South Korea Treasury Management Profile 2018 - Together we thrive - HSBC Group

 
South Korea Treasury Management Profile 2018 - Together we thrive - HSBC Group
South Korea
Treasury Management
Profile 2018

                      Together we thrive
South Korea Treasury Management Profile 2018 - Together we thrive - HSBC Group
2                                HSBC Treasury Management Profile 2018 | South Korea   HSBC Treasury Management Profile 2018 | South Korea                                                                                        3

Contents                                                                               Introduction and
                                                                                       Purpose

Introduction and Purpose   3                                                          South Korea
                                                                                       This is one of a series of Treasury Management Profiles designed for finance and treasury professionals worldwide. By providing a
Legal and Regulatory       6                                                          snapshot of banking, payments and cash management in selected locations, these profiles can help treasury managers to make
                                                                                       informed decisions, manage risks effectively and take advantage of new opportunities. However, this information is not intended to
Taxation7                                                                             be comprehensive and does not constitute financial, legal, tax or other professional advice. Accordingly you should not act upon the
                                                                                       information contained in this document without obtaining your own independent professional advice. The materials contained in this
Banking13
                                                                                       document were assembled in May 2017 (unless otherwise dated) and were based on the law enforceable and information available
Payment Instruments        14                                                         at that time.

Payment Systems            17
                                                                                         Facts and Figures
Cash Management            21
                                                                                         Capital/Other major cities: Seoul/Incheon, Pusan, Ulsan                Business hours:                        08:30–17:30 (Mon–Fri)
Electronic Banking         22                                                           Area:                              98,720km2                           Banking hours:                         09:00–16:00 (Mon–Fri)

Trade Finance              24                                                           Population:                        50.92m                              Stock exchange:                        Korea Exchange (KRX)

                                                                                         Language:                          Korean                              Leading share index:                   KRX 100, KOSDAQ Index,
Useful Websites            26
                                                                                                                                                                                                       KOSPI Index
                                                                                         Currency:                          South Korean won (KRW)

                                                                                         Country telephone code:            82                                  Sectoral distribution                  Agriculture 2.3%,
                                                                                                                                                                of GDP (% of GDP):                     Industry 37.6%,
                                                                                         Weekend:                           Saturday and Sunday                 Source: https://www.cia.gov/library/
                                                                                                                                                                publications/resources/the-world-      Services 60.2%
                                                                                         National holidays:                 2018 — 1 Jan, 15–17 Feb, 1 Mar,     factbook/index.html.                   (2016 estimate)
                                                                                         Source: www.goodbusinessday.com.   1, 7, 22 May, 6 Jun, 15 Aug,
                                                                                                                            23–26 Sep, 3, 9 Oct, 25 Dec

                                                                                       Government                                                             Head of state
                                                                                       Legislature                                                            Moon Jae-in, president since 10 May 2017.
                                                                                       Representative democratic republic with a unicameral National
                                                                                       Assembly (Kukhoe).                                                     ®® The president is directly elected to serve one five‑year term.

                                                                                       ®® National Assembly: 300 members are elected to serve four-           Political leader
                                                                                          year terms.                                                         Lee Nak-Yon prime minister since 31 May 2017.

                                                                                       Legislative elections were last held in April 2016.
South Korea Treasury Management Profile 2018 - Together we thrive - HSBC Group
4                                                                                          HSBC Treasury Management Profile 2018 | South Korea                        HSBC Treasury Management Profile 2018 | South Korea                                                                                                          5

                                                                                                                                                                                                                                                           Country credit rating
                                                                                                                                                                                                                                                           Fitch Ratings rates South Korea for issuer default as:

                                                                                                                                                                                                                                                               Term                              Issuer Default Rating

                                                                                                                                                                                                                                                               Short                             F1 +

                                                                                                                                                                                                                                                               Long                              AA –

                                                                                                                                                                                                                                                               Long-term rating outlook          Stable
                                                                                                                                                                                                                                                                                          Source: www.fitchratings.com, October 2017.

