employees, in 124 to non-compliance with internal guidelines and in 74 to CDD. The FSS also prepare an annual plan of audits and decides which financial institutions will be controlled based on the risks, the results of past audits and the size of the financial institutions. Within the FSS, each auditor is also in charge of monitoring a batch of financial institutions. 216. During 2010, the FSS also received 240 000 suspicious transactions reports from financial institutions (on 6 billion transactions registered during the same year) and the number of such reports is increasing. 12 000 of these reports were reported to the law enforcement agency and in 60% of these 12 000 reports information was also provided to revenue authorities when ties with tax related matters were identified.
Record keeping requirements

217. Under the AML/CFT framework, financial institutions must keep all identification and verification records as well as financial transaction records, internal and external reports and any other relevant documents for more than five years (art. 84 and 85 of the AML/CFT regulation). 218. In addition, pursuant to the CA, all merchants, are required to keep accounting records (art. 29-33). In these account books, all transactions and other particulars must be entered and the supporting documentation must also be kept (art. 33 CA). Art. 33 CA provides that any company must preserve, in addition to its trade books, all important documents relating to its business. The retention period for these accounting records is fixed to 10 years. 219. For tax purposes, the Framework Act on National Taxes states in its Article 85-3 that any person shall prepare and keep faithfully books and documentary evidence related to all transactions under the conditions as prescribed by each tax-related Act. Under the Corporation Tax Act (CTA), all types of companies must retain accurate accounting records.
Sanctions
220. Anyone failing to comply with the provisions of article 3 of the Act on Real Name, Financial Transactions and Guarantee of Secrecy may be sanctioned by fine not exceeding KRW 5 million (EUR 3 205). As regards CDD provided for by article 5-2 of the FTRA or the AML/CFT Regulation, there are no sanctions that could be directly applied in the case of failure to comply with such requirements. However, in its supervision duty, and when failure to comply with CDD is detected, the Commissioner of the KoFIU may require financial institutions to take necessary measures to remedy the deficiencies (art. 17 FTRA). F inancial institutions that would not comply with these orders will be sanctioned by fine up to KRW 10 million (EUR 6 410). This fine will be applied for each CDD violation detected. Koreas authorities have advised that in the process of improving the AML/CFT framework following the FATF 2009 report, the current legislation will be amended to allow for the application of direct fines. 221. Where violations are noted during an audit, financial institutions have usually one month to improve the situation and correct the data. Korean Financial Intelligence Authorities have advised that in their supervision duties, the number of CDD violations noted was very low (74 in 2010 for 1 701 audits performed that year) and that in any case the violations were remedied by the financial institutions concerned without further requiring the application of fines. To ensure that everything is done properly, Koreas AML/CFT supervisory authorities perform follow-up audits on the spot. Considering the low number of violations and the high quality of data kept

by financial institutions as noted during the audits performed, it appears that Koreas system of sanctions as regards CDD answers the needs.
Conclusion
222. Considering the multiple laws applicable to financial institutions, it is concluded that under Koreas legal framework, financial institutions are required to keep reliable bank records for at least ten years. These records, both identification records as well as financial transaction records, must be enough detailed and accurate to comply with CDD requirements provided for by Koreas AML/CFT framework. In sum, it can be concluded that Koreas legal and regulatory framework ensures bank information pertaining to any account holders to be retained by financial institutions. 223. In addition, none of Koreas partners has mentioned having encountered difficulties in receiving the requested bank information.
Phase 1 determination The element is in place. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.
COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 65
B. Access to information
Overview
224. A variety of information may be needed in a tax enquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether Koreas legal and regulatory framework gives the authorities access powers that cover all relevant persons and information and whether rights and safeguards are compatible with effective exchange of information. It also assesses the effectiveness of this framework in practice. 225. Korean revenue authorities have significant sources of information directly available to answer incoming requests: access to databases maintained by other governmental authorities, tax returns provided by taxpayers and information received from third parties through automatic reporting. Information received by the NTS can easily be accessed as it is stored in a single tax system (TIS). This allows Koreas competent authority for EOI to directly answer the simplest requests received from counterparts. 226. In most cases, answering incoming requests requires further research. To this extent, Korean authorities can rely on the broad powers to gather information granted by the tax legislation. This allows revenue authorities to send questionnaires, access business premises, question any person, and in cases in relation to criminal tax matters, to seize documents. These gathering measures are reinforced by effective sanctions. In practice, Korea has always been in position over the last three years to access and further provide information to its partners, demonstrating the adequacy of its information gathering powers and sanctions relating to them. 227. There are no statutory secrecy provisions that may hamper the effective provision of information. Further, Application of rights and safeguards (e.g. notification, appeal rights) in Korea will not unduly prevent or delay effective exchange of information.
66 COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION
B.1. Competent Authoritys ability to obtain and provide information

Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information).
Presentation of the Korean competent authority

228. While the Ministry of Strategy and Finance (MOSF) has overall responsibility as regards treaty negotiations, the Korea National Tax Service (NTS) serves as competent authority with respect to exchange of information in the field of direct taxation. 229. The NTS is the Korean government agency responsible for administering Koreas tax laws and the assessment and collection of internal taxes. The NTS was established as an external organisation of the MOSF in 1966. It is responsible for establishing basic policies on tax administration and it supports the tax administration by directing, supervising and controlling the 6 Regional Tax Offices, 107 District Tax Offices and 17 Branch Offices. 20 000 staff work for the NTS whose annual budget is about USD 1 200 million (EUR 858 million). 230. Under the supervision of the NTS, Regional Tax Offices located in six of the main Korean cities 20 are responsible for the direct guidance and control over the activities of District Tax Offices. These Regional Tax Offices also have responsibilities in auditing large size businesses (that is, businesses with a turnover above KRW 50 billion (EUR 32 051 282). District Tax Offices act as front office and service providers for taxpayers. They also control small and mid size businesses. Audits of individuals are also shared between Regional and District Tax Offices. 231. At the central level, the headquarters situated in Seoul comprises 11 bureaus including an Investigation Bureau. The head of the International Investigation Division located in NTSs headquarters in Seoul acts as competent authority for EOI purposes on behalf of the Assistant Commissioner, head of the Investigation Bureau. The NTS sends an updated list of all competent authorities in Korea whenever changes occur. This list comprises detailed information on people in charge of EOI. This information is also available on the NTS website 21.
20. 21.
Busan, Daegu, Daejeon, Gwangju, Suwon and Seoul. www.nts.go.kr/eng/index.asp.
232. The International Investigation Division is, amongst other things, concerned with DTCs-related matters (such as EOI). Within this Division, one unit (unit 2, hereinafter EOI division) is competent to deal with all EOI related matters and this is its sole function. This unit is staffed with one deputy director and four civil servants. Two officials are in charge of processing incoming requests for information, one of translation and automatic exchanges and the last one of translation, spontaneous EOI, and EOI on request. All staff within the EOI team are equipped with personal computers and printers and can directly access a wide range of information already in hands of the NTS as well as information maintained by other government authorities (e.g. (i) database maintained by the Ministry of Public Administration and Security: residence registration data, immigrations (entry into and departure from Korea), real estate registration data, company registration data , etc.; (ii) data required under relevant laws to be sent to the NTS (and maintained by its internal system): foreign exchange data, export and import data , etc.). 233. Upon receipt of a request, the competent authority performs a control check to determine whether the request is in conformity with the respective exchange of information agreement. Once the request is checked, it is registered in a computerised tool and each request receives a single file number. The process for dealing with incoming requests is further described under section C.5 of this report.
Bank, ownership, and identity information (ToR B.1.1) and accounting records (ToR B.1.2) Information directly available to revenue authorities
234. First, and in connection with its reorganisation in 1999, the NTS developed a comprehensive IT system (called Tax Integrated System TIS) where all taxpayer-related information is directly made available to tax officials. This information encompasses personal data on taxpayers, tax returns and information automatically reported to revenue authorities by third parties including information on wages, pensions, dividends, interest, capital gains, real estate, credit card expenses, medical and educational expenses. Other databases can also be accessed such as the database maintained by the Ministry of Public Administration and Security, information made publicly available by registration authorities or information reported by other government authorities such as the real estate register or customs. 235. As previously described, Korean taxpayers are subject to detailed reporting obligations with the NTS. This includes registration requirements as well as submission of annual tax returns containing ownership information and detailed accounting data and information. Considering the extensive definition of taxpayers under both Corporation Tax Act and Income Tax Act

(not only person subject to taxes are required to file an annual tax return with revenue authorities but all domestic companies, all foreign companies with income from Korean sources, and all natural persons resident or deriving income from Korea), the obligation to provide relevant information for tax purposes to the NTS has a broad scope. 236. NTS officials have access to accounting and other information reported on an annual basis by corporations with their tax returns. Accounting information can also be found on the website of the Financial Supervisory Service 22, which make available accounting information to the public (financial statements (quarterly/half-yearly/yearly), audit report, and other information disclosed by listed companies or companies whose value is at least KRW 10 billion (EUR 6 410 256)).
Power to obtain information

