Newsletter | August 2014, Issue 3
	BANKING
	Regulations Enacted to Lessen FATCA Compliance Burdens on Financial Institutions
	On June 18, 2014 at the 11th regular meeting of the Financial Services Commission (“FSC”), the FSC enacted implementation regulations (the “Regulations”) relating to the Korea-US intergovernmental agreement (“IGA”) on the Foreign Account Tax Compliance Act (“FATCA”).  The Regulations aim to provide clear guidance regarding the implementation of and compliance with the FATCA so as to alleviate burdens on financial institutions and their customers.  The Regulations went into effect on July 1, 2014.
	Key contents of the Regulations are as follows.
	Overview of FATCA
	The FATCA was enacted on March 18, 2010 and aims to allow the US government to procure information on US citizens’ financial activities overseas. Final regulations relating to the FATCA were announced on January 17, 2013.
	‒ The FATCA requires non-US financial institutions to execute an agreement with the U.S. Internal Revenue Service (“IRS”) by the end of June 2014 and starting July 1, 2014, to screen accounts for those held by US citizens, report information relating to those accounts, and withhold taxes from those accounts.   ‒ Any financial institution that is found to be non-compliant will be subject to a withholding tax of 30% on US-source income (interest, dividends, etc.).
	Korea executed an IGA regarding the FATCA on March 17, 2014.  Under the IGA, each nation’s financial institutions must report relevant account information to the other nation’s tax authority.  The information sharing will start September 2015 and take place every September thereafter.
	Further details of the IGA as contained in a Ministry of Strategy and Finance press release dated March 19, 2014 are as follows:
	Categories US → Korea Korea → US Accounts Covered Individual Accounts Deposit account with annual, interest of USD 10 or more Other financial accounts relating to US-source income Financial accounts in excess of USD 50,000 Corporate Accounts Financial accounts relating to US-source income Financial accounts in excess of USD 250,000 Reported Information Interest, dividends, other income Interest, dividends, other income, account balance Reporting Responsibility Banks, financial investment firms, insurance companies, etc. Timing Every September starting September 2015 (data shared will be current as of end of previous calendar year)
	Scope of Application
	Financial institutions ― Savings institutions such as banks, savings banks and mutual finance institutions; entrustment institutions such as securities firms; funds; insurance companies; etc. (scope of reporting obligation reduced for banks, cooperatives, etc. whose total assets as shown on their balance sheet are less than USD 175 million and that meet certain other requirements)
	Financial accounts ― Bank account, trust account, fund account, insurance contract (if cash surrender value is more than USD 50,000), pension contract, etc. (reporting obligation exempted for certain special tax treatment products (annuity accounts, worker’s asset building accounts, long-term house-purchasing accounts, etc.) for which annual contribution is limited)
	Process
	Financial institution reviews its accounts data and checks for accounts owned by US citizens.
	The consolidated balance of all accounts opened with the financial institution and held under the name of the same individual or entity is summed up (but only to the extent calculable using the institution’s computing system).
	For accounts held by US citizens, certain account information (name, account number, balance, total interest, etc.) is transferred to the Korea National Tax Service (“NTS”) once a year.
	Group accounts opened between July 1, 2014 and December 31, 2014 will receive a grace period until the end of June 2016.
	※ Screening and Reporting Periods per Account Category
	Account Category Period for Verifying Owner’s US Citizenship Balance Subject to Report Deadline for Report to NTS2) New Accounts Accounts opened after July 1, 2014 Upon opening of account Balance as of end of 20143 (and of each year thereafter) By end of July 20153 (and of each July thereafter) Existing Accounts High Value Personal Accounts Accounts whose balance as of end of June 2014 was in excess of USD 1 million By end of June 2015 Balance as of end of 20143 (and of each year thereafter) By end of July 20153 (and of each July thereafter) Low Value Personal Accounts Accounts whose balance as of end of June 2014 was over USD 50,0001 : but lower than or equal to USD 1 million By end of June 2016 Balance as of end of 20154 (and of each year thereafter) By end of July 20164 (and of each July thereafter) Group Accounts Accounts whose balance as of June 2014 was in excess of USD 250,000
	Notes:
	1) In case of insurance or pension contracts, in excess of USD 250,000.
	2) Information sharing between NTS and IRS to take place September 2015 and every September thereafter.
	3) If account owner’s US citizenship is verified during 2014.
	4) If account owner’s US citizenship is verified during 2015.
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	If you have any questions regarding this article, please contact below:
	Sang Hwan Lee shlee@kimchang.com Joon Young Kim joonyoung.kim@kimchang.com
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	www.kimchang.com Banking Practice Group