                                                                                                                                                                      Exchange rate & Interest rate (%)                                                    Consumer inflation & GDP volume growth (%)
    Economy                                                                                                                                                                   South Korea                                                                       South Korea

                                                                                                                              2017
                                                  2010      2011      2012      2013      2014        2015        2016                                                1,200                                                                     1,200      4                                                                  4
                                                                                                                              Q1           Q2          Q3

    Exchange rate* (KRW/USD)**                    1,156.1   1,108.3   1,126.5   1,094.9 1,053.0       1,131.2     1,160.4     1,153.2      1,130.0     1,132.2         900                                                                      900        3                                                                  3

    Interest rate (MMR) (%)     **
                                                  2.16      3.09      3.08      2.59      2.34        1.65        1.34        1.23         NA          NA
                                                                                                                                                                       600                                                                      600
    Unemployment (%)**                            3.7       3.4       3.2       3.1       3.5         3.6         3.7         4.3          3.9         NA                                                                                                  2                                                                  2

    Consumer inflation*** (%)                     + 3.0     + 4.0     + 2.2     + 1.3     + 1.3       + 0.7       + 1.0       + 2.1        + 1.9       + 2.3
                                                                                                                                                                       300                                                                      300
                                                                                                                                                                                                                                                           1                                                                  1

    GDP volume growth                ***
                                           (%)    + 6.5     + 3.7     + 2.3     + 2.9     + 3.3       + 2.8       +2.9        +3.0         + 2.7       NA
                                                                                                                                                                         0                                                                      0
    GDP (KRW tr)                                  1,265     1,333     1,377     1,429     1,486       1,559       1,637       –            –           –                                                                                                   0                                                                  0
                                                                                                                                                                                   2012          2013          2014     2015         2016
                                                                                                                                                                                                                                                                      2012       2013     2014            2015     2016

    GDP (USD bn)                                  1,094     1,202     1,223     1,306     1,411       1,378       1,411       –            –           –                      Exchange rate (KRW/USD)
                                                                                                                                                                                                                                                                 Consumer inflation %
    GDP per capita (USD)                          22,590    24,676    24,648    26,190 28,186         27,398      27,781      –            –           –                      Interest rate (Local Currency MMR)

                                                                                                                                                                                                                                                                 GDP volume growth %
    BoP (goods/services/income) as % GDP          3.1       1.9       4.6       6.5       6.3         8.1         7.4         –            –           –
    * Official rate. ** Period average. *** Year on year.                        Sources: IMF, International Financial Statistics, November 2017 and 2017 Yearbook.   Sources: IMF, International Financial Statistics, November 2017 and 2017 Yearbook.
6                                                                           HSBC Treasury Management Profile 2018 | South Korea             HSBC Treasury Management Profile 2018 | South Korea                                                                                                          7

Legal and                                                                                                                                   Taxation
                                                                                                                                                                                          1