237. Pursuant to Article 31 of the Act for Coordination of International Tax Affairs (ACITA), the competent authority in Korea will obtain and exchange with a contracting State the information required for the imposition and collection of taxes, review of tax appeals, and criminal prosecution. This article applies to any tax treaty concluded by Korea, tax treaty being understood (art. 2 of the Act) as any type of international agreement subject to international laws such as a treaty, convention, pact, note, etc., with respect to taxes on income and capital. The scope of this Act therefore includes information requested under a DTC, a TIEA or a multilateral instrument (Korea signed in 2010 the Joint COE/OECD Convention on Mutual Administrative Assistance in Tax Matters as further described under section C.1 of this report. Ratification of this convention is pending). 238. Powers to access and collect information are contained in each tax related Act. For instance, and pursuant to art. 122 of the Corporation Tax Act, any public official in charge of corporation tax related matters may question or examine accounts, books or any documents held by, amongst others, the following persons: (i) persons liable to pay taxes or considered to have a tax liability under the CTA (art. 122 1.); (ii) any person responsible for collecting withholding taxes (art. 122 2.); (iii) representatives in Korea of foreign companies (art. 122 4.); and (iv) any third parties in relation to a company liable to tax under the CTA (art. 122 5.). 239. Under Art. 170 of the Income Tax Act (ITA), any public official in charge of income tax related matters may question, investigate or order the presentation of any books, documents and other things held inter alia by the following persons: (i) persons liable to pay taxes or considered to have a tax
22. www.fsc.go.kr/eng/.
liability under the ITA (art. 170 1.); (ii) any person responsible for collecting withholding taxes (art. 170 2.); and (iii) any third parties in relation to a person liable to tax under the ITA (art. 170 5.). 240. Korean tax authorities also have powers, under art. 84 of the Framework Act on National Taxes, to ask any governmental agency, local government or public officials to provide assistance. 241. These very broad powers to query persons placed under the CTA or the ITA to provide information apply whether the information requested relates to ownership information or accounting records. Financial institutions are also covered by the CTA. 242. All information can at least be accessed for five years which is the statute of limitations under Korean law. In addition, Korean authorities have clarified that when information or records have to be kept for a longer period under another law, this information can be accessed for that period. This is the case for accounting records, which have to be kept for 10 years under the Commercial Act. When the retention period has expired, there may be situations where records might be destroyed and no longer available. In this case, the person required to provide information could not be sanctioned. 243. In criminal tax matters, Koreas tax authorities may question suspects of such offenses and have powers to search and seize documents (art. 2 of the Procedure for Punishment of Tax Evaders Act). To use these powers, the official dealing with the case must first obtain a warrant from a judge of the competent District Court (art. 3). Such a warrant is not necessary where an offense is in progress or where a suspected offender is likely to flee or destroy evidence (art. 3). 244. The search and seize procedure provided by the Procedure for Punishment of Tax Evaders Act may be used for the most serious cases, to get wider powers to gather information. Nevertheless, as a normal practice, and even for domestic criminal tax matters, Korean Tax Authorities will first rely on the powers to gather information provided for by both ITA and CTA. For EOI purposes, the Korean authorities have advised that they will always use the access to information measures granted by the relevant tax acts to answer incoming requests. Considering the wide range of powers to gather information provided by these laws, there is no need, even when an incoming case relates to a criminal tax matter abroad, to obtain a warrant from a judge and use a specific search and seizure procedure.
Gathering of information in practice

245. The Korean competent authorities have advised that amongst the incoming requests for information received over the last three years (166), 27% (45) were directly handled at the central level by the EOI division. This includes information collected from banks which are processed directly by the EOI division. However incoming requests mostly relate to companies and the provision of ownership and accounting records 246. Koreas tax laws do not precisely describe how information which is not available within the NTS must be collected. In practice, this implies that Koreas authorities have at their disposal a wide range of possibilities to gather information: usually, when they need information from taxpayers and third parties, revenue authorities will send a questionnaire. Gathering information in this way is the simplest approach, the most flexible and gives good results. Koreas authorities have indicated that in practice, they grant less than 10 days to answer questions, usually five, and that the percentage of responses on due time is very high; when the person requested to provide information does not answer to a questionnaire or when it is obvious that this approach may hinder the collection of information or jeopardise its provision, revenue officials can directly go to the premises of a business or the domicile of an individual to take the information. No further formalities are required under Korean law although the NTS has advised that in practice an appointment is usually agreed with the person concerned. In such case, the NTS can take the original versions of the documents needed or copies; revenue authorities can also collect information during a tax audit. In such case, any type of information can also be taken without requiring the prior consent of the taxpayer. This approach also allows to get more information from this taxpayer, and in particular to question him(her) when needed; power to question the taxpayer or a third party is a possibility for the NTS to collect information; the NTS also has the powers to seize documents during criminal investigation. Its scope is strictly limited and under the control of a judge. 247. Context, needs and challenges will therefore determine the way information is gathered. For purely domestic purposes and given the high level of compliance, gathering of information through questionnaires is preferred.
For EOI purposes and to assure the provision of information, collection of information in business premises will usually be chosen. 248. There is no specific procedure to access bank information in Korea. The Korean authorities have reported that having the name and the address of the taxpayer under investigation in the requesting State facilitates the access to information. There are however under Koreas laws no legal provisions requiring the provision of such details as prerequisites to process the incoming request. If an account number is only available, the request will be handled. The EOI Division has also advised that, requests for banking information are in all cases processed at the NTSs headquarters level and the EOI division directly requests bank information to financial institutions. 249. Koreas authorities have not faced any difficulty to access bank information in the past and financial institutions have always provided this information in a timely manner. Requests for data not computerised place a bigger burden on financial institutions and may delay the provision of information. Korea has reported that in one case it was unable to provide the requested bank information because the 5-year retention period elapsed and it was not computerised. 250. There are no specificities regarding the collection of accounting records. Korean authorities have only mentioned that while there is a five year statute of limitation in Korea, business entities are required to keep their records for ten years (five years for the underlying documentation) and to provide them to the revenue authorities under request. The NTS has also clarified that it has already been and will still be in position to process requests for accounting records relating to more than five years ago and to provide them to a requesting partner. 251. Finally, although no timeframe to provide information is mentioned in Koreas legal framework, Koreas authorities have advised that the collection of information through questionnaire is done quickly (less than 10 days) with a high level of answers on due time. Going to the business premises to collect information requires more time but is done within one month in practice. The EOI division usually gives one month to financial institutions to provide the requested records. In practice, when the datas are computerised, they are provided within 10 days by financial institutions. 252. Koreas partners have reported that in practice, the information requested was always provided although this may have been done in a more timely fashion in some instances.
Use of information gathering measures absent domestic tax interest (ToR B.1.3)
253. The concept of domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. There is no domestic tax interest in Korea. As specifically set out by the Act for the Coordination of International tax Affairs (ACITA), when an incoming request is received from a treaty partner under an EOI agreement, the Korean competent authority for EOI will obtain and exchange such information with its counterparts, relying on its domestic powers to gather information as well as the wide spectrum of information already within its hands. None of Koreas partners has reported having encountered difficulties to receive the information requested because Korea would not have the necessary powers to collect that information.
Compulsory powers (ToR B.1.4)

254. In case a financial institution would not provide the information requested, Art. 31-2 of ACITA provides for a fine up to KRW 30 million (EUR 19 231). In practice, there has not been any case where a Korean financial institution has refused to provide bank information on request. This has also been confirmed by Koreas partners. 255. In other cases, any legal or natural person requested to provide information that would make a false statement or refuse to execute its duties may be subject to a fine up to KRW 5 million (EUR 3 205) (art.17 (5) of the Punishment of Tax Evaders Act). Internal NTS guidelines clarify that in practice, the KRW 5 million fine (EUR 3 205) is the only amount that can be applied. Koreas authorities have also mentioned that this sanction is rarely used as in almost all cases the persons concerned are cooperative and answers are provided in a timely fashion. Besides the application of fines, the main consequence, when information is not provided in relation to queries posed for domestic tax assessment purposes, is to assess taxes according to the information already available to revenue authorities. In the most extreme cases, further investigation will be performed. 256. There are no specific sanctions in the case a government agency would not provide information requested by the NTS but in practice the NTS has never encountered any difficulty to get information held by other administrations. In addition, duties to provide information is, in Korea, imposed on taxpayers and only in few situations has the NTS to ask the requested information to another government agency. 257. When records that had to be kept have been destroyed, the NTS can also sanction the person who failed to respect its duties. As previously mentioned, pursuant to the Punishment of Tax Evaders Act (art. 8), any person who incinerates, destroys or conceals books or documentary evidence prescribed
by any tax laws (documents to be kept under art. 85-3 of the Framework Act on National Taxes included) may be punished by imprisonment up to two years or by fine not exceeding KRW 20 million (EUR 12 821). 258. The NTS has specific search and seizure powers when a procedure relates to a criminal tax matter. This procedure must first be authorised by a judge and is further under the control of the justice. However, the NTS also have the possibility to go to the business premises to collect any type of relevant information. In EOI matters and to be the most efficient, this is how information will be collected. 259. Korea has the necessary powers to compel the provision of information and further answer the incoming requests received. In practice, Korea has not experienced any situation where information could not be provided because of ineffective compulsory powers or sanctions\.
Secrecy provisions (ToR B.1.5) Banking secrecy

