South Korea: Amendment to tax procedure for Korean Government Bonds (KGB) and Monetary Stabilisation Bonds (MSB)
Clearstream Banking1 informs clients that effective
immediately
the tax procedure for Korean Government Bonds (KGB) and Monetary Stabilisation Bonds (MSB) has been streamlined to ease the investment in Korean bonds.
Background
- The Ministry of Economy and Finance (MOEF) has updated the draft amendment to the Corporate Tax Act Enforcement Decree related to the QFI system. Effective 1 January 2025, The Qualified Foreign Intermediary (QFI) system has been changed. Clients who are intermediaries do not need to have the QFI status and QFI tax exemption in order to hold South Korean Government Bonds (KGB) and Monetary Stabilisation Bonds (MSB) for their final beneficial owner(s).
- Clients who are intermediaries can hold KGB and MSB through several underlying intermediaries CFI (Custodian Foreign financial Institution).
- The requirements for OIVs have been streamlined to ease the tax exemption process for OIVs.
Impact on clients
- Clients who are intermediaries do not need to request the QFI status and tax exemption before holding KTB and MSB through Clearstream Banking. However, there is no change in the responsibilities and liabilities of the intermediaries as defined in the Enforcement Decree of the Corporate Tax Act and the Enforcement Decree of the Income Tax Act.
- Clearstream Banking now allows more than one intermediary in the custody chain. Clients, as intermediary, can hold KGB and MSB through another intermediary CFI or through multiple intermediaries CFIs.
- For Overseas private investment vehicles (deemed as beneficial owners), the confirmation letter of Private OIV’s Failure of Investor Verification is no longer needed.
- The tax documentation requirements for all BO types have been streamlined to ease the investment in Korean bonds.
Further information
The Market Taxation Guide – South Korea will be updated in due course.
For further information, please contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or your Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42 avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248 , and Clearstream Banking AG (for Clearstream Banking AG clients using Creation accounts), registered office at Mergenthalerallee 61, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.
Clearstream Banking S.A. is registered as an Australian CS (Overseas) Facility, under subsection 824B(2) of the Corporations Act 2001, with registration number ARBN 675 244 783.