Regulatory

Central bank                                                         Reporting                                                              Resident/non-resident                                                   Corporate income tax rates are as follows:
The Bank of Korea (BoK) is an autonomous institution operating in    Depending upon the details of cross-border money transfers and/        A company that has its headquarters, main office or a place
accordance with the Bank of Korea Act and its amendments.            or transactions between residents and non-residents, a report to       of effective management in South Korea is considered to be a
                                                                                                                                            taxable entity in Korea for Korea-source income.                                                                       Tax rate
                                                                     a foreign exchange bank, the BoK, or the Ministry of Strategy and                                                                               Tax base
Bank supervision                                                                                                                                                                                                                                                   (including local surtax)
                                                                     Finance (MoSF), may be required.
The Financial Services Commission (FSC) and its executive arm,                                                                              Tax authority                                                            Above KRW 20 billion                          22% (24.2%)
the Financial Supervisory Service (FSS), supervise the banking       In principle, all payments and receipts between residents and          ®® National Tax Service (NTS).
sector in South Korea. In accordance with the Bank of Korea Act,     non-residents should be made through foreign exchange banks                                                                                     KRW 200 million –                             20% (22%)
the BoK also carries out some supervisory functions.                 in South Korea. Foreign exchange banks include all domestic and        Tax year/filing                                                          KRW 20 billion
                                                                     foreign bank branches operating in the country.                        The business year should be specified in the company’s articles of
                                                                                                                                                                                                                     Below KRW 200 million                         10% (11%)
Resident/non-resident status                                                                                                                incorporation or in the bylaws, and should not exceed one year.
A company, which is incorporated in South Korea, is considered       Exchange controls                                                      Most companies use the calendar year.
as resident while its overseas branch is categorised as non-         The Korean won (KRW) is South Korea’s official currency.                                                                                       According to tax reform proposals, a new 25% (27.5% including
resident. A company, which is incorporated out of South Korea,                                                                              Korea operates a self-assessment system. If the business year
                                                                                                                                                                                                                    local surtax) corporate income rate for taxable income in excess
is considered as non-resident, while its domestic branch in South    Foreign exchange controls are administered by the BoK                  is longer than six months, advance tax must be paid for the first
                                                                                                                                                                                                                    of KRW 200 billion will become effective on or after January
Korea is categorized as resident.                                    and MoSF. Excluding the KRW, settlements with other countries          six-month period of the business year, based on 50% of the
                                                                                                                                                                                                                    1 2018. A local surtax of 10% of the corporate income tax
                                                                     can be completed in any convertible currency.                          previous year’s tax liability or the actual financial performance for
                                                                                                                                                                                                                    due applies.
Bank accounts                                                                                                                               the six-month period. Filing and payment of advance tax must be
Resident                                                             Foreign exchange banks must be notified of all foreign currency-       made within two months after the first six-month period.
                                                                                                                                                                                                                    Corporate taxpayers are subject to a minimum tax that is imposed
Foreign currency accounts can be held by residents both              denominated commercial and financial credits (i.e. foreign
                                                                                                                                                                                                                    at a rate of 10% on taxable income up to KRW 10 billion, 12%
domestically and abroad. Residents may need to report to the         currency loan) to residents from non-residents up to USD 30            Companies must file a year-end income tax return within three
                                                                                                                                                                                                                    on taxable income above KRW 10 billion to KRW 100 billion, and