260. Under Art. 4 of the Act on Real Name Financial Transactions and Guarantee Secrecy, no one working for a financial institution may provide or reveal information on financial transactions without a written request or consent from the holder. However, the ACITA sets out in its Art. 31 that where an incoming request is received from a foreign partner under an EOI agreement, financial institutions must provide the requested information. Therefore, this secrecy provision does not apply for EOI purposes.
Professional privileges
261. Among the situations in which Korea is not obliged to supply information in response to a request is when the requested information would disclose confidential information protected by attorney-client privilege. Article 26 of the Attorney at Law Act provides that no attorney-at-law or former attorneyat-law shall disclose any confidential matter that he/she has learned in the course of performing his/her duties. This provision however does not apply to cases where such disclosure of confidential matters is especially prescribed otherwise by Acts. 262. The Attorney at Law Act also provides in its article 1 that the mission of any attorney-at-law shall be to defend fundamental human rights and realize social justice and in its article 3 that the duties of an attorneyat-law shall be to perform acts related to law-suits, representation in claims for administrative dispositions or other general legal affairs as delegated by parties or other persons concerned or as commissioned by the State, local

governments or public agencies. Therefore, the scope of the confidentiality provision in the Attorney-at-Law Act is strictly limited to specific matters. The Korean authorities have in particular clarified that this privilege has never been invoked to prevent exchange of information in practice. Where an attorney acts in any other capacity (e.g. as a real estate broker or in a fiduciary capacity), the attorney client privilege does not apply. 263. Korean law also recognised a protection against disclosure of information by certified judicial scriveners. Art. 27 of the Judicial Scrivener Act provides that a person who is or was a certified judicial scrivener will not reveal confidential information obtained in the course of performing his duties without justifiable reason. This secrecy provision could be broader than what is provided by the Terms of Reference but Koreas tax authorities have not experienced any difficulty in accessing information held by certified judicial scriveners for either domestic or EOI purposes. Furthermore, this privilege has never been invoked to prevent exchange of information as confirmed by the absence of case law in this matter. Furthermore, article 31 (1) of the Act for the Coordination of International Tax Affairs provides that Koreas competent authorities will, on request, obtain and exchange with a Contrating State the information required to be provided and Korea confirmed that this law prevails over the confidentiality rules of the Judicial Scrivener Act. 264. Article 19 of the Certified Public Accountants Act provides that No certified public accountant or his clerks, or no former certified public accountant or his clerks shall disclose confidential information which was obtained in the course of performing his functions, unless otherwise provided by other laws. This includes tax laws. Moreover, in practice, professional secrecy of Certified Public Accountants has never been an obstacle for Koreas tax authorities to respond to an exchange of information request. The Korean authorities have also advised that for domestic purposes accounting records are requested from accountants without professional confidentiality being invoked. This results from the fact that the duty to provide accounting records on request to revenue authorities is not directly placed on accountants but on taxpayers or other persons. As a result, this information is always available in Korea.
B.2. Notification requirements and rights and safeguards

The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.
Not unduly prevent or delay exchange of information (ToR B.2.1)

265. There is no prior notification procedure in Korea. Any information can be collected for EOI purposes without informing at the time of collection the person concerned. When information already in possession of the NTS is exchanged, the NTS must inform the person concerned within 10 days after the provision of information to the requesting party (art. 47 of the Enforcement Decree to the ACITA). The 10 day deadline may be extended to 6 months if so requested by the requesting country (Art. 47 (4) of Enforcement Decree to the ACITA). This post notification is not for guaranteeing the taxpayers right to challenge the provision of the request but for informing of the provision of information to a counterpart. As it involves notification only after the exchange of information has occurred, it cannot prevent or delay exchange of information.
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 77
C. Exchanging information
Overview
266. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. A jurisdictions practical capacity to effectively exchange information relies both on having adequate mechanisms in place as well as an adequate institutional framework. This section of the report assesses Koreas network of exchange of information agreements against the standards and the adequacy of its institutional framework to achieve effective exchange of information in practice. 267. Korea has an extensive network of signed bilateral agreements that provide for exchange of information in tax matters. This EOI network encompasses 86 jurisdictions of which 83 are covered by a DTC (Double Tax Convention) and 3 by a TIEA (Tax Information Exchange Agreement). Of these treaties, 78 are in force. Over the last three years, Korea has sought to expand its treaty network by signing or initialling DTCs with 11 new jurisdictions, protocols amending conventions with 8 more jurisdictions (including Belgium, Singapore and Switzerland protocols signed, Austria, Luxembourg, and Malaysia, protocols initialled) and 14 TIEAs. Korea is also a signatory of the Joint COE/ OECD Convention on Mutual Administrative Assistance in Tax Matters and its protocol, though ratification is pending. EOI negotiations with eight more jurisdictions are also under way. 268. Considering this large treaty network, Koreas agreements cover its major trading partners and Korea has not refused to enter into an exchange of information agreement with any Global Forum member seeking to do so. All Koreas agreements but eight 23 meet the international standards. Five of them 24 have already been renegotiated and ratifications are pending. EOI to the standard will also take place with the Netherlands and Brazil once the
23. 24. Austria, Brazil, Democratic Republic of Korea, Luxembourg, Malaysia, the Netherlands, Singapore, and Switzerland. Austria, Luxembourg, Malaysia, Singapore, and Switzerland.
78 COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

Joint COE/OECD Convention on Mutual Administrative Assistance in Tax Matters will be ratified by Korea and these two countries. 269. Koreas policy is to negotiate exchange of information agreements to the international standard. In particular, Koreas practice is to include in its EOI mechanisms an exchange of information article in conformity with the 2005 update of the OECD Model Tax Convention. Considering Koreas extensive treaty network, many of them do not include the last update to OECD Model Tax Convention. However, Koreas capacity to access a wide range of information (as detailed in section B.1. of this report), in particular bank information, without reference to a domestic tax interest ensures Koreas ability to exchange information in line with the international standard. 270. Although this report is focused on exchange of information on request, it is noted that Korea also exchanges information spontaneously and automatically. Korea has already organised automatic exchanges of information with 28 jurisdictions and sent, in 2011, letters to 37 of its partners, trying to expand the number of jurisdictions with which such exchanges could take place. Positive answers have been received from 13 jurisdictions for the moment. 271. From the information received during the course of the peer review, it appears that Korea was over the last three years in position to provide information in 90 days in almost half the cases. It should be noted that Korea has improved its practices increasing from 19% in 2008 to 57% in 2010 the number of requests answered in 90 days, this combined with an increasing number of requests received. This improvement directly relates to the implementation in 2010 of new administrative practices to respect, to the best extent possible, the 90 days rule. A close monitoring of the requests received and an ongoing dialogue with people in charge of collecting information at the local level are the main factors underlying the improved results. When not in position to answer within 90 days, it is Koreas practice, since 2010, to provide an update of status, along with the information already available at the time this update is sent out. 272. Inputs received from Koreas peers suggest a high quality of answers provided by the Korean authorities, although sometimes with delays. Some partners mentioned not having received any update of status from Korea but in this regard, Korea changed its practices in early 2010. Peers also mention that Korea has been able to respond to the vast majority of requests it receives in a thorough and comprehensive manner.
C.1. Exchange-of-information mechanisms

Exchange of information mechanisms should allow for effective exchange of information.
273. At the central level, the Ministry of Strategy of Finance is responsible of treaty negotiations. This covers any EOI arrangements, DTCs, protocols or TIEAs. The Tax Treaty Division is staffed with six persons. Any steps until the treaty is initialled are undertaken and followed by this division. After the treaty is initialled, the process is handled by the Ministry of Foreign Affairs with the support of the Ministry of Strategy and Finance for the technical aspects. 274. Korea endorsed in 2004 the latest version of Article 26 of the OECD Model Tax Convention. Since then, Korea only negotiates treaties containing wording akin to paragraphs 4 and 5 of Article 26. In particular, when Korea approaches a partner to negotiate a new DTC, Koreas proposal always contains a full version of article 26 and it is Korea policy to convince its partners to only conclude treaties with the most advances EOI standard. 275. Koreas network of signed EOI arrangements now covers 86 jurisdictions of which 83 are covered by DTCs and 3 by a TIEA. Korea is also a signatory of the Joint COE/OECD Convention on Mutual Administrative Assistance in Tax Matters and its protocol, even though this convention has not been ratified by Korea so far. It is noted that the Convention between Korea and Switzerland does not contain any EOI provision. 25 Recently, Korea has signed DTCs with Colombia, Gabon, Uruguay and Panama (these countries are included in the 86 jurisdictions covered by an EOI agreement) as well as three protocols amending DTCS with Belgium, Singapore and Switzerland (protocols analysed in this report). Protocols amending conventions were also initialled, in particular, with Austria, Luxembourg and Malaysia (Protocols not analysed in detail in this report).
Other forms of exchange of information

276. Korea is involved in spontaneous and automatic EOI. Korea has received information spontaneously over the last three years and has also provided such information in a few instances. Over the last three years, Korea has been involved in automatic exchanges with 28 countries For 12 of them, information was provided on a unilateral basis. Information exchanged included the following: wages, pensions, dividends, interest. Furthermore, in 2011 Korea sent out letters to 37 of its treaty partners to determine whether they were interested in automatic exchanges. For 12 of these countries
25. A protocol amending this convention has been signed by Switzerland and Korea on 28 December 2010.

information has already been provided automatically by Korea without reciprocity and for the 25 others, Korea would be interested to engage in such exchanges. Of these 37 countries, 13 have given a positive answer while 7 have declined. All spontaneous and automatic exchanges are managed by the EOI division in Seoul. Once received, all information is uploaded in TIS which is available to all tax officials in Korea. 277. Korea has not signed any memorandum of understanding to organise the different types of exchange of information with its treaty partners. For Korea, its treaties are clear enough to allow for any types of exchanges, without requiring further clarification. Korea has nevertheless mentioned having received one request for a memorandum of understanding and is ready to sign such agreement if asked by its partners. 278. Korea does not have any experience as regards joint audits but is open to develop such initiatives with interested partners.
Joint International Tax Shelter Information Centre

279. JITSIC was established to supplement the ongoing work of its members in identifying and curbing tax avoidance and shelters and those who promote them and invest in them. 26 Delegates from each of the member jurisdictions are based in either Washington, DC or London and exchange information on abusive tax schemes, their promoters and investors, consistent with the provisions of bilateral tax conventions. 27 Pursuant to the domestic procedures of the parties, the delegates of JITSIC from each respective member jurisdiction are delegated the ability to act as competent authorities for purposes of bilateral exchanges of information. 280. Between March 2009 and September 2010, Korea participated in these works as an observer. Since September 2010, Korea is a full member of JITSIC and has dispatched one official to each of the London and Washington, DC JITSIC offices. These two officials have been appointed as competent authorities for Korea to allow them to exchange information with people from other JITSIC member countries.
Foreseeably relevant standard (ToR C.1.1)

