In case of an officer or employee receiving or exercising stock-based compensation from a foreign controlling shareholder, the Korean subsidiary or branch office will be obligated to submit exercise/ receipt transaction details to the tax authorities. (Article 164-5 of the Personal Income Tax Law)

Key Data and Filing Deadline:

  • Filing deadline: March 10 of the year following the taxable period in which the date of exercise/receipt falls
  • Data subject to the filing: Stock-based compensation exercised or received on or after January 1, 2024 

RSM Thoughts

  1. If the Korea entity is subject to this case, please ensure that a responsible team or manager keeps track of stock transaction data. The scope of information to be collected has yet to be determined, but key data (i.e., employee name, # of stocks received or exercised, etc.) should be one of the data. 
  2. We understand that this type of data is sometimes difficult for the local management to obtain (i.e., no HR in Korea, hesitance to provide information to the foreign tax authorities, etc.). We understand this potential limitation, so we encourage a responsible team or manager to communicate internally to properly respond with this compliance. At the end of the day, it is a Korean tax regulation that may impact taxes the Korean government earns. Anyhow, the first filing shall be March 10th of 2025 (NOT 2024), so we have one year to plan. 
  3. We expect this to be part of the withholding tax filing obligations, so please have an in-house team or relevant service provider be updated on this.