designated FX bank or the Governor of BoK depending on the           million, subject to the FETR. The MoSF must be notified of credits     months (four months for companies filing a consolidated tax
                                                                                                                                                                                                                    16% on taxable income over KRW 100 billion (7% for small and
details of a foreign currency account to be opened abroad.           in excess of USD 30 million.                                           return) after the end of a fiscal year and attach the balance
                                                                                                                                                                                                                    medium-sized enterprises (SMEs)).
Residents are not permitted to open Korean Won currency (KRW)                                                                               sheet, income statement, statement of appropriation of retained
accounts abroad in principle. KRW funds deposited in Resident’s      The BoK must be informed of all KRW-denominated commercial             earnings (or statement of disposition of deficit) and other relevant
                                                                                                                                                                                                                    Losses may be carried forward for up to ten years. SMEs
KRW accounts in Korea are not convertible into foreign currency      credits to non-residents from residents in excess of KRW 1 billion.    documents. A branch of a foreign corporation may be granted an
                                                                                                                                                                                                                    may be allowed to carry losses back for one year. Effective
without justifiable reason.                                          It must also be informed of KRW-denominated loans and credits          extension of time to file its tax return in certain cases. Domestic
                                                                                                                                                                                                                    from 1 January 2016, a deduction limitation on the tax loss
                                                                     to non-residents from residents in excess of KRW 30 billion.           companies subject to mandatory external audit also may have a
                                                                                                                                                                                                                    carryforward is introduced. Under the new deduction limitation
Non-resident                                                                                                                                one-month extension for filing in certain cases.
                                                                     Under the Foreign Investment Promotion Act, restrictions may                                                                                   rule, companies other than SMEs may utilise their tax loss
Non-residents are permitted to open an account with a domestic                                                                                                                                                      carryforwards to set off only 80% of the taxable income for a
bank in both foreign or KRW currency. Non-residents can hold         apply to non-resident investment in certain sectors, including rice,   A consolidated return system is available for a parent company
                                                                     meat, tobacco and nuclear power generation, and in any public                                                                                  fiscal year. According to proposed tax revisions, the deduction
(i) free won accounts for current transactions and reinsurance                                                                              and its 100% directly or indirectly owned domestic subsidiaries.
                                                                     sector utilities involved in privatisation.                                                                                                    limit will be reduced to 60% and 50% on or after 1 January 2018
contracts and (ii) exclusive KRW accounts for securities                                                                                                                                                            and 2019 respectively.
investment. KRW funds as deposited in Non-resident’s free won                                                                               Corporate taxation
accounts are freely convertible into foreign currency.                                                                                      A domestic company is taxable on its worldwide income.
                                                                                                                                            A foreign company with a permanent establishment (PE) in South
Interest-bearing current accounts are not available. Overdraft                                                                              Korea is required to file its corporate tax return disclosing the
facilities are available to residents and non-residents subject to                                                                          income attributable to the PE. A foreign company with a PE in
Foreign Exchange Transaction Regulations (FETR).                                                                                            South Korea is taxable on its Korean‑sourced income for Korean
                                                                                                                                            corporate income tax purposes.                                          1.
                                                                                                                                                                                                                       All tax information supplied by Deloitte Touche Tohmatsu (www.deloitte.com) and
                                                                                                                                                                                                                    Deloitte Highlight, 2017.
8                                                                              HSBC Treasury Management Profile 2018 | South Korea           HSBC Treasury Management Profile 2018 | South Korea                                                                                    9

