SOUTH KOREA Law and Practice Contributed by: Dongwook Kang, Chris Kim, Seung-Wan Chae and Jongwoo Kim, Bae, Kim & Lee LLC
sovereign funds that invest through domestic IPFs, as discussed in 2.4 Tax Regime for Funds . 4.9 Double Tax Treaties For purposes of determining the entitlement of a fund to the benefits under a South Korean tax treaty, the “person” and “resident” requirements included in rel - evant tax treaty must be met. Under the OECD Model Tax Convention, the term “person” includes an indi - vidual, a company and any other body of persons. Therefore, a fund that takes the form of a company will satisfy this definition, while a fund that is treated as a transparent entity such as a partnership is usually not treated as a person and thereby is not entitled to treaty benefits at the fund level. Company-type funds must also meet the residency requirements under the relevant treaty as well as beneficial ownership require - ments with respect to the relevant income. Having said that, under the proposed tax revision as of July 2025, South Korean funds without legal personality (eg, trust-type funds) may be eligible to obtain a South Korean tax residency certificate from 2026, provided that all of their investors qualify as bona fide South Korean tax residents under the relevant tax treaties. 4.10 Foreign Account Tax Compliance Act (FATCA)/Common Reporting Standard (CRS) Compliance Regime South Korea signed the Model 1 Intergovernmental Agreement (IGA) with the USA on 10 June 2015. South Korea has been treated as if it had an IGA in effect since 30 June 2014, following the issuance of imple - mentation regulations by South Korea’s FSC on 18 June 2014. On 29 October 2014, the South Korean government also entered into the Multilateral Competent Author - ity Agreement (MCAA) to exchange information with the jurisdictions committed to the Common Reporting Standard (CRS). On 16 February 2017, South Korea amended its regulations to implement the automatic exchange of financial information with foreign coun - tries under the CRS and FATCA. 4.11 Anti-Money Laundering (AML) and Know Your Customer (KYC) Regime The legislations governing money laundering and terrorist financing include the Financial Transac -
tion Reports Act (FTRA), the Proceeds of Crime Act (POCA) and the Act on Prohibition Against the Financ - ing of Terrorism and Proliferation of Weapons of Mass Destruction (PFOPIA). The FTRA provides for preventative measures, such as the establishment and operation of the Korean Financial Intelligence Unit (KoFIU), and other meas - ures to be undertaken by financial institutions. The POCA criminalises money laundering, and provides for the government’s authority to preserve and confis - cate criminal proceeds. The PFOPIA provides for the criminalisation of terrorist financing and designation of individuals and entities with whom financial institu - tions cannot conduct financial transactions without prior approval by the Financial Services Commission. Financial institutions are required to conduct custom - er due diligence (CDD) under the Act on Real Name Financial Transactions and Confidentiality (RNFTC) and the Financial Transaction Reports Act (FTRA). The RNFTC effectively prohibits the opening or main - taining of anonymous accounts or accounts under fictitious names, and requires financial institutions to check and verify the real name of their customers. 4.12 Data Security and Privacy for Investors In South Korea, the collection and use of personal information (PI) is mainly governed by the Personal Information Protection Act (PIPA), together with its enforcement decree or prime implementing regula - tion (PIPA-ED). PIPA resembles the EU General Data Protection Regulation (GDPR) in scope and thrust, but differs in key aspects, including the predominant legal basis for PI collection (express informed con - sent, largely to the exclusion of the other bases such as legitimate interest) and requisites for PI transfers. The other relevant statute is the Credit Information Use and Protection Act (CIPA), which covers credit information, including financial and transaction data, and financial services reliant on such data. CIPA, simi - lar to PIPA, requires express consent for its collection and usage. 4.13 Anticipated Changes for Investors There are no anticipated changes for investors.
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