Interpretation of the Concept of “Resident” Where the Person Subject to Foreign Financial Account Reporting Obligations Is a Dual Resident : Supreme Court Decision No. 2024Ma6881, April 17, 2025
Asian Tax Journal Vol. 27 No. 2 (2026), pp. 103-131
Abstract
In a recent ruling (Supreme Court Decision 2024Ma6881, April 17, 2025), the Supreme Court of Korea held that if an individual is a dual resident of Korea and another country, they remain subject to the overseas financial account reporting obligation under the Income Tax Act, even if they are ultimately determined to be a resident of the other country under a tax treaty. In this case, the taxpayer was deemed a resident of Singapore under the Korea-Singapore Tax Treaty; however, the Court ruled that because the individual qualified as a resident under the Korean Income Tax Act, they were subject to administrative fines for failing to report their overseas financial accounts. While this conclusion may follow from a literal interpretation of the relevant statutes, it raises significant questions when considering the legislative intent and the historical evolution of the reporting system. This paper argues that the Court's mechanical interpretation, which subjects individuals to penalties regardless of their non-resident status under a tax treaty, is problematic. Given that the primary purpose of the reporting system is to prevent tax evasion through the flight of assets, it is inappropriate to include individuals who are ultimately classified as non-residents under tax treaties. Furthermore, this ruling contradicts the recent government policy trend of easing administrative penalties for overseas financial account reporting. The paper also highlights that, in contrast, courts in the United States have reached the opposite conclusion in similar cases. While the Supreme Court's decision is significant for strictly distinguishing between domestic reporting obligations and tax treaty residency determinations, it is regrettable that the Court did not adopt a more teleological approach that considers the broader legislative purpose and the practical application of the system.
Keywords
- Overseas Financial Account Reporting
- Tax Treaty
- Resident
- Non-resident
- Dual Resident
- Administrative Fine
- Declaratory Provision
- Constitutive Provision
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