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How should I deal with a violation of the obligation to report overseas financial accounts?

Hello. I received contact from the National Tax Service for a violation of the obligation to report overseas financial accounts. A few years ago, I earned some profit from an overseas real estate investment. At that time, I received the sale proceeds into an overseas account, and some of the funds are still in that account. I was not really familiar with the concept of reporting overseas financial accounts. I heard that I could face not only an administrative fine but also criminal punishment. How should I deal with this?

reporting of overseas financial accounts

reporting of financial accounts

Answer to Related Inquiry

Author: 김국일

Hello. The obligation to report overseas financial accounts is a system under the 'Act on International Tax Adjustment.'

If the total balance of overseas financial accounts exceeds 500 million won as of the last day of each month, there is an obligation to report it to the National Tax Service by June of the following year.

If overseas financial account information is not reported within the reporting deadline or is underreported, an administrative fine is imposed according to the criteria below, up to a limit of 20% of the unreported (or underreported) amount.

If the unreported (or underreported) amount exceeds 5 billion won, personal details of the violator (including the representative in the case of a corporation), such as their name, age, occupation, address, and the amount of the violation, may be disclosed.

In addition, a notification disposition or criminal punishment (imprisonment with labor for up to two years, or a fine of not less than 13% and not more than 20% of the unreported or underreported amount) may be imposed.

As in your situation, when the obligation to report overseas financial accounts is violated, it is important to promptly organize the facts in response to the National Tax Service's contact and to explain them faithfully.

Submitting materials that prove there was no intent, that the source of the funds was legitimate, and that there was no purpose of tax avoidance can lower the level of punishment.

Because such a matter involves a complex interplay of international taxation, foreign exchange transactions, and tax audit response, it is advisable to establish a response strategy together with an attorney specializing in finance and tax.