281. The international standard for exchange of information envisages information exchange upon request to the widest possible extent. Nevertheless it does not allow fishing expeditions, i.e. speculative requests for information that have no apparent nexus to an open inquiry or investigation. The
26. 27. JITSIC Memorandum of Understanding. JITSIC Terms of Reference.
balance between these two competing considerations is captured in the standard of foreseeable relevance which is included in Article 26(1) of the OECD Model Tax Convention set out below: The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. 282. Of the DTCs signed by Korea, only those with Canada (signed in 2006), Colombia, Gabon, and Panama (all signed in 2010, not in force) as well as the Protocols signed with Belgium, Singapore, and Switzerland in 2010 (all not in force) contain the term foreseeably relevant. Koreas TIEAs signed with The Bahamas, the Cook Islands, and the Marshall Islands are patterned on the OECD Model TIEA and are therefore compliant with the foreseeably relevant standard. 283. Koreas DTCs usually use the term necessary in lieu of foreseeably relevant. It is the case for 74 out of the 83 DTCs signed by Korea. The term necessary is recognised in the commentary to Article 26 of the OECD Model Tax Convention to allow for the same scope of exchange as does the term foreseeably relevant. 28 Treaties signed with Austria, Brazil, and the Democratic Republic of Korea only allow exchanges for the application of the Convention. These three treaties are not to the standard but the treaty with Austria has already been renegotiated. As Korea and Brazil are signatory of the Joint COE/OECD Convention on Mutual Administrative Assistance in Tax Matters, EOI to the standard will take place between with these two countries once this convention will be ratified. 284. Likewise, the DTC with the Netherlands provides for the exchange of such information (being information which such authorities have in proper order at their disposal) as is necessary. This wording may impose a restriction on the partners ability to respond to a request as this may be interpreted in a restrictive manner. Furthermore, the scope of this treaty is limited to the application of the Convention. This treaty also does not meet the standard but the Netherlands is also a signatory of the Joint COE/OECD Convention on Mutual Administrative Assistance in Tax Matters,.
28. The word necessary in Article 26(1) of the 2003 OECD Model Taxation Convention was replaced by the phrase foreseeably relevant in the 2005 version. The commentary to Article 26 recognises that the term necessary allows for the same scope of exchange as does the term foreseeably relevant.

285. It is also clarified that the protocol signed with Switzerland on 28 December 2010 contains an interpretative provision requiring the provision of some information from the requested State when making a request. Information to provide includes in particular: (i) the name of the person under examination or investigation and, if available, other particulars facilitating the identification of that person(s), such as address, date of birth, marital status, tax identification number; and (v) the name and, to the extent known, the address of any person believed to be in possession of the requested information. 286. It is also noted that paragraph (c) of the interpretative provision states that subparagraphs (i) through (v) of subparagraph (b) need to be interpreted in order not to frustrate effective exchange of information. Further, a statement of Switzerlands government made in February 2011 clarifies that identifying the taxpayer and the holder of the information is an indispensible prerequisite for the granting of administrative assistance. In most cases, this occurs by indicating the name and address. Other means of identification should be admissible in the future. When formally adopted by the Swiss Parliament, this interpretation of the treaties signed by Switzerland will bring the Korea-Switzerland protocol to the standard, after conclusion of a mutual agreement procedure. Switzerland has already informed Korea through diplomatic channels that a mutual agreement procedure will be concluded as soon as the procedure with the Swiss Parliament will be completed. Korea stands ready to conclude such an interpretative agreement. Koreas authorities have also advised that they do not require the name of the person under examination in the requesting country or of the party involved in Korea to exchange information if other identifying information that enables the NTS to obtain the requested information is provided. 287. Koreas authorities have advised that they have not declined any request for information received over the last three years, on the basis that the requested information was not foreseeably relevant.
In respect of all persons (ToR C.1.2)

288. For exchange of information to be effective, it is necessary that a jurisdictions obligation to provide information is not restricted by the residence or nationality of the person to whom the information relates or by the residence or nationality of the person in possession or control of the information requested. For this reason, the international standard for exchange of information envisages that exchange of information mechanisms will provide for exchange of information in respect of all persons. 289. Sixty-five of Koreas DTCs as well as its three TIEAs specifically provide for exchange of information in respect of all persons. None of these
agreements restricts the application of the exchange of information provisions to certain persons, for example, those considered resident in one of the states. 290. The scope of the DTCs signed with Belgium 29, Denmark, Indonesia, Malaysia, Portugal, Russia, Thailand, Turkey, and UAE is limited to persons covered by the convention. However, these treaties note that information is to be exchanged for carrying out the provisions of the domestic laws. As nonresidents are under the scope of the Korean legislation, these treaties provide for the exchange of information in respect of all persons. 291. Koreas competent authority has advised that it has not had any difficulties with any of its exchange of information partners with respect to this issue.
Obligation to exchange all types of information (ToR C.1.3)

292. Jurisdictions cannot engage in effective exchange of information if they cannot exchange information held by financial institutions, nominees or persons acting in an agency or a fiduciary capacity. The OECD Model Tax Convention, which is an authoritative source of the standards, stipulates that bank secrecy cannot form the basis for declining a request to provide information and that a request for information cannot be declined solely because the information is held by nominees or persons acting in an agency or fiduciary capacity or because the information relates to an ownership interest. 293. Seven 30 of Koreas DTCs (with Canada, Colombia, Gabon, Panama and the protocols with Belgium, Singapore, and Switzerland) specifically provide that a contracting state may not decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person. The TIEAs with the Bahamas, the Cook Islands, and the Marshall Islands contained in Article 5(4) subparagraphs (a) and (b) of the OECD Model TIEA, obliging the contracting parties to exchange all types of information. 294. Additional provisions in the DTC signed with the Netherlands provide that the obligation to exchange information does not include information obtained from banks or from institutions assimilated therewith. The term institution assimilated therewith means inter alia, insurance companies. DTCs signed with Austria, Luxembourg and Malaysia do not specifically provide for the exchange of bank information. Although with these three partners Korea would be in position to exchange such information even without a specific provision allowing for such exchanges, the absence of a specific
29. 30. DTC before the protocol updating the EOI provision has been signed. Of which only the DTC with Canada is in force and in effect.

provision requiring exchange of bank information unlimited by bank secrecy will serve as a limitation on the exchange of information which can occur under the relevant DTC. These four treaties do not comply with the international standard. For three of them (with Austria, Luxembourg and Malaysia), a protocol updating these EOI provisions has already been initialled. Korea and the Netherlands are also both signatory of the Joint COE/OECD Convention on Mutual Administrative Assistance in Tax Matters. 295. As there are no restrictions in Koreas authorities capacity to access bank information, all other agreements, even without a provision equivalent to paragraph 5 of Article 26 of the OECD Model Tax Convention are in line with the international standard. Restrictions in access to bank information may however exist for some of Koreas treaty partners. It is recommended that Korea monitor effective exchange of information with such treaty partners and, if necessary, renegotiate its older DTCs to incorporate wording in line with Article26(5) of the OECD Model Tax Convention.
Absence of domestic tax interest (ToR C.1.4)

296. The concept of domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. An inability to provide information based on a domestic tax interest requirement is not consistent with the international standard. Contracting parties must use their information gathering measures even though invoked solely to obtain and provide information to the other contracting party. 297. Koreas DTCs with Azerbaijan, Canada, Colombia, Gabon, Panama and the protocols signed with Belgium, Singapore, and Switzerland incorporate wording akin to Article 26(4) of the OECD Model Tax Convention, obliging the contracting parties to use information-gathering measures to exchange requested information without regard to a domestic tax interest. Koreas three TIEAs allow information to be obtained and exchanged notwithstanding it is not required for any domestic tax purpose. 298. Koreas other DTCs do not contain such a provision. There are, however, no domestic interest restrictions on Koreas powers to access information. Korea is able to exchange information, including in cases where the information is not publicly available or already in the possession of the governmental authorities as noted in section B.1 of this report. 299. A domestic tax interest requirement may however exist for some of Koreas treaty partners. In such cases, the absence of a specific provision requiring exchange of information unlimited by domestic tax interest will serve as a limitation on the exchange of information, which can occur under the relevant DTC. In practice, Korea has experienced no difficulties
arising from domestic tax interest provisions in its partner jurisdictions. No requests for information have been declined on this basis. It is recommended, however, that Korea continue to monitor effective exchange of information in place between such treaty partners and, if necessary, renegotiate its older DTCs to incorporate wording in line with Article 26(4) of the OECD Model Tax Convention.
Absence of dual criminality principles (ToR C.1.5)

300. The principle of dual criminality provides that assistance can only be provided if the conduct being investigated (and giving rise to an information request) would constitute a crime under the laws of the requested country if it had occurred in the requested country. In order to be effective, exchange of information should not be constrained by the application of the dual criminality principle. 301. There are no dual criminality requirements in Koreas agreements for exchange of information in tax matters.
Exchange of information in both civil and criminal tax matters (ToR C.1.6)
302. Information exchange may be requested both for tax administration purposes and for tax prosecution purposes. The international standard is not limited to information exchange in criminal tax matters but extends to information requested for tax administration purposes (also referred to as civil tax matters). 303. All Koreas DTCs but that signed with the Democratic Republic of Korea provide for the exchange of information in both civil and criminal tax matters. Indeed, some of Koreas agreements refer to fighting fiscal evasion as one of the objects of the agreement and in others, the first paragraph of the exchange of information provision provides that the information exchange will occur inter alia for the prevention of evasion or avoidance of, or fraud in relation to, such taxes.
Provide information in specific form requested (ToR C.1.7)

