A Study on the Problems and the Improvement of the Taxation System for Domestic Source Income of Private Overseas Investment Vehicle
Asian Tax Journal Vol. 20 No. 2 (2019), pp. 9-38
Abstract
The purpose of this study is to identify problems in the current regime for taxing domestic source income of Private Overseas Investment Vehicle by analyzing perception gaps among different parties and to suggest appropriate reform measures to make the taxation system more reasonable. It presents an empirical research model, conducted through a survey and statistical analysis, in order to see how five different parties such as taxpayers & tax agents, the National Tax Service, the Ministry of Strategy and Finance, the courts, professors and researchers react to the problems and the reform measures. The results and implications of this study can be summarized as follows： First, after the limited partnership system was introduced by the 2012 amendment to the Commercial Code, the MOSF, professors and researchers, taxpayers and tax agents argued that an Overseas Investment Vehicle that is a partnership should not be considered as a foreign corporation, whereas the NTS and the courts disagreed. Therefore, it is necessary for the current legislation to be revised to clarify its categorization. Second, the MOSF, professors and researchers, taxpayers and tax agents pointed out that the decision in the Tiger－ABS SPC case has no basis under the Korea－Germany double tax treaty and argued that the tax treaties should be applied according to the Corporate Income Tax Law and BEPS Action 2 and that with regard to overseas investment vehicle’s income, the treaties should be applied at the level of the vehicle’s investors. However, since the courts disagree, the Corporate Income Tax Law needs to be amended to specify that the beneficial owner is the investor of overseas investment vehicle, not the overseas investment vehicle itself. Third, the majority of parties consider the amendment to regulations for determining beneficial ownership as a top priority among potential tax reform measures.
Keywords
- Overseas Investment Vehicle
- Private Overseas Investment Vehicle
- Foreign Corporation
- Limited Partnership
- Substantive Owner
- Beneficial Owner