2024 Foreign Financial Account Reporting System: Key Changes and Essential Guide

A comprehensive overview of this year's updates to help you meet your obligations and avoid penalties.

With the implementation of the 2024 Foreign Financial Account Reporting System, residents and domestic corporations need to understand the key changes and reporting methods. By understanding the major amendments this year, you can fulfill your reporting obligations and avoid penalties. For example, failing to report a qualifying account can result in fines ranging from 10% to 20% of the unreported amount. This article will explain the reporting targets, criteria, and changes in an easy-to-understand manner.

1. What is the Foreign Financial Account Reporting System?

The Foreign Financial Account Reporting System requires residents or domestic corporations to report to the National Tax Service (NTS) if the combined balance of all foreign financial accounts they hold exceeds KRW 500 million at any point during the year. The reporting period is from June 1 to June 30 every year, and this year it is extended to July 1 due to a weekend. It is crucial to meet this deadline to avoid any penalties associated with late reporting.

2. Key Changes for 2024

This year, there have been significant changes, including the inclusion of overseas virtual asset accounts as part of the reporting requirements. The key changes are as follows:

- **Exemption from Reporting Obligation for International Organizations and Their Employees**: International organizations and their employees have been added to the exemption list, including organizations such as the United Nations, World Bank, and other recognized intergovernmental agencies. Foreigners working for these specific international organizations may be exempt from reporting obligations. International organizations and their employees have been added to the exemption list. Foreigners working for certain international organizations may be exempt from reporting obligations.

- **Reporting of Overseas Virtual Asset Accounts**: The reporting requirement for virtual asset accounts, which began in 2023, continues. Virtual assets include cryptocurrencies like Bitcoin, Ethereum, and other digital assets used for transactions. All overseas accounts used for virtual asset transactions are included in the reporting obligations, thereby allowing stricter management of overseas virtual asset investments. The reporting requirement for virtual asset accounts, which began in 2023, continues. All overseas accounts used for virtual asset transactions are included in the reporting obligations, thereby allowing stricter management of overseas virtual asset investments.

3. Reporting Obligors and Criteria

The reporting obligors are residents and domestic corporations that meet the following criteria:

- **Resident Criteria**: Individuals who have a domicile in Korea or have resided for more than 183 days as of the end of the reporting year.(*Expat resident; resided more than 5 years during the last 10 years)

- **Reporting Threshold**: If the combined balance of all foreign financial accounts held exceeds KRW 500 million on any day at the end of each month in 2023, reporting is required.

4. Reporting Methods and Procedures

Reporting foreign financial accounts can be done electronically through Hometax ([www.hometax.go.kr](http://www.hometax.go.kr)) by submitting a report directly to the tax office. When reporting, all relevant information must be provided, including the account holder's identity, account number, financial institution name, and the highest balance at the end of each month.

5. Penalties for Non-Compliance

Failure to comply with the reporting obligations can result in fines. Compliance rates have significantly improved due to such penalties, underscoring the importance of adhering to these requirements. If accounts are not reported or under-reported, a fine of 10% to 20% of the unreported amount will be imposed. If the unreported amount exceeds KRW 5 billion, criminal penalties may also be imposed. Additionally, those who report another person's non-compliance can receive a reward of up to KRW 2 billion.

6. Disclosure of Names and Criminal Penalties

If the unreported amount exceeds KRW 5 billion, the National Tax Information Committee may disclose personal details such as name, age, occupation, and the amount of the violation. Criminal penalties may include up to two years of imprisonment or a fine ranging from 13% to 20% of the unreported amount, particularly for serious cases involving large amounts.

Conclusion

The Foreign Financial Account Reporting System is an essential system introduced to prevent illegal capital outflows and ensure transparent asset management. This year, the inclusion of virtual asset accounts has further strengthened reporting obligations. All residents and domestic corporations should understand these changes and ensure accurate reporting within the deadline to avoid any penalties.

If you have any questions regarding reporting, please feel free to ask. Assistance is available through the NTS helpline at +82-44-204-2914 or the Hometax website (www.hometax.go.kr). Assistance is available through the NTS Hometax website or at your local tax office.