The Earnings Tax Act and its Enforcement Decree have been not too long ago revised to introduce a requirement for native subsidiaries or branches of overseas firms in South Korea to file info regarding stock-based compensation issued to their executives and workers by the overseas firms. This requirement grew to become efficient on 1 January 2024 to stock-based compensation acquired or exercised on or after 1 January 2024.

Notification Obligation

From 1 January 2024, the place executives or workers of a neighborhood subsidiary or department of a overseas firm obtain or train stock-based compensation (eg shares, inventory choices or bonuses given in cash equal to the share worth) granted by the overseas mum or dad firm, the native subsidiary or department (because the case could also be) should submit the next info to the South Korean tax authority:

• particulars of the grant, train and fee schedules of the stock-based compensation;
• earnings arising from such train and fee; and
• private info of the related govt or worker.

The above info have to be submitted by 10 March of the 12 months following the tax 12 months by which the train or fee of the stock-based compensation happens.

For executives or workers of a neighborhood subsidiary, a overseas mum or dad firm refers to a overseas firm that owns, instantly or not directly, no less than 50% of the shares of the native subsidiary. For executives or workers of a department of a overseas firm, a overseas mum or dad firm refers back to the headquarter or department of a overseas firm, or a overseas firm that instantly or not directly owns no less than 50% of the inventory of one other overseas firm.

Key Takeaway

Employers who’ve issued or are aspiring to difficulty stock-based compensation should guarantee they adjust to the submitting obligation whether it is granted by a overseas mum or dad firm.