In the last 10 years, South Korea has seen an incredible surge in economic expansion. The country now represents the fourth largest economy in Asia, and the capital city of Seoul – particularly its Gangnam neighborhood – has become a capitalist paradise teeming with big-name brands and luxury boutiques. However, the increased wealth enjoyed by some Koreans has drawn the attention of the country’s National Tax Service (NTS), leading financial regulators to question whether they have enough information about the offshore assets of their citizens.
According to Tax-News.com, the NTS began cracking down on this issue this year, expanding its data collecting abilities to get a more comprehensive sense of Korean assets abroad. This measure is reportedly an effort to increase revenues for the Korean government by expanding the pool from which it can effectively extract taxes.
This increased activity has spurred an increase in voluntary disclosure – 62 percent more assets have been declared compared to this time last year – as more Koreans have stepped forward to provide details about their international holdings. The documented rise could be due, in part, to the fact that, along with boosting its investigative efforts, the government body has also reassured the population that those who come forward won’t face some form of punitive action.
“The NTS has declared that it intends to develop further its ability to identify and investigate undeclared accounts held abroad” the source states. “However, […] those who declare their overseas assets voluntarily will retain their confidentiality and, while they will be required to pay the tax and interest due, will not be audited.”
Offshore account compliance can be uncertain territory for taxpayers and government bodies alike. While regulators may encounter difficulties when it comes to monitoring their citizens’ activities, individuals may be unclear about the assets they must declare, and who they are legally required to disclose them to. Steve Moskowitz, Senior Partner of Moskowitz, LLP, a Tax Law Firm in San Francisco, CA, just returned from meeting with Korean tax officials in Seoul, Korea. We will post highlights of his trip soon.
Moskowitz LLP, A Tax Law Firm, Disclaimer: Because of the generality of this blog post, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Prior results do not guarantee a similar outcome. Furthermore, in accordance with Treasury Regulation Circular 230, we inform you that any tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purposes of (i) avoiding tax related penalties under the Internal Revenue Code, or (ii.) promoting, marketing, or recommending to another party any tax related matter addressed herein.