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Authorities discover Citi, Standard Chartered, Deutsche and HSBC underpaid taxes
Four Korean branches of overseas banks are to pay a combined 300 billion won ($268 million) in capital gains taxes on from an offshore fund in Luxembourg, underpaid for the past five years, government officials confirmed Thursday.
Citi Bank, Standard Chartered Bank, Deutsche Bank and HSBC are to make additional payment on their capital gains from investing in offshore funds called Sicav in Luxembourg, tax authorities said. The 300 billion won of additional tax demanded is the amount underpaid by the four lenders from misunderstanding the tax treaty between Korea and Luxembourg.
“A tax rate of 22 percent should have been applied on their offshore capital gains, but only 15 percent were collected for the past five years,” a Finance Ministry official in charge of tax treaties said.
The four banks have been paying a discount rate of 15 percent tax applicable on capital gains from investments other than Sicav funds.
Sicav is a type of collective investment fund with variable capital, most common in Europe
“The 7 percent of underpaid taxes between 2006 and 2010 will soon be ordered for collection,” he said.
Standard Chartered Bank objected to the claim that it underpaid tax.
“SC will appeal to the Tax Tribunal to reverse the coming decision. I cannot elaborate further but the claim that SC underpaid tax is unfair,” a tax official at SC said.
Tax Tribunal is a state agency under the Prime Minister’s Office empowered to resolve tax disputes.
The National Tax Service is said to have found the shortfall in tax collection during its offshore tax evasion investigation. It has been toughening its crackdown on offshore tax evasion by wealthy individuals and large businesses since last year to increase the government’s tax base.
The agency last January made the Offshore Compliance and Enforcement Center, an ad hoc taskforce established in 2009, a permanent body.
The NTS has been in talks to exchange financial information with Switzerland and Luxembourg, traditionally popular banking destinations for its tight confidentiality protection laws.
The agency slapped fines totaling 2.77 trillion won ($2.49 billion) based on more than 18,300 examinations conducted into individuals and businesses that tried to evade taxes in 2010. It placed more than 100 workers on the tax evasion crackdown team this year and introduced new screening procedures for increased efficiency.
“Investigations into offshore tax evasion and audit require expertise and close cooperation with tax authorities abroad. We are strengthening our information gathering system to clamp down tax offenders,” a NTS official said.
By Cynthia J. Kim (cynthiak@heraldcorp.com)
Four Korean branches of overseas banks are to pay a combined 300 billion won ($268 million) in capital gains taxes on from an offshore fund in Luxembourg, underpaid for the past five years, government officials confirmed Thursday.
Citi Bank, Standard Chartered Bank, Deutsche Bank and HSBC are to make additional payment on their capital gains from investing in offshore funds called Sicav in Luxembourg, tax authorities said. The 300 billion won of additional tax demanded is the amount underpaid by the four lenders from misunderstanding the tax treaty between Korea and Luxembourg.
“A tax rate of 22 percent should have been applied on their offshore capital gains, but only 15 percent were collected for the past five years,” a Finance Ministry official in charge of tax treaties said.
The four banks have been paying a discount rate of 15 percent tax applicable on capital gains from investments other than Sicav funds.
Sicav is a type of collective investment fund with variable capital, most common in Europe
“The 7 percent of underpaid taxes between 2006 and 2010 will soon be ordered for collection,” he said.
Standard Chartered Bank objected to the claim that it underpaid tax.
“SC will appeal to the Tax Tribunal to reverse the coming decision. I cannot elaborate further but the claim that SC underpaid tax is unfair,” a tax official at SC said.
Tax Tribunal is a state agency under the Prime Minister’s Office empowered to resolve tax disputes.
The National Tax Service is said to have found the shortfall in tax collection during its offshore tax evasion investigation. It has been toughening its crackdown on offshore tax evasion by wealthy individuals and large businesses since last year to increase the government’s tax base.
The agency last January made the Offshore Compliance and Enforcement Center, an ad hoc taskforce established in 2009, a permanent body.
The NTS has been in talks to exchange financial information with Switzerland and Luxembourg, traditionally popular banking destinations for its tight confidentiality protection laws.
The agency slapped fines totaling 2.77 trillion won ($2.49 billion) based on more than 18,300 examinations conducted into individuals and businesses that tried to evade taxes in 2010. It placed more than 100 workers on the tax evasion crackdown team this year and introduced new screening procedures for increased efficiency.
“Investigations into offshore tax evasion and audit require expertise and close cooperation with tax authorities abroad. We are strengthening our information gathering system to clamp down tax offenders,” a NTS official said.
By Cynthia J. Kim (cynthiak@heraldcorp.com)
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Articles by Korea Herald