Various types of tax credits and exemptions are available, such as      ®® The foreign individual (and any related parties) owns less
                                                                                                                                              Withholding tax (subject to tax treaties)
an investment tax credit, R&D tax credit, tax exemption for high-          than 25% of the share capital of the Korean company during
tech foreign-invested companies, etc., provided the requirements           the year in which the transfer occurs, and did so during the
                                                                                                                                              Payments to:                          Interest          Dividends    Royalties        Other income      Branch remittances
of the Tax Incentive Limitation Law are met.                               prior five-year period. Under proposed tax amendments, the
                                                                           ownership threshold will be reduced from less than 25% to          Resident companies                    15.4%/27.5%       None         None             None              NA
Advance tax ruling availability                                            less than 5%. The current rule will continue to apply until 31
A taxpayer can submit a request for a written ruling to the NTS or         December 2018 for the transfer of listed Korean company            Non-resident companies                15.4%/22%         22%          22%              22%               5–15%
the Ministry of Strategy and Finance (MoSF) to resolve or clarify          shares acquired before 1 January 2018.
certain tax issues before entering into transactions. Obtaining
a ruling can take several months. Such rulings are public               Withholding tax (subject to tax treaties)                            Tax treaties/tax information exchange agreements                     Proposed tax reform introduces a New Limitation on Interest
information. Although third parties can refer to rulings, they are      Interest on a regular loan paid to a non-resident company or         (TIEAs)                                                              Expense Deductions for Multinational Companies effective from
only binding upon the party requesting them. The tax authorities        an individual is subject to a 22% withholding tax (including the     The South Korean government has entered into tax treaties            1 January 2019. Non-deductible interest is the greater of:
may issue a private tax ruling in response to a taxpayer’s enquiry      local surtax). Interest on bonds is subject to a 15.4% withholding   with more than 80 countries. When domestic tax law
as to the interpretation/application of the tax law. An advance         tax (including the local surtax). The rate may be reduced under      conflicts with a tax treaty, the tax treaty overrides domestic       ®® The amount of interest deduction denied under the thin
ruling system also is in place.                                         a tax treaty, although withholding at the domestic, rather than      law.                                                                    capitalization rules; and
                                                                        treaty, rate may be required for certain payments to jurisdictions                                                                        ®® Net interest expense that exceeds 30% of adjusted taxable
Capital gains tax
                                                                        regarded as tax havens. Disallowed interest may be treated as a      South Korea has exchange of information relationships with              income. Adjusted taxable income is taxable income for
Domestic companies report capital gains, together with other
                                                                        dividend (see Thin capitalisation section).                          99 jurisdictions through 89 double tax treaties and ten TIEAs.          the year plus depreciation on fixed assets and net interest
profits earned by the company, on their corporate tax return and
there is no preferential rate for capital gains.                                                                                                                                                                     expense.
                                                                        The taxation of a gain from trading in derivative products or        Thin capitalisation
                                                                        sophisticated financial products is still in the development stage   If domestic or foreign companies borrow from a foreign               An FCS is a head office or a foreign entity owning, directly or
Korean-sourced capital gains derived by a non-resident are taxed
                                                                        in South Korea, and there are currently no definite rules. Certain   controlling shareholder (FCS), or an FCS or head office              indirectly, 50% or more of the shares of a Korean company or a
at the lesser of 11% of the sales proceeds received or 22% of the
                                                                        gains are treated as interest and other gains are treated as other   guarantees borrowings from third parties, and such                   foreign entity that substantially controls the Korean company.
gains realised. Foreign companies that derive capital gains from
                                                                        income. Withholding tax rates would differ, depending upon the       borrowing exceeds 200% (600% for financial institutions)
the sale of real estate, and companies with large holdings of real
                                                                        character of the income derived.                                     of its net equity or paid-capital, whichever is greater, then        When a company borrows funds that are then used to lend to
estate, are required to file a tax return and are subject to tax at
                                                                                                                                             the interest expense on the debt exceeding 200% (600% for            related parties, a portion of the interest expense incurred by
the regular corporate tax rate, unless there is a separate article in   Income from transactions in financial investment services and        financial institutions) of the FCS’s share of the borrower’s         the company, equivalent to the ratio of the loans made to the
a tax treaty.                                                           capital markets derived by a foreign company with no permanent       net equity or paid-in capital is not a deductible expense, for       related party over the company’s total borrowings, would not be
                                                                        establishment in South Korea is not treated as Korean-sourced        Korean corporate income tax purposes. Furthermore, any               deductible for income tax purposes. This is because the loan to
The sale of listed shares by a foreign individual shareholder is
                                                                        income subject to Korean withholding tax.                            disallowed interest is treated as a dividend to the FCS and is       a related party would be considered a non-business asset under
exempt from capital gains tax, regardless of whether a tax treaty
applies, when the following requirements are satisfied:                                                                                      subject to withholding tax.                                          the corporate income tax law when the lender is not engaged in a
                                                                        In general, there is no branch remittance tax. However, a branch
                                                                                                                                                                                                                  financing business.
                                                                        tax, ranging from 5% to 15% of after-tax profits less deemed
®® Listed shares are transferred through the Korea Stock
                                                                        reinvested capital, may be levied if a tax treaty between South
   Exchange, or KOSDAQ;
                                                                        Korea and the country in which the branch’s head office is
®® The foreign individual has no permanent establishment in             resident allows South Korea to impose the branch tax.
   South Korea; and
10                                                                          HSBC Treasury Management Profile 2018 | South Korea         HSBC Treasury Management Profile 2018 | South Korea                                                                                   11