304. Exchange of information mechanisms should allow for the provision of information in the specific form requested (including depositions of witnesses and production of authenticated copies of original documents) to the extent possible under a jurisdictions domestic laws and practices. 305. There are no restrictions in the exchange of information provisions in Koreas DTCs and TIEAs that would prevent Korea from providing

information in a specific form, as long as this is consistent with its own administrative practices. Koreas DTC with the United States (2003) includes a specific clause to reinforce the need to provide information in the form requested (in the form of depositions or witnesses and copies of unedited original documents). 306. Koreas competent authority is prepared to provide information in the specific form requested to the extent permitted under Korean law and administrative practice. Information received from partner jurisdictions with an exchange of information relationship with Korea does not show that Korea has not been able to respond to such requests in the past.
In force (ToR C.1.8)

307. Exchange of information cannot take place unless a jurisdiction has exchange of information arrangements in force. Where exchange of information agreements have been signed, the international standard requires that jurisdictions must take all steps necessary to bring them into force expeditiously. 308. Korea has an extensive EOI network covering to date 86 partners, 83 of them being covered by a DTC and 3 by a TIEA. Of the EOI arrangements signed, only the TIEAs with the Bahamas, the Cook Islands, and the Marshall Islands, the conventions with Colombia, Gabon, Panama, Uruguay and Sudan, and the protocols with Belgium, Singapore and Switzerland are not in force. All DTCs or protocols to DTCs not in force (except Sudan) were signed in 2010 while all TIEAs not in force were signed in 2011. All other agreements providing for exchange of information in tax matters are in force. 309. A number of treaties signed by Korea were ratified by both parties within 18 months following their signature. In the latest years, only in very few instances the entry into force was delayed (e.g. Algeria, Iran, Sudan, and the Democratic Republic of Korea). In the case of Algeria, Koreas authorities have advised that the treaty was swiftly ratified by Korea but the ratification by the counterpart took time. In the case of Sudan, the treaty is already ratified by Korea but ratification pending on the other side. For Iran, after signing the treaty further negotiations took place explaining that the ratification was delayed by both parties. 310. The domestic procedure to sign tax treaties comprises the following steps: (i) review by the Ministry of Foreign Affairs and Trade of the agreement and its translation in Korean; (ii) review by the Ministry of Government Legislation which will check all versions of the treaty; (iii) review by the State Council; (iv) approval by the President; and (v) signature. After an international agreement is signed, the National Assembly ratifies it (under
Article 60 of the Constitution, any new agreement that must be enacted to receive effect must first be adopted by the National Assembly). 311. The Korean authorities have clarified that it usually takes one year from initialling to signature of a treaty and an additional year for the adoption of the treaty by the National Assembly. The recent increase of the number of treaties signed has led to some delays in the process as a whole. Nevertheless Korea has recently taken steps to shorten the timeframe to sign its EOI arrangements. For instance, Korea has already prepared a template in Korean of its TIEA model to reduce the time needed by the Ministry of Government Legislation to review the EOI arrangements initialled. Korea will continue to improve its practices. 312. Regarding the ratification of treaties, when the treaty partner is seen as a key counterpart by the Parliament the process can be shortened. Among the treaties recently signed, the DTC with Colombia has already been ratified by the National Assembly, the convention with Panama was tabled by the Parliament in November 2011 and that with Gabon will be tabled very soon. 313. To address this specific situation, Koreas authorities have also advised that an interpretation of article 31 of the Act for the Coordination of International Tax Affairs made by the Ministry of Government Legislation already allows the Korean authorities not to go to the Parliament for ratification of protocols only amending article 26 of DTCs because these protocols do not deal with Korean legislative matters. Any new protocol only amending article 26 will be ratified directly by the President. This new ratification procedure also applies to TIEAs.
In effect (ToR C.1.9)

314. For exchange of information to be effective, the contracting parties must enact any legislation necessary to comply with the terms of the agreement. 315. All of Koreas agreements that have been signed and ratified by both parties are in effect in Korea. In particular, the Act for Coordination of International Tax Affairs specifically provides for the use by Korean tax authorities of the powers to collect information to answer any EOI request. 316. In addition, as noted previously in this report, Koreas legal and regulatory framework is in place to ensure availability and access to information required for international tax matters. As such, Koreas international agreements have been given effect to in its national legislation.

C.2. Exchange-of-information mechanisms with all relevant partners

The jurisdictions network of information exchange mechanisms should cover all relevant partners.
317. Ultimately, the international standard requires that jurisdictions exchange information with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement. Agreements cannot be concluded only with counterparties without economic significance. If it appears that a jurisdiction is refusing to enter into agreements or negotiations with partners, in particular ones that have a reasonable expectation of requiring information from that jurisdiction in order to properly administer and enforce its tax laws it may indicate a lack of commitment to implement the standards. 318. Koreas network of signed bilateral EOI arrangement covers to date 86 jurisdictions, 83 of which are covered by a DTC and 3 by TIEAs. This EOI network covers both Koreas main trading partners (Japan, China, the US, Germany, and the UK) as well as a number of regional jurisdictions (Japan, China, the Democratic Republic of Korea, Malaysia, Myanmar Russia, Singapore, Thailand, and Vietnam). Korea has signed exchange of information agreements with all G20 members but Argentina, all OECD members, and 48 GF members. 31 319. Korea has mentioned that since 2009 20 DTCs or protocols amending DTCs were concluded as well as 14 TIEAs. Three new DTCs with Colombia, Gabon, and Panama as well as three protocols amending DTCS with Belgium, Singapore and Switzerland were signed over the last two years. 320. More recently, Korea has entered into TIEAs negotiations leading to the signature of such an agreement with The Bahamas, the Cook Islands and the Marshall Islands in 2011. Other TIEAs have been initialled with Anguilla,
31. All OECD and G20 members but Argentina plus The Bahamas, Malaysia, Panama, the Philippines, Qatar, Singapore, and UAE.
Bermuda, British Virgin Islands, Cayman Islands, Costa Rica, Guernsey, Jersey, Liberia, Saint Lucia, Samoa, and Vanuatu. Korea has also mentioned that it has participated to a multilateral initiative leading to the conclusion of TIEAs with Cook Islands, Costa Rica, Liberia, and Marshall Islands. 321. Korea is still seeking to expand and update its treaty network. Negotiations are started either because Korea wants to develop its economic relationships with these partners or because there is a need to renovate an existing DTC to implement the latest EOI standard. Considering the work of the Global Forum, Korea has focused during the last three years on exchange of information. Korea has advised that new DTCs were recently initialled with Bahrain, Brunei, Ecuador, Ghana, Peru, Tajikistan, and Turkmenistan. Protocols amending DTCs were also initialled with Austria, Australia, Italy, Luxembourg and Malaysia. 322. Negotiations to conclude a new DTC are under way with Hong Kong (a first round of negotiations took place in November 2010) as well as negotiations to revise the existing DTC with Indonesia, Singapore and Turkey. As part of its policy to conclude TIEAs, Korea is also negotiating with Andorra, Mauritius, Montserrat and Antigua and Barbuda. For this last jurisdiction, the current focus is on Antigua and Barbudas proposal to include custom duties in the agreement. Proposal for a TIEA was also made to San Marino. 323. Korea also signed on 27 May 2010 the Joint COE/OECD Convention on Mutual Administrative Assistance in Tax Matters and its protocol. Once this convention will be ratified, it will provide for EOI relationships to the standard with Argentina and Georgia (convention and protocol already ratified by Georgia, still pending for Argentina). Once this convention will be ratified, it will also allow for EOI to the standard with Brazil and the Netherlands. 324. Ultimately, the international standard requires jurisdictions to exchange information with their relevant partners, meaning those partners who are interested in entering into an exchange of information agreement. During the course of the assessment, one jurisdiction has advised that it proposed to Korea twice, in 2007 and 2010, to sign a TIEA. No responses to these proposals were provided by Korea. In answer, the Korean authorities have advised not having received such request from this partner but to be ready to consider such request when received. 325. In sum, Koreas network of EOI arrangements covers to date all relevant partners as well as its main trading partners and countries situated in East and South-East Asia.

