On September 8, a Model 1 intergovernmental agreement (IGA) signed by the US and South Korea entered into force.
The United States and South Korea signed a Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement (IGA) on June 10, 2015. On the same date, a memorandum of understanding was signed by representatives of the United States Department of the Treasury and the Republic of Korea Ministry of Strategy and Finance.
The countries signed Model 1 IGA, under which Korea-based Financial Institutions will need to report information on financial accounts held by US persons to the Korean Tax Service. This information is then exchanged with the IRS. Failure by FFIs in Korea to disclose information on their US clients will result in a 30 percent withholding tax on payments of US-sourced payments. The automatic exchange of information will also be reciprocal, allowing the Korean Tax Service to obtain information on the financial accounts of South Koreans from IRS.
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