                                                                                                                                                Under the commercial law and foreign
                                                                                                                                                currency transaction regulations, there is a
                                                                                                                                                provision to enable cash pooling and cash
                                                                                                                                                concentration among affiliates worldwide.

Transfer pricing                                                    Application for reduced tax rate                                    Cash pooling                                                            Payroll and social security taxes
Transactions with overseas related parties must be made on          Foreign companies or non-residents who become substantial           South Korea has no specific tax rules for cash pooling                  There is no payroll tax payable by employees. Employers are
arm’s-length terms. The following transfer pricing-related          beneficiary owners of domestic-sourced income, such as              arrangements. However, under the commercial law and foreign             required to withhold income taxes, pension contributions and
information must be disclosed when filing a corporate income tax    interest, dividends etc., that is subject to withholding taxes in   currency transaction regulations, there is a provision to enable        insurance contributions from their employees’ payroll on a
return:                                                             Korea, should submit an Application for Reduced Tax Rate to the     cash pooling and cash concentration among affiliates worldwide.         monthly basis (at rates ranging from 6.6% to 44% (increased to
                                                                    withholding agent before the date of payment in order to enjoy                                                                              46% effective on or after 1 January 2018, according to proposed
®® A report on the selected transfer pricing method and the         the reduced tax rate in tax treaties between Korea and other        Real estate taxes                                                       tax changes), and to submit them to the appropriate government
   reason for its selection;                                        countries.                                                          A company that owns land, buildings, ships and aircraft at a            offices by the tenth day of the month following the month in
®® A schedule of the taxpayer’s international transactions with                                                                         certain assessment date is subject to property tax on such assets.      which salaries are paid.
   foreign related parties; and                                     Acquisition tax                                                     The tax rates range from 0.24% to 0.6% (including the education
®® A summary income statement for foreign related parties.          When a taxpayer acquires certain assets, such as real estate, a     surtax), depending on the type of property. A company that owns         An employer must make four types of social security
                                                                    vehicle or luxury assets (including golf club membership) set out   real estate, such as land or residential buildings, is subject to the   contributions – National pension (4.5% of monthly salary),
Effective from 1 January 2016, domestic companies and PEs of a      in the Local Tax Law, generally a 4.6% acquisition tax (including   comprehensive real estate tax in addition to the local property tax.    national health insurance (3.06%), (un)employment insurance
foreign company that have annual sales of more than                 local surtax) is imposed on the purchase price of the assets        (See Stamp duty section.)                                               (0.65%) and industrial injury compensation insurance (with
KRW 100 billion, and a transaction volume with foreign-related      acquired.                                                                                                                                   employees also contributing to the first three).
                                                                                                                                        Sales taxes/VAT (incl. financial services)
parties of more than KRW 50 billion per year, are required
                                                                    When a shareholder acquires over 50% of the shares in a             VAT is levied on all taxable goods and services and on all taxable
to submit additional transfer pricing documentation (i.e. a
                                                                    domestic company, the shareholder is deemed to have acquired        goods imported into South Korea. The standard rate is 10%,
comprehensive report on cross-border transactions, including
                                                                    the underlying assets, as mentioned above, of that company;         but VAT is zero rated for certain supplies or services, including
a master file, local file, and country-by-country report), which
                                                                    therefore the acquiring shareholder is subject to deemed            the export of goods, services provided outside Korea, and
provides organisation/management information, cross-border
                                                                    acquisition tax on the book value of such assets.                   international navigation services involving ships and aircraft.
transaction information, various business/intangible asset/
financial/tax information, etc. Both unilateral and bilateral       Assets located in the Seoul metropolitan area are subject to an     Public transportation services, certain food products,
advance pricing agreements are available.                           increased tax burden equal to two to four times the acquisition     publications, medical services and services provided by financial
                                                                    tax.                                                                institutions, such as banking, insurance and securities listed in
Controlled foreign companies
                                                                                                                                        the VAT law, are exempt from VAT.
When 10% or more of the issued shares in a foreign company are      Registration tax
owned by a Korean resident and the average effective income tax     A company is subject to capital registration tax at 0.48%           VAT applies to foreign suppliers that provide electronic services
rate of the foreign company for the most recent three consecutive   (including local surtax) on the amount of capital contributed.      (e.g. games, audio or video files, software, etc. activated through
years is 15% or less, the Korean resident is deemed to have         The tax rate triples when the company is located in the Seoul       mobile communication devices or computers) to persons (other
received a dividend of an amount equal to ‘deemed distributable     metropolitan area to 1.44%. The registration tax for certain        than tax-registered businesses) in Korea using information
retained earnings’ multiplied by the shareholdings ratio, even      acquired assets has been combined with acquisition tax.             communication networks.
though there has been no actual distribution of such retained
earnings to the Korean resident.                                    Securities transaction tax                                          All domestic businesses supplying taxable goods or services
                                                                    Securities transaction tax is imposed on the seller at a rate of    must register with the tax authorities for VAT purposes. Foreign
Stamp duty                                                          0.5% for unlisted shares, and 0.3% for listed shares, of the        suppliers that provide electronic services via information
Stamp duty is imposed when a document verifying that property       transfer price upon the sale of securities.                         communication networks should access the National Tax Service
rights are found, transferred or changed is newly made, but the                                                                         (NTS) website and apply for simplified registration of the business
tax is not significant.                                                                                                                 with the NTS.
12   HSBC Treasury Management Profile 2018 | South Korea   HSBC Treasury Management Profile 2018 | South Korea                                                                                       13

