The governments of South Korea and the US have approved the text of an inter-governmental agreement (IGA), which allows the automatic exchange of tax information, to implement the Foreign Account Tax Compliance Act (FATCA).
The South Korean National Tax Service (NTS) and the US Internal Revenue Service (IRS) will start exchanging tax information on regular basis from next year which will enable South Korean FFIs comply with FATCA legislation, according to tax-news.com.
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Enacted by the US Congress in 2010, FATCA is intended to ensure that the US obtains information on accounts held abroad at foreign financial institutions (FFIs) by US persons.
The completion of an IGA had first been discussed between the two countries in April 2012.
Under the IGA, the automatic exchange of information would be reciprocal.
Currently, South Koreans with overseas financial accounts worth more than KRW1 billion (US$927,000) are currently obligated to report the assets, and to explain the sources of the funds, or pay at least a 10% fine.
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By GlobalDataAs per the FATCA law, failure by an FFI to disclose information on their US clients, including account ownership, balances and amounts moving in and out of the accounts, will result in a requirement to withhold 30% tax on payments of US-sourced income.
Banks, investment firms and insurance companies are among the FFIs that will be subject to the IGA.
