Abstract

Recently domestic pension funds have expanded foreign investment and preferred the foreign investment entrusted. Domestic pension funds can’t take foreign tax payment credit on tax amounts paid in a foreign country in the foreign investment. This is regarded that the foreign investment is more unfavorable tax treatment than the domestic investment. In order to solve this problem, it is necessary that domestic pension funds be recognized as tax－exempt entity from foreign country’s taxing authorities. And so the tax－exempt entity provisions to mutual agreement between two countries are needed. The US tax law enacts a withholding tax exempt from the levy in designating tax－exempt entity on some of financial income from domestic pension funds’ foreign investment. And The US tax law enacts tax exemption in case that foreign pension funds be regarded as investing countries’ foreign government. The US tax law enacts foreign government as integral part and controlled entity, the former is tax exempt from financial income and the latter is taxed on financial asset management profit. This study presents the improvement plan on tax problem to foreign investment. First, it is argued that domestic pension funds be tax exempt in designating them as the US tax law’s taxexempt entity. Second, it is necessary that investing countries tax in enacting tax exemption provisions mutually on pension funds by national certification through mutual agreement between two countries.

Keywords

• foreign tax payment credit
• foreign investment entrusted
• tax－exempt entity
• integral part
• controlled entity
• mutual agreement

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