                                                           Banking

                                                           Overview                                                              Digitalisation, and the efficiencies and financial benefits that
                                                           There are 18 banks operating in South Korea: six national             technology can bring to the banking sector, is being embraced
                                                           commercial banks, six regional commercial banks and five              by South Korea’s banks and actively encouraged by the central
                                                           specialist banks. There are also 42 branches of foreign banks and     bank, which recognises that non-financial technology companies
                                                           79 savings banks.                                                     will increasingly shape the country’s financial sector. In 2017, for
                                                                                                                                 example, South Korea’s SK Telecom and Hana Financial Group
                                                           National commercial banks have extensive branch networks              will launch a mobile financial services platform offering a variety
                                                           throughout the country and provide deposit taking, lending and        of mobile financial services – such as payments, remittance and
                                                           payment and settlement services. Regional commercial banks            asset management – through a single mobile app.
                                                           typically provide services to small and medium-sized companies
                                                           in the region in which they are based.                                According to recent figures from the BoK, the number of digital
                                                                                                                                 banking users in South Korea totaled 54.2 million in Q1 2017,
                                                           The five specialist banks – Korea Development Bank, Export-           up from 53.7 million the previous quarter.
                                                           Import Bank of Korea, Industrial Bank of Korea, the National
                                                           Agricultural Cooperative Federation and the National Federation       South Korea’s government actively promotes South Korea as
                                                           for Fisheries Cooperatives – provide financing to those industries    a leading Asian financial services hub, upgrading financial
                                                           that cannot be serviced by commercial banks.                          infrastructure, undertaking deregulation and enacting liberal
                                                                                                                                 reforms. As part of its strategic reform of the financial sector,
                                                           South Korea’s government holds a controlling stake in a number        the government has encouraged strategic global banking
                                                           of domestic financial institutions, most notably Industrial Bank of   relationships.
                                                           Korea (50.4%) and Korea Development Bank (100%). In February
                                                           2017, the government completed its privatisation of Woori Bank;
                                                           in 2015, it announced it was looking to sell 51% of the bank
                                                                                                                                  Major banks
                                                           (owned by state-run Korea Deposit Insurance Corporation) to
                                                           multiple buyers. On completion, it will have sold 29.7% of its                                                  Total assets (USD billions)
                                                                                                                                  Bank
                                                           shares.                                                                                                         30 June 2017

                                                           Foreign banks play an active role in the country’s financial sector    KB Financial Group                       368,623
                                                           and offer the widest range of cash management services.                Shinhan Financial Group                  361,344

                                                           In a bid to spur growth in its banking sector, South Korea is          NongHyup Financial Group                 333,137
                                                           allowing non-financial firms to open banks. In November 2015,
                                                                                                                                  Hana Financial Group                     304,716
                                                           the FSC gave preliminary approval to two consortia backed by
                                                           Kakao Corp (which operates Kakao Pay, a mobile payments                Korea Development Bank                   226,155*
                                                           service), and an affiliate of China’s Alibaba Group, to set up the     * Data as at 31 December 2016.
                                                           country’s first online-only banks. Kbank launched operations in
                                                           April 2017; Kakaobank went live in July 2017.                          Source: www.accuity.com, January 2017.
14                                                                                 HSBC Treasury Management Profile 2018 | South Korea                    HSBC Treasury Management Profile 2018 | South Korea                                                                                 15

Payment
Instruments

 Payment statistics
                                                                                                                                                                  Samsung Pay is the                                        Card payments
                                                                                                                                                                                                                            Payment cards, particularly credit cards, are a popular method
                                            Millions of transactions   % change        Traffic (KRW billions)                       % change                                                                                of payment in South Korea. Credit cards accounted for 44% of

                                            2015           2016        2016/2015       2015                  2016                   2016/2015                     country’s leading                                         the volume of all cashless payments in 2016, but just 0.6% of the
                                                                                                                                                                                                                            value. Debit card volumes and value were negligible.

                                                                                                                                                                  mobile payment app.
 Cheques and bills                          254.4          200.7       -21.1           5,681,764.4           5,336,238.0            -6.1
                                                                                                                                                                                                                            There were 95.6 million credit cards in circulation at the end
 Debit card payments                        0.19           0.13        -31.6           7.6                   5.2                    -31.6                                                                                   of 2016 and 154.1 million debit cards. There are 35 domestic

                                                                                                                                                                  In its first year of
 Credit card payments                       9,818.4        10,663.7    8.6             614,241.2             675,762.2              10.0                                                                                    card issuing companies in South Korea, in addition to Visa and
                                                                                                                                                                                                                            MasterCard. All cards issued are EMV-compliant.
 Cheque card payments                       5,400.8        6,392.9     18.4            134,213.7             155,055.2              15.5

 IC card payments                           2.2            4.0         81.8            199.6                 359.3                  65.0
                                                                                                                                                                  operation, transaction                                    Debit card use is restricted by the operating hours of the debit
                                                                                                                                                                                                                            card system in South Korea (08:00 to 23:00). A more popular
 Direct debits                              925.6          895.6       -3.2            89,307.2              90,239.5               1.0                                                                                     choice for consumers is the cheque card, which can be used 24
 Credit transfers*                          4,015.5        4,245.2     5.7             85,450,880.3          92,362,693.3           8.1                           volumes reached                                           hours a day (26% of the value of all transactions in 2016, but just
                                                                                                                                                                                                                            0.2% of the value) and IC cards.

