Plan to force reporting of foreign accounts

Plan to force reporting of foreign accounts

Finance Ministry will require all residents, including expats, to register deposits overseas next year

Foreigners staying in Korea for over one year will have to report any bank accounts they hold outside Korea to local authorities beginning next year, according to the Ministry of Strategy and Finance yesterday.

Businesses based overseas that operate in Korea may be required to do the same, the ministry said.

In its 2010 policy guide submitted to President Lee Myung-bak, the ministry said overseas bank accounts would have to be reported for every resident in Korea. The local tax law defines a resident as anyone who lives in Korea for more than one year, regardless of nationality.

The ministry said the measure is aimed at preventing high-income earners from evading taxes by using overseas banks. Local policy makers have regarded stricter tax collection as a way to reduce the government deficit, which has quickly burgeoned amid the economic crisis.

“We are working to revise the relevant law and expect the revision will be made by the end of the first half of next year,” said an official at the ministry who called the revision part of enhanced monitoring of taxation of Korean citizens’ overseas income. But long-term foreign residents will also be affected by the decision.

The regulation will also be applied to all “local companies.” The official said the ministry has yet to determine how to define that term, but local branches of foreign companies could be included. Still, the official added, the measure is designed to monitor Korean companies more closely, not foreign ones.

The 2010 plan also calls for more frequent changes to utility rates including gas and electricity, to conform to shifts in international fuel prices.

The price linkage system, in which utility bills are adjusted on a regular basis to match international energy prices, is at the center of the policy.

The government had used such a system to set gas prices, resetting them to match international liquefied natural gas rates every two months, but has put those automatic updates on hold since March 2008. Since then, international prices of fuel including oil have fluctuated severely.

Noh Dae-lae, an assistant finance minister, told reporters yesterday that the government has already confirmed it will restart the gas price linkage system and plans to do so in March. He also said electric bills would be linked similarly beginning in 2011.

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