Phase 1 determination The element is in place. Factors underlying recommendations Recommendations Korea should continue to develop its exchange of information network with all relevant partners. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
Information received: disclosure, use, and safeguards (ToR C.3.1)

326. Governments would not engage in information exchange without the assurance that the information provided would only be used for the purposes permitted under the exchange mechanism and that its confidentiality would be preserved. Information exchange instruments must therefore contain confidentiality provisions that spell out specifically to whom the information can be disclosed and the purposes for which the information can be used. In addition to the protections afforded by the confidentiality provisions of information exchange instruments, jurisdictions with tax systems generally impose strict confidentiality requirements on information collected for tax purposes. 327. All exchange of information articles in Koreas DTCs have confidentiality provisions modeled on Article 26(2) of the OECD Model Tax Convention. Likewise, the TIEAs with the Bahamas, Cook Islands, and Marshall Islands have confidentiality provisions modeled on Article 8 of the OECD Model TIEA. 328. Koreas tax legislation also provides for confidentiality rules. Art 81-13 of the Framework Act on National Taxes states that a tax official should not offer or disclose data which a taxpayer has submitted. When confidential information is disclosed, the Criminal Act provides that the official in breach of confidentiality may be subject to an imprisonment of up to two years and a suspension of up to five years.
329. In practice, the Korean authorities have developed several means to ensure confidentiality to be respected. The IT system where incoming requests are registered can be accessed only by authorised staff. Translation of requests is also directly done by the EOI division to avoid any disclosure of information to people outside the division and when the incoming request is passed on at the local level, the importance of confidentiality is always stressed. Also, an EOI manual drafted in 2010 by NTS EOI division contains specific sections dedicated to the confidentiality of information received. Finally, the NTS internal board of audit ensures that confidentiality rules are respected by NTS staff and that data in relation to taxpayers are protected.
All other information exchanged (ToR C.3.2)

330. The confidentiality provisions in Koreas exchange of information agreements and domestic law do not draw a distinction between information received in response to requests for information forming part of the requests themselves. As such, these provisions apply equally to all requests for such information, background documents to such requests, and any other document reflecting such information, including communications between the requesting and requested jurisdictions and communications within the tax authorities of either jurisdiction.
C.4. Rights and safeguards of taxpayers and third parties

The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.
Exceptions to requirement to provide information (ToR C.4.1)

331. The international standard allows requested parties not to supply information in response to a request in certain identified situations. Among other reasons, an information request can be declined where the requested information would disclose confidential communications protected by attorney-client

privilege. Attorney-client privilege is a feature of the legal systems of many countries. 332. All of the agreements concluded by Korea incorporate wording modeled on Article 26(2) of the OECD Model Tax Convention or Article 8 of the OECD Model TIEA providing that requested jurisdictions are not obliged to provide information which would disclose any trade, business, industrial, commercial or professional secret or information which is the subject of attorney-client privilege/legal privilege or information the disclosure of which would be contrary to public policy. In practice no issues in relation to the rights and safeguards of taxpayers and third parties were raised by Koreas partners.
C.5. Timeliness of responses to requests for information

The jurisdiction should provide information under its network of agreements in a timely manner.
Responses within 90 days (ToR C.5.1)

333. In order for exchange of information to be effective it needs information to be provided in a timeframe which allows tax authorities to apply the information to the relevant cases. If a response is provided after a significant lapse of time the information may no longer be of use to the requesting authorities. This is particularly important in the context of international cooperation as cases in this area must be of sufficient importance to warrant making a request. 334. In 2008, 2009 and 2010, Korea has received a total of 166 requests for information 32 (36 in 2008, 54 in 2009, 76 in 2010) from 28 countries.
32.
The EOI division counts any letter as a request even when several persons in Korea are covered by the letter.
335. The statistics show an increasing number of incoming requests (+ 50% between 2008 and 2009 and + 40% between 2009 and 2010). Japan is by far Koreas main EOI partner representing 55% of Koreas incoming request. 336. On a total of 166 incoming requests, Korea was in position to provide an answer within 90 days in 46% of the cases and within 180 days in 31% more instances. Only four cases were processed in more than one year and of the requests received in 2010, only 6 were still pending as at December 2011.
Fulfilled within Year 2008 2009 2010 Total 7 26 43 76 16 14 22 52 9 6 5 20 More than Open Declined Total 0 0 6 6 2 6 0 8 36 54 76 166 2 2 0 4
90 days 180 days 365 days 365 days
337. It must also be noted that during the last three years Korea has continuously improved its processes. In 2008 only 19% of incoming requested were answered in 90 days, 48% in 2009 and 57% in 2010. When 11 requests were answered in more than 6 months in 2008 (30%), 8 and 11 were in 2009 and 2010 (15%). 338. Koreas authorities have advised that since 2010 when the Global Forum started to reviewthe implementation of the international standard, they have improved their internal processes to be able to provide information in 90 days in more instances (see further developments under section C.5.2). In addition, the ratio of responses provided in 90 days is now part of the internal evaluation system of the International Investigation Division, so this ratio has become a priority and is carefully monitored. Once a year, statistics on EOI are summarised and presented to Board of Audit and Inspection. 339. Korea has also mentioned that since 2010 it sends as a routine an update of status to its treaty partners where not in position to answer within 90 days. This update usually contains information regarding the stage where the request stands as well as the information already available. The provision of status updates on due time is also part of the annual evaluation of EOI divisions staff. 340. Koreas EOI partners have indicated that responses have in some instances been slow and that Korea has not provided an update of status in some situations. In 2010, Korea amended its internal processes to comply with the international standard. It is likely that most, if not all, of these instances occurred before this change.
Organisational process and resources (ToR C.5.2) Organisational process

341. As previously mentioned, Korea has received 166 requests for information over the last three years. In all cases, these requests are received by the EOI division at the NTS central level. A first analysis of the request will be performed at the central level to determine whether the information requested is covered by the EOI arrangement under which the request was made. 342. When information enabling Korea to perfectly identify the person concerned by the request in Korean is missing, the EOI division will first try to find these missing elements from the information available to revenue authorities in TIS or from other Korean public sources of information (databases maintained by other Ministries for instance). If not possible, further information will be asked to the requesting party, usually by e-mail or mail to facilitate the process. When the request is complete and complies with the treaty applicable, it is processed and registered in a specific database dedicated to EOI. A single request number is then allocated to the incoming request. 343. At this early stage, only in 8 cases over the last three years has Korea declined to provide the requested information. In one case the entity being the subject of the request was not identified, in two cases, the information requested was not covered by the DTC in force, in four cases information was requested by a country not covered by an EOI agreement and in one case, the case was under a lawsuit and the provision of information was delayed until the conclusion of the case. In one case over the last three years, one of Koreas counterparts was not satisfied with the answer provided and sent a follow up request. Korea has nevertheless clarified that in this particular case, the identification was made by the counterpart on the basis of a passport number which was erroneous, leading to a mistake in identifying the taxpayer concerned. 344. In 27 % of the cases, the EOI division was directly in position to process the request, because either the information was available in TIS or bank information was requested (all requests for bank information are directly handled at the central level). In most cases, and because requests in relation to companies usually need the collection of further information at the companys level, these requests are transferred to the local level. 345. Before sending the request, it is, for confidentiality reasons, translated into Korean by the EOI division. A decision is taken regarding the transmission of the request to a District Tax Office or a Regional Tax Office. This allocation is based on the type of person to which the request relates (i.e.: if it is a large business, the requests will likely to be transferred to a Regional Tax
Office) and the complexity of the request. When Regional or District Offices must process the request, it usually takes one week between the time the request is received by the EOI Division and the time it is passed on. 346. Once the competent office is determined, and before sending the request, the EOI division will first send an instruction sheet with some details regarding the request, the deadline to process the case and the way the information must be collected. Even though for domestic purposes information is mainly gathered through written questionnaires, for EOI purposes, the EOI division will usually instruct District and Regional Offices to go to the premises of the person concerned by the request. Korean laws do not provide for a specific timeframe to collect this information. The usual practice is to grant one month to local officials to gather the requested information. In any case, the time allocated will be within the 90 day rule. While this instruction sheet is sent out electronically, only hard copies of the requests themselves are delivered. 347. Once received at the local level, the instruction sheet along with the copy of the incoming requests is transmitted to the investigation division (there is one in any District Tax Office) which has the authority to audit taxpayers. The head of the investigation division will then assign the case to a team generally consisting of 2-3 auditors as part of its program of audits and grants to those officials the permission to visit the business premises when the EOI division has advised that this means should be used to gather the requested information. In practice, the people involved in the collection of information at the local level have confirmed that the information is collected as instructed by the EOI division and in the timeframe assigned. 348. Once the case is allocated, the auditors will in most cases contact the person required to provide the information to agree for an appointment. This is however not a prerequisite and there is still the possibility to directly go to the business premises to gather information without prior information of the person concerned. This is particularly used where, from the information provided, it appears that informing that person could jeopardise the provision of information. People involved in the collection of information have confirmed that the instruction sheet and the incoming requests sent by the EOI division are usually clear enough to process the case. The EOI division has also clarified that over the course of the collection, they frequently receive a call from local officials to get advice or further clarifications. 349. The visit in the business premises in most cases take place very quickly after receipt of the request as incoming EOI requests are usually a priority. During these visits, tax auditors usually take copies of the documents requested. They also have the possibility to question the person subject of the request. Once the information is collected, people at the local level prepare a report and will usually contact the EOI division to ensure, before

