South Korea: Relief at source for Korean Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB)

Clearstream Banking1 informs clients that effective immediately non-residents and foreign investors investing in Korean Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB) can benefit from tax exemption on interest and redemption (“income”) payments and capital gains derived from KTB and MSB. This follows the proposed amendments to the Enforcement Decree of the Income Tax Act and Enforcement Decree of the Corporate Tax Act. Impact on clients Clients who are non-residents and foreign investors can benefit from tax exemption on income payments from KTB and MSB if the necessary documents have been submitted to Clearstream Banking. Standard refund of withholding tax on income payments from KTB and MSB is not available through Clearstream Banking. Clearstream Banking does not assist with tax exemption on capital gains derived from KTB and MSB. Clients should consult their tax advisor for further information. Eligible beneficial owners Exemption from withholding tax on income payments from KTB and MSB is available through Clearstream Banking for eligible beneficial owners as follows: Overseas Investment Vehicle (public or private) that is a “foreign corporation” under Article 2 subparagraph 3 of the Corporate Tax Act; Note: An “overseas public investment vehicle” is an overseas investment vehicle (“OIV”) similar to a “collective investment scheme” defined in Financial Investment Services and Capital Markets Act. It is an OIV which is either legally recognised as a public investment vehicle under the laws of the country in which it was incorporated, or one which has recommended at least 50 investors abroad to subscribe to the acquisition of securities in preparation of an investment prospectus or a similar matter. Overseas Investment Vehicle (public or private) that is not a “foreign corporation” under Article 2 subparagraph 3 of the Corporate Tax Act; Note: An “overseas public investment vehicle” is an Overseas Investment Vehicle (“OIV”) similar to a “collective investment scheme” defined in the Financial Investment Services and Capital Markets Act. It is an OIV which is either legally recognised as a public investment vehicle under the laws of the country in which it was incorporated, or one which has recommended at least 50 investors abroad to subscribe to the acquisition of securities in preparation of an investment prospectus or a similar matter. Central or local government or public institution; Pension fund; Financial institution; Other corporate entity. Documentation requirements To obtain exemption from withholding tax on income payments from KTB and MSB, the documentation must be provided to Clearstream Banking before the respective deadlines (see “Deadlines for receipt of documents” below): Overseas Investment Vehicle (public or private) that is a “foreign corporation”, central or local government or public institution, pension fund, financial institution, other corporate entity One-Time Certificate for South Korea Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB); Application for tax exemption on interest income from investment in Government Bonds and Monetary Stabilisation Bonds (for foreign corporations) Form 72-6; Certificate Of Residence (COR); and Per-payment breakdown (when applicable). Overseas Investment Vehicle (public or private) that is not a “foreign corporation” One-Time Certificate for South Korea Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB); Application for tax exemption on interest income from investment in Government Bonds and Monetary Stabilisation Bonds (for non-residents) Form 19-13(1); Certificate Of Residence (COR); and Per-payment breakdown (when applicable). Provision of per-payment breakdown The per-payment breakdown must be provided by the Clearstream Banking client, before the prescribed deadline (see “Deadlines for receipt of documents” below) via Swift (formatted MT565) or Xact Web Portal message, using the following template: Clearstream Banking client’s account number; ISIN; Payment date; Corp. event ID; Total holding for the event; The breakdown of holding per beneficial owner(s) with the respective tax rate to be applied; Investment Registration Certificate (“IRC”) number; Full name of the beneficial owner(s) (as per IRC); Full address of the beneficial owner(s) (complete street address including postal code, city, country) (as per IRC). Deadlines The deadlines for the submission of the documentation exemption from withholding tax on income payments from KTB and MSB are as follows: Documents Deadlines for receipt of documents One-Time Certification for South Korea Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB). Ten business days before the first income payment date, by 10:00 CET. Application for tax exemption on interest income from investment in Government Bonds and Monetary Stabilisation Bonds (for foreign corporations) – Form 72-6 Ten business days before the first income payment date, by 10:00 CET. Application for tax exemption on interest income from investment in Government Bonds and Monetary Stabilisation Bonds (for non-residents) – Form 19-13(1). Ten business days before the first income payment date, by 10:00 CET. Certificate of residence Ten business days before the first income payment date, by 10:00 CET. Per-payment breakdown Three business days before each income payment date, by 10:00 CET. Trading prerequisite In order to access the South Korean market, Clearstream Banking clients must be in possession of an IRC. Holding requirement In Clearstream Banking, IRC holders are non-individuals for domestic South Korean securities. For Overseas Investment Vehicle “OIV” (non-public OIV) and “OPCIV” (public OIV) with beneficial owners, the IRC holders are the “OIV” and the “OPCIV”. Note: The procedure and documentation requirements for obtaining an IRC are provided in Settlement Services - South Korea. 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. ------------------------------------------ 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 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.