Tax Plan Aims At Investors in Foreign Funds

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Tax Plan Aims At Investors in Foreign Funds

The government is strongly considering imposing taxes on indirect income raised from investing in foreign funds. The government's plan is to participate in multilateral cooperation led by the Organization for Economic Co-operation and Development to prevent harmful tax competition.

"As scales of international trade and capital exchange grow, the government plans to enforce rules to prevent possible tax evasions for indirect incomes raised from investments in foreign funds," said a source from the Ministry of Finance and Economy on Tuesday. "We are currently working with the Korea Institute of Public Finance to introduce the Foreign Investment Fund tax rules in two to three years."

Through the tax rules, the government can assess Koreans on indirect income in amounts held offshore in a noncontrolled foreign company or a foreign trust and impose a dividend income tax on Korean citizens based on estimates. Until now, the government has postponed imposing taxes for Korean investors' indirect incomes from foreign sources, such as funds managed in tax heavens, until the actual dividends were paid.

Currently, some advanced countries including the United States and Germany adopted the foreign investment fund tax rules. The OECD also recommended countries adopt the measure in order to prevent possible tax evasion through investment in tax heavens.

by Hong Byeong-gee

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