sending the reply, that the incoming request has been correctly answered. The answer is then checked by the head of the investigation division, then by the head of the tax office before being provided to the EOI division. An average 30-40 days have elapsed between the time where the request is sent to local offices and the provision of the response. 350. Once the report is received by the EOI division, it is checked again by the official in charge of the case. The answer is translated in English before being checked by the head of the EOI division, signed by the Head of the International Investigation Division and provided to the requesting party. The EOI division has stressed that answers received from the District and Regional Tax Offices are usually complete. Thus, situations where further information is asked to local officials are rare. This is due to the ongoing discussions that take place during the course of the collection of information between the EOI division and local officials. As previously mentioned, over the last three years in only one case was Koreas answer not completely satisfactory and this was due to erroneous information provided by the treaty partner. 351. The EOI division has advised that since the international standard was universally agreed in 2009, it has changed its practices. In particular, more attention is given to the timeliness of answers and a careful ongoing monitoring of the requests received in ensured. In particular, the EOI division has confirmed that it maintains contact with the local officials in charge of processing the incoming cases until the collection of information is completed. This ensures that (i) comprehensive information will be given to these local officials to help them in gathering information to the best extent possible; and (ii) that these officials are aware of the expectations regarding this collection. 352. It was previously the EOI divisions practice to send a single answer when all information had been gathered, even when some information was immediately available at the central level at the time the request was received. To better stick to the international standard, it is now the practice to send interim reports once some information is available. In particular, the EOI division has implemented in 2010 as a routine the provision of an update of status. When this is sent, the EOI division takes the opportunity to send at the same time the information available. In sum, while the focus was previously placed on the completeness of the answers provided, the EOI division has tried to find a balance between the importance of achieving a high standard of replies and the timeliness of responses. 353. The information received from Koreas partners shows that Korea has been able to respond and to provide the requested information, although this provision has been delayed in some instances. The new processes implemented in Korea since 2010 will nevertheless enhance the situation as already seen from the latest statistics provided by Korea.
Resources
354. The EOI division is staffed with 5 officials, the Deputy Director, two in charge of processing incoming requests for information, one of translation and automatic exchanges and the last one of translation, spontaneous EOI and EOI on request. There are also seven attachs located abroad (United States, Japan, China (2), Vietnam, Indonesia, OECD) which, although not competent authorities in the field of EOI, can facilitate the relationships between Korean and foreign authorities. Furthermore, two Korean officials are dispatched in Washington, DC and London JITSIC centres and are allowed to directly exchange information with officials from other JITSICs member countries. 355. To facilitate the processing of incoming requests at the local level, the EOI division has developed and published in July 2010 an EOI manual, which presents the internal guidelines to deal with incoming cases, the domestic rules applicable to incoming requests as well as the international standards of transparency. An update of this manual is anticipated in early 2012. 356. Officials joining the EOI division mostly have tax related educational background and must have a strong experience in either District Tax Offices or Regional Tax Offices before joining the team. They are in particular experienced as regards audits of businesses and individuals and/or collection of information. Korea authorities have also indicated that there is a specific training program for international tax audits and investigations and that EOI is part of this training. The EOI division also organises meetings at the local level to provide information and education on EOI. Finally, Korea also sends tax officials to the OECD regional centre located in Seoul to make them aware of international tax issues. 357. Among the possibilities to improve Koreas situation in the field of EOI, the EOI division has mentioned that while tax auditors from the Seoul area were perfectly aware of the issues tied to EOI, there would still be a room for improvement for tax officials from other regions. This will be the next focus of the EOI division. 358. Overall Korea has dedicated appropriate financial, human and technical resources to the various areas of its exchange of information regime considering the volume of requests it receives. All competent authority staff maintain high professional standards and have adequate expertise and training specific to exchange of information
Absence of restrictive conditions on exchange of information (ToR C.5.3)

359. There are no laws or regulatory practices in Korea that impose unreasonable, disproportionate, or unduly restrictive conditions on exchange of information.
Phase 1 determination The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 99
Summary of Determinations and Factors Underlying Recommendations 33

Factors underlying recommendations
Determination
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities (ToR A.1) Phase 1 determination: Identity of holders of bearer shares is not available in all The element is in situation in Korea. place but certain aspects of the legal implementation of the element needs improvements. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements (ToR A.2) Phase 1 determination: For trustees of personal The element is in place. trusts, Koreas legislation does not clearly prescribe that underlying documentation must be maintained. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. For trustees of personal trusts, Koreas legal framework should clearly provide that underlying documentation must be maintained. Korea should make sure that information pertaining to holders of bearer shares is available to its authorities in all circumstances
33.
The ratings will be finalised as soon as a representative subset of Phase 2 reviews is completed.
100 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

Determination Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.
Recommendations
Banking information should be available for all account-holders (ToR A.3)
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information) (ToR B.1) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information (ToR B.2) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 101
Determination
Recommendations
Exchange of information mechanisms should allow for effective exchange of information (ToR C.1) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The jurisdictions network of information exchange mechanisms should cover all relevant partners (ToR C.2) Phase 1 determination: The element is in place. Korea should continue to develop its exchange of information network with all relevant partners.
Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received(ToR C.3) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties (ToR C.4) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.
102 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

Determination
Recommendations
The jurisdiction should provide information under its network of agreements in a timely manner (ToR C.5) The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.
ANNEXES 103
Annex 1: Jurisdictions Response to the Review Report*
Korea would like to express a sincere gratitude to the assessment team for its hard work for the assessment of Korea. Korea also thanks other PRG members for their valuable input for Koreas combined peer review report. Korea is in agreement with the findings of this report. Since the cut-off date, there have been some recent developments with respect to Koreas EOI network. On 27 February 2012, internal procedure necessary for the entry into force was completed in respect of five EOI arrangements: protocol revising the DTC with Switzerland, a new DTC with Panama, TIEAs with the Cook Islands and the Marshall Islands as well as the OECD/CoE Multilateral Convention on Mutual Administrative Assistance in Tax Matters and the Protocol thereto.
* This Annex presents the Jurisdictions response to the review report and shall not be deemed to represent the Global Forums views.
104 ANNEXES
Annex 2: List of all Exchange-of-Information Mechanisms in Force
Multilateral agreement
Korea is a signatory to the multilateral Convention on Mutual Administrative Assistance in Tax Matters. The status of the multilateral Convention and its amending 2010 Protocol as at 31 January 2012 is set out in the below table. 34 When two or more arrangements for the exchange of information for tax purposes exist between Korea and a treaty partner, the parties may choose the most appropriate agreement under which to exchange the information.
Protocol (P)/ Amended Convention (AC) Signature (opened on 27-May-10) Entry into force 03-11-2011 03-11-2011 26-03-2003 07-02-1992 28-04-2004 16-07-1992 11-12-1989 17-09-2003 12-10-2010 17-04-2008 01-04-1995 01-04-1995 01-09-2005 1-06-2011 01-10-2004 01-12-2000 04-04-2011 03-11-2011 03-11-2011 27-05-2010 27-05-2010 27-05-2010 03-11-2010 03-11-2011 (P) (AC) (P) (P) (P) (P) (P) (P) 01-06-2011 01-06-2011 01-06-2011 (AC) (AC)
Original Convention Signature (opened on 25-Jan-88)
Country Argentina Australia Azerbaijan Belgium Brazil Canada Denmark Finland France Georgia Germany
Entry into force
34.
The updated table is available at www.oecd.org/dataoecd/8/62/48308691.pdf.
ANNEXES 105
Original Convention Signature (opened on 25-Jan-88) 22-07-1996
Protocol (P)/ Amended Convention (AC) Signature (opened on 27-May-10) Entry into force 27-05-2010 26-01-2012 03-11-2011 30-06-2011 (P) (AC) (AC) (AC) (P) (P) (P) (P) (P) (P) (P) (P) (P) (AC) (P) (AC) (P) (P) (AC) (P) (P) (P) 01-10-2011 01-09-2011 01-06-2011 01-06-2011 01-10-2011 01-03-2012 01-02-2012 01-06-2012
Country Iceland India Indonesia Ireland Italy Japan Korea Mexico Moldova Netherlands Norway Poland Portugal Russia Slovenia South Africa Spain Sweden Turkey Ukraine United Kingdom United States
Entry into force 01-11-1996
31-01-2006 03-11-2011 27-05-2010 27-05-2010 27-01-2011 25-09-1990 05-05-1989 19-03-1996 27-05-2010 27-05-2010 12-11-2009 20-04-1989 30-12-2004 24-05-2007 28-06-1989
01-05-2006
27-05-2010 03-11-2011 27-05-2010 27-05-2010 27-01-2011
01-02-1997 01-04-1995 01-10-1997
27-05-2010 27-05-2010 09-07-2010 27-05-2010 03-11-2011
1-06-2011 01-12-2010 01-04-1995 01-07-2009 01-05-2008 01-04-1995
27-05-2010 03-11-2011 18-02-2011 27-05-2010 03-11-2011 27-05-2010 27-05-2010 27-05-2011
106 ANNEXES
Bilateral agreements
List of Tax Information Exchange Agreements (TIEAs) or Double Tax Conventions (DTCs) signed by Korea as at 31 January 2012.
No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 Jurisdiction Albania Algeria Australia Austria Azerbaijan Bahamas Bangladesh Belarus Belgium Brazil Bulgaria Canada Chile China Colombia Cook Islands Croatia Czech Republic Denmark Estonia Type of EOI agreement Double Taxation Convention (DTC) DTC DTC DTC DTC Taxation Information Exchange Agreement (TIEA) DTC DTC DTC DTC (Protocol) DTC DTC DTC DTC DTC DTC TIEA DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC Date signed 17 May 2006 24 Nov 2001 12 Jul 1982 8 Oct 1985 19 May 2008 04 Aug 2011 10 May 1983 20 May 2002 29 Aug 1977 26 Jan 2010 07 Mar 1989 11 Mar 1994 05 Sep 2006 18 Apr 2002 28 Mar 1994 27 Jul 2010 31 May 2011 13 Nov 2002 27 Apr 1992 11 Oct 1977 09 Dec 1992 23 Sep 2009 19 Sep 1994 08 Feb 1979 19 Jun 1979 25 Oct 2010 10 Mar 2000 Date in force 13 Jan 2007 31 Aug 2006 01 Jan 1984 01 Dec 1987 25 Nov 2008 --22 Oct 1984 17 Jun 2003 19 Sep 1979 --27 Nov 1991 22 Jun 1995 18 Dec 2006 22 Jul 2003 28 Sep 1994 ----15 Sep 2006 03 Mar 1995 08 Jan 1979 15 Jan 1994 25 May 2010 11 Feb 1995 23 Dec 1981 01 Feb 1981 --31 Oct 2002
20 Egypt 22 Fiji 23 Finland 24 France 25 Gabon 26 Germany
ANNEXES 107
No.
Jurisdiction
Type of EOI agreement DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC TIEA DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC
Date signed 20 Mar 1995 29 Mar 1989 15 May 2008 19 Jul 1985 10 Nov 1988 6 Jul 2006 18 Jul 1990 18 Mar 1997 10 Jan 1989 08 Oct 1998 22 Jul 2004 18 Oct 1997 16 Dec 2000 5 Dec 1998 29 Nov 2004 15 Jun 2008 20 Apr 2006 07 Nov 1984 20 Apr 1982 25 Mar 1997 31 may 2011 06 Oct 1994 17 Apr 1992 27 Jan 1999 22 Feb 2002 05 Oct 2001 25 Oct 1978 06 Oct 1981 05 Oct 1982 23 Sep 2005 13 Apr 1987 20 Oct 2010 23 Nov 1996
Date in force 10 Jul 1997 01 Apr 1990 23 Oct 2008 01 Aug 1986 3 May 1989 8 Dec 2009 27 Dec 1991 13 Dec 1997 14 Jul 1992 22 Nov 1999 28 Mar 2005 9 Apr 1999 20 Aug 2003 13 Jun 2000 9 Feb 2006 26 Dec 2009 14 Jul 2007 26 Dec 1986 02 Jan 1983 21 Mar 1998 --11 Feb 1995 06 Jun 1993 16 Jun 2000 04 Aug 2003 29 May 2003 17 Apr 1981 22 Apr 1983 01 Mar 1984 13 Feb 2006 20 Oct 1987 --21 Apr 1998
27 Greece 28 Hungary 29 Iceland 30 India 31 Indonesia 32 Iran 33 Ireland 34 Israel 35 Italy 36 Japan 37 Jordan 38 Kazakhstan 39 Korea (Dem Rep of) 40 Kuwait 41 42 Laos Latvia
43 Lithuania 44 Luxembourg 45 Malaysia 46 Malta 47 Marshall Islands 48 Mexico 49 Mongolia 50 Morocco 51 52 Myanmar Nepal
53 Netherlands 54 New Zealand 55 Norway 56 Oman 57 Pakistan 58 Panama 59 Papua New Guinea
108 ANNEXES
Type of EOI agreement DTC DTC DTC DTC DTC DTC DTC DTC DTC (Protocol) DTC DTC DTC DTC DTC DTC DTC DTC DTC (Protocol) DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC
No. 61
Jurisdiction Poland
Date signed 21 Feb 1984 21 Jun 1991 26 Jan 1996 27 Mar 2007 11 Oct 1993 19 Nov 1992 24 Mar 2007 6 Nov 1979 24 May 2010 27 Aug 2001 25 Apr 2005 07 Jul 1995 17 Jan 1994 28 May 1984 10 Sep 2004 27 May 1981 12 Feb 1980 28 Dec 2010 16 Nov 2006 27 Sep 1988 24 Dec 1983 22 Sep 2003 29 Sep 1999 25 Oct 1996 4 Jun 1976 29 Nov 2011 11 Feb 1998 26 Jun 2006 20 May 1994
Date in force 9 Nov 1986 21 Feb 1992 21 Dec 1997 15 Apr 2009 6 Oct 1994 24 Aug 1995 1 Dec 2008 11 Feb 1981 --8 Jul 2003 2 Mar 2006 07 Jan 1996 21 Nov 1994 20 Jun 1986 --9 Sep 1982 22 Apr 1981 --29 Jun 2007 25 Nov 1989 27 Mar 1986 02 Mar 2005 19 Mar 2002 30 Dec 2006 20 Oct 1979 --26 Jun 2006 15 Jan 2007 9 Sep 1994
60 Philippines 62 Portugal 63 Qatar 64 Romania 65 Russia 66 Saudi Arabia 67 Singapore 68 Slovak Republic 69 Slovenia 70 71 73 74 75 76 78 South Africa Spain Sudan Sweden Switzerland Thailand Turkey
72 Sri Lanka
77 Tunisia 79 UAE 80 Ukraine 81 United Kingdom 82 United States 83 Uruguay 84 Uzbekistan 85 Venezuela 86 Vietnam
ANNEXES 109
Annex 3: List of all Laws, Regulations and Other Relevant Material
Commercial Laws/Civil Laws

