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Aberdeen e-alert - Issue 2015-06

Aberdeen e-alert - Issue 2015-06



Sébastien Labbé

Partner, Head of Tax

KPMG in Luxembourg


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New opportunity for SICAVs on WHT tax reclaims to be filed in South Korea

The present newsletter aims at providing an update regarding recent developments on the treaty benefits and withholding tax (“WHT”) reclaims filing opportunity for SICAVs in Korea.



On 6 May 2011, the Ministry of Strategy and Finance issued a ruling stating that SICAVs should be treated as holding companies under Article 28 of the Luxembourg-Korea Tax treaty, and thus excluded from treaty benefits.

Consequently, based on this ruling, standard WHT rates should be applied to Korean income distributed to Luxembourg SICAVs (i.e. 22% on dividends and general interests and 15.4% on interest derived from bonds) instead of reduced rates (i.e. 15% on dividends or 10% on dividends for shareholdings of at least 25% and 10% on interests).

Therefore at the beginning of 2012, the Korean Tax Authorities (“KTA”) issued tax assessments covering May 2009 to May 2011 addressed to four local custodians and claiming the payment of 130 billion Korean Won ($118 million) of under-withheld tax. The local custodians lodged an appeal against the tax assessment which was rejected by the KTA.


What’s new?

The custodian banks filed a recourse against the KTA’s decision and in January 2015, the Seoul district courts considered that SICAVs were eligible to treaty benefits even for the period prior to the removal of Article 28 of the Luxembourg-Korea tax treaty.

However, the KTA have since appealed the decision of the district courts and the case is now pending before the Seoul High Court (Court of Appeal). The KTA are expected to appeal all the way to the Supreme Court and the final decision is not expected for another 2-3 years.

Moreover, the revised Luxembourg-Korea tax treaty entered into force on 4 September 2013, and its main amendment was the removal of its previous Article 28, which provided for the exclusion from treaty benefits of specific holding companies. SICAVs should be therefore able to claim treaty benefit from this point forward, provided that they are the beneficial owner of the income.


KPMG comments

This is a very positive sign for SICAVs which paid withholding tax at standard rate and wishing to file a claim to obtain a reimbursement of the WHT paid in excess (i.e. the difference between the regular WHT rate and the treaty reduced rate).

We would recommend you/your clients to file WHT reclaims for the period of early 2012 to September 2013.

Please note that, as of 1 January 2015, the period for filing a reclaim was extended from 3 years to 5 years after the deadline of filing. However, as the extension is only applicable for requests for which the deadline has not passed under the previous rule, we would recommend our clients to file tax reclaims for the 2012 and 2013 period before 31 December 2015.


For further information, please do not hesitate to contact us.







The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


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