KGBs and MSBs – rates, eligibility, availability of relief etc. – South Korea (Securities deposited with KSD)

Withholding Tax

Only non-resident clients who are tax-exempt are eligible to hold KGBs and MSBs in Clearstream¹. The standard rate of withholding tax on income payments from KGBs and MSBs is therefore 0% in Clearstream and no relief and reclaim procedures apply.

In addition, South Korean financial institutions are paid on a gross basis on income derived from KGBs and MSBs.

Trading prerequisites

To access the South Korean market, Clearstream clients and/or the final beneficial owner must be in possession of an Investment Registration Certificate (IRC) or a Legal Entity Identifier (LEI).

Exemption from withholding tax on income payments from South Korean securities is only available to eligible IRC or LEI holders.

Note: Effective 14 December 2023, the Financial Supervisory Services (FSS) in South Korea stopped issuing new IRCs. Foreign investors who already have an IRC must continue to use this number in the market and cannot substitute it with the LEI.

Holding requirements

In Clearstream, IRC or LEI holders cardholders are non-individuals for domestic South Korean securities.

1. Non-resident clients (i.e., foreign corporations or intermediaries)

Eligiblility requirements

Non-resident clients eligible to hold KGBs and MSBs are foreign corporations, including:

• Overseas Investment Vehicles (OIVs) (public and private, deemed as beneficial owners),
• central or local governments or public institutions,
• pension funds,
• financial institutions (investment companies, insurers, banks, other financial institutions),
• other corporate entities.

​​​​Note: In cases foreign corporations invest through an OIV (including both private and public funds), the OIV will be regarded as the beneficial owner.

Clients holding KGBs and MSBs as intermediary CFI (Custodian Foreign financial Institution) must ensure to fulfil all below criteria:

• Be a foreign corporation with, its headquarters or main office located in a country where a tax treaty has been signed with the Republic of Korea; and
• Be a foreign corporation, that has the capacity to perform custody business of securities issued abroad (outside the country they are located); and
• Have a role whereby they are collecting beneficial owner information according to MOEF interpretation of the “Guidelines on Scope of Eligibility as Qualified Foreign Intermediaries (QFI) and Operations of QFI System”.

If there are several CFIs in the investment chain, they all have to meet the CFI criteria listed above.

Clearstream does not assist in this regard. Please consult your tax advisor for further information.

Documentation requirements

The documentation required from non-resident clients in order to be authorised to hold KGBs and MSBs in Clearstream is as follows:

• One-Time Certification for KGBs and MSBs;
• Power of Attorney (POA) to Clearstream;
• Certificate Of Residence (COR). It should be issued by the competent authority of the client's country of residence and within 6 months of the tax exemption application.
  Note: If a certificate of residence is not available, the following alternative documents can be provided:
  • For corporations: certificate of incorporation; or 
      government-issued document with corporation name and address; 
      or IRC.
  • For central or local governments or public institutions, pension 
      funds: government-issued document; or equivalent document that 
      can verify the actual investor; or IRC.

In addition, for Overseas Investment Vehicles (public or private, deemed as beneficial owners):

Overseas public investment vehicles (deemed as beneficial owners)

In the case of public fund in country of establishment:

• Fund establishment certificate; or
• Fund registration certificate; or
• Document issued by supervisory authority; or
• IRC; or
• Other equivalent document.

In the case of other public funds:

• Fund establishment certificate; or
• Fund registration certificate; or
• IRC; and
• Document that can verify that the fund qualifies for overseas investment vehicle equivalent to overseas public investment vehicle.

Overseas private investment vehicles (deemed as beneficial owners)

• Fund establishment certificate; or
• Fund registration certificate; or
• Document issued by supervisory authority; or
• Other equivalent document, or
• IRC.

The tax forms are valid until revoked (unless there is a change in the Clearstream client's details). Originals are required.

Clients acting as an intermediary wishing to hold KGBs and MSBs on behalf of their final beneficial owner(s) or through another CFI or through multiple CFIs must ensure all intermediaries (CFIs) in the custody chain and/or final beneficial owner(s) are eligible and fulfil all above criteria before holding KGBs and MSBs for third parties. Clients are responsible for ensuring compliance with this requirement and may be required to disclose any additional information and documentation regarding other CFIs and/or final beneficial owner(s) in the custody chain, if required from time to time by Clearstream, the depository and/or the tax authorities.

Important notes:

• The name of the client must be exactly the same as per the existing IRC or registered LEI.
• The client who has an existing IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method.

2. South Korean domestic financial institutions

Eligiblility requirements

South Korean domestic financial institutions may only settle and safekeep KGBs and MSBs with Clearstream if they comply with the following eligibility criteria:

• South Korean domestic financial institutions must be licensed as domestic investment dealers of KGBs and MSBs by the Financial Services Commission (FSC) per the Financial Investment Services and Capital Markets Act (FSCMA) and Enforcement Decree of the FSCMA.
• South Korean domestic financial institutions must be beneficial owners who settle and safekeep KGBs and MSBs as proprietary assets.
• South Korean domestic financial institutions must be able to directly withhold tax on the interest income derived from KGBs and MSBs that they hold in Clearstream per the Enforcement Decree of the Corporate Tax Act (November 2025).

Note: Clearstream does not bear any independent obligation to verify, monitor or ensure such South Korean domestic financial institutions clients’ on-going compliance with the conditions set forth above.
 

Documentation requirements

The documentation to be submitted by South Korean domestic financial institutions to be authorized to hold KGBs and MSBs in Clearstream is the "One-Time Certificate for South Korea Government Bonds (KGB) and Monetary Stabilisation Bonds (MSB)".

Important notes:

• South Korean domestic financial institutions (licensed domestic investment dealers) that are incorporated in South Korea are required to obtain an LEI before investing in KGBs and MSBs.
• South Korean domestic financial institutions (licensed domestic investment dealers) that are not incorporated in South Korea but are branches in South Korea of foreign financial institutions, are required to obtain an LEI or be able to use the LEI of its parent before investing in KGBs and MSBs.

Deadlines

Clients must ensure that the required documentation is provided before they or any underlying beneficial owner makes a first investment.

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1. Clearstream refers collectively to Clearstream Banking S.A. and Clearstream Europe AG (for Clearstream Europe AG clients using Creation accounts).