Commercial Act Commercial Registration Act Civil Act Trust Act Act on the Establishment and Operation of Public Service Corporations Act on External Audit of Stock Companies Rules on Establishment and Supervision of Non profit Corporations under the Jurisdiction of BAI Enforcement Decree of the Act on External Audit of Stock Companies Enforcement Decree of the Act on the Establishment and Operation of Public Service Corporations
Taxation Laws
Corporation Tax Act Income Tax Act Framework Act on National Taxes Inheritance and Gift Tax Act Special Tax Treatment Control Act Act for the Coordination of International Tax Affairs Value Added Tax Act
110 ANNEXES
Punishment of Tax Evaders Act Procedure for the Punishment of Tax Evaders Act Enforcement Decree of the Inheritance and Gift Tax Act Enforcement Decree of the Act for the Coordination of International Tax Affairs Enforcement Decree of the Corporation Tax Act Enforcement Decree of the Income Tax Act Enforcement Decree of the Special Tax Treatment Control Act
Anti-Money Laundering Laws

Act on Reporting and Use of Certain Financial Transaction Information Act on Real name, financial Transactions and Guarantee of Secrecy AML/CFT Regulation Enforcement Decree of the Act on Reporting and Use of Certain Financial Transaction Information Enforcement Decree of the Act on Real name, financial Transactions and Guarantee of Secrecy Enforcement Rules of the Act on Real name, financial Transactions and Guarantee of Secrecy
Banking and Financial Laws

Financial Investment Services and capital Markets Act Regulation on Financial Investment Business Securities Market Listing Regulation Enforcement Decree of the Financial Investment Services and capital Markets Act
Other Laws
Criminal Act Non-Contentious Case Litigation Procedure Act Real Estate Registration Act
ANNEXES 111
Attorney Act Certified Judicial Scriveners Act Certified Public Accountant Act
Exchange of information
Double Tax Conventions Tax Information Exchange Agreements
112 ANNEXES
Annex 4: People Interviewed During On-Site Visit
Ministry of Strategy and Finance

International Tax Division Director Deputy Directors (2) Deputy Directors (2) Deputy Director Assistant Director Deputy Director
International Treaties Division Corporation Tax Division Income Tax Division Property Tax Division
Supreme Court of Korea (National Court Administration)

Real Estate Registration Division Deputy Director Deputy Director Deposit and Corporation Registration Division
Financial Services Commission (Korea Financial Intelligence unit)

Planning & Administration Office Deputy Director
ANNEXES 113
Information Analysis Coordination Office Deputy Director Deputy Director Compliance & Regulatory Division
Korea Federation of Banks

Management Supporting Department Manager
Ministry of Justice
Office of legal Counsel Prosecutor Public Service Advocate Officer of the Legal Research Commercial Legal Affairs Division
Financial Supervisory Service

Trust Team Senior Manager
Korea Financial Investment Association

Trust support team Chief
National Tax Service

International Investigation Division Director Deputy Director Examiners (2) Examiner
Yeok-Sam District Tax Office
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OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16 (23 2012 12 1 P) ISBN 978-92-64-16896-1 No. 59891 2012
Global Forum on Transparency and Exchange of Information for Tax Purposes
PEER REVIEWS, COMBINED: PHASE 1 + PHASE 2
REPUBLIC OF KOREA
The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions which participate in the work of the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes. These standards are primarily reected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004, which has been incorporated in the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised, but all foreseeably relevant information must be provided, including bank information and information held by duciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identied by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 plus Phase 2 reviews. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please visit www.oecd.org/tax/transparency and www.eoi-tax.org.
Please cite this publication as: OECD (2012), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Republic of Korea 2012: Combined: Phase 1 + Phase 2, OECD Publishing. http://dx.doi.org/10.1787/9789264168978-en This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information.
ISBN 978-92-64-16896-1 23 2012 12 1 P
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Global Forum On Transparency and Exchange of Information For Tax Purposes: Peer Reviews: Global Forum On Transparency and Exchange of Information For Tax Purposes Peer Reviews: Republic of Korea 2012

Cargado por

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GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report Combined: Phase 1 + Phase 2

ISBN 978-92-64-16896-1 (print) ISBN 978-92-64-16897-8 (PDF)

Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.

ABOUT THE GLOBAL FORUM 5

About the Global Forum

Information and methodology used for the peer review of Korea

EUR 1 = USD 1.398 as at 30 October 2011. www.xe.com, accessed 30 October 2011.

International exchange of information for tax purposes

Overview of the financial sector and relevant professions

Number (2010) 13 37 5 105 63 962 1392 23 30 62 80 135 9 1 3 55 29 8

Anti money laundering/combating financing of terrorism legislation

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 21

Compliance with the Standards

22 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 23

A.1. Ownership and identity information

24 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Companies (ToR 7 A.1.1)

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 25

26 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 27

Information held by companies

28 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Disclosure of major shareholdings in listed companies

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 29

Tax requirements Registration with revenue authorities

30 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Annual tax returns

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 31

Foreign companies Branches of foreign companies

32 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 33

34 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 35

Bearer shares (ToR A.1.2)

36 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Deposit of bearer shares instruments

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 37

Partnerships (ToR A.1.3)

Registration for commercial purposes

Partnership in this section means simple partnership.

38 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Registration with revenue authorities

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 39

Annual tax returns

Information held by the partnership or partners

Information held by service providers

40 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Trusts (ToR A.1.4)

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 41

Registration requirements/information held by government authorities Personal trusts

42 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 43

Information maintained by trustees or other persons Personal trusts

44 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 45

Identity information maintained by service providers

46 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Foundations (ToR A.1.5)

Information held by government authorities

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 47

48 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 49

50 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION