News

Korea blasted for plan to change tax rules

Tax_calculatorA trade association has criticised Korea's plan to lower the ownership threshold at which foreign investors are liable for capital gains tax. On July 1, 2018, according to draft regulations, foreign investors will pay capital gains tax on listed equity transactions if they hold 5% or more of the company at the time of sale or at any time in the past five years. Currently, the threshold is 25%. “This is a significant change that poses extremely challenging operational hurdles for securities companies and for the overall Korean market infrastructure for little or no additional tax revenue for the Korean government,” said the Asia Securities Industry and Financial Markets Association (ASIFMA). The association claimed the tax revenues would be low because “the overwhelming majority” of foreign investors in Korea own less than 5% of the companies they invest in. But to prove transactions are exempt from capital gains tax, foreign investors would require back-dated financial information that is costly and difficult to obtain. Complying with the proposed rules would therefore require “substantial investment in technology and process” and would entail “major disruptions”, said the association. In addition, ASIFMA warned that securities companies in Korea may decide to apply an 11% withholding tax on foreign investors' transactions as a blanket measure to protect themselves from secondary tax liability. Foreign investors would have to recoup this money from the government. “A 11% withholding on all sales proceeds will have a significant detrimental impact to foreign investors and a disastrous consequence for the Korean equities market,” said ASIFMA. ©2018 funds global asia

Executive Interviews

INTERVIEW: Operational challenges

Jun 09, 2018

Caroline Higgins of Northern Trust tells George Mitton about A-share inclusion, ETF Connect and why Cayman funds predominate in the region.

INTERVIEW: Making a name

Apr 18, 2018

Formed by a merger in 2012, Old Mutual Global Investors was little-known in Asia. Carol Wong, managing director for Asia-Pacific, is changing that. She talks to George Mitton.

Roundtables

SINGAPORE ROUNDTABLE: Optimism versus caution

Oct 23, 2018

The impact of financial technology, developments in Asian passporting and the promise of new markets in Thailand were among the topics discussed by our panel. Chaired by George Mitton in Singapore.

HONG KONG ROUNDTABLE: a long-term project

Jun 09, 2018

Our panel discussed robo-advisers, ETF Connect, and why the mutual recognition of funds (MRF) scheme will take time to develop. Chaired by George Mitton in Hong Kong.