                                                                                                                                                                  USD 2 billion (25% of
 Debit transfers                            1,709.1        1,771.5     3.7             179,801.2             187,551.7              4.3
                                                                                                                                                                                                                            South Korea does not have a dedicated interbank settlement
 E-money                                    5.3            3.2         -39.6           8.9                   5.9                    -33.7                                                                                   system for credit card transactions. Each card issuer can choose

                                                                                                                                                                  this is online).
 Total                                      22,131.5       24,176.9    9.2             95,150,424.80         98,807,880.3           7.2                                                                                     a different method of settlement. For bank-issued cards, the
                                                                                                                                                                                                                            BC Card Company determines the multilateral netting balances
 * Includes paper-based and electronic credit transfers.                                              Source: ECOS Economic Statistic System, May 2017.
                                                                                                                                                                                                                            of each bank, which are then settled via the Cheque Clearing
                                                                                                                                                                                                                            System.

Cash                                                                      Credit transfers can be initiated online, at bank branches or via               Direct debits                                                     Payments made with a Visa or MasterCard payment card
Cash remains an important payment medium in South Korea,                  ATM, telephone and mobile banking.                                              Direct debits are available in South Korea for both high-value    are cleared and settled by their respective international card
particularly for low-value transactions. According to the BoK, 20%                                                                                        and low‑value payments.                                           schemes. Debit card transactions are cleared through the
of all payments are made using cash.                                      ®® High-value and urgent interbank transfers are cleared and                                                                                      Electronic Funds Transfer at the Point of Sale system (EFTPOS).
                                                                             settled via BOK‑Wire+, the national RTGS system, on a real-                  There are two types of direct debit in South Korea: the bank
In December 2016, the BoK launched a pilot programme whereby                 time basis.                                                                  giro system direct debit for low-value payments and the CMS       The KFTC operates a national Cash Dispenser network of ATMs.
customers receive small change in the form of top-ups on pre-             ®® Low-value, non-urgent and high-volume electronic credit                      debit transfer for high‑value commercial payments.                A cross-border ATM network enables card holders to withdraw
paid cards. This is the first stage in the central bank’s plan for           transfers are processed via one of the nine retail payment                                                                                     cash from ATMs in the USA, Malaysia and the Philippines using
South Korea to become a ‘coinless’ society.                                  systems operated by the Korea Financial Telecommunications                   Cheques                                                           domestically issued cards.
                                                                             & Clearings Institute (KFTC), on a real-time basis. Low-value                The cheque is a common cashless payment instrument for
Credit transfers                                                             credit transfers include payroll, supplier and third-party                   both retail and commercial payments. However, its use is in       The Asian Payment Network (APN) initiative currently allows
Credit transfers in South Korea can be paper based or automated,             payments.                                                                    decline due to an increasing preference for electronic payments   ATM card holders in the South Korea to perform cash
although the vast majority (96.1% in volume and over 99% in                                                                                               for both high-value and low‑value transactions.                   withdrawals at the ATMs of participating banks in each
value) are automated. Companies subject to an external audit are               Credit transfers accounted for 17.6% of the volume of all                                                                                    member country (Australia, China, Japan, Indonesia, Malaysia,
required to use electronic credit transfers.                                                                                                              Cheques are truncated into electronic items before being          New Zealand, the Philippines, Singapore, South Korea,
                                                                               cashless payments in 2016, and 93.5% of the value.
                                                                                                                                                          cleared via the BCS. Final settlement is via MACSS. Funds are     Thailand and Vietnam), through a linked ATM network.
                                                                                                                                                          available to beneficiaries on a T+1 or T+2 basis.
16                                                                              HSBC Treasury Management Profile 2018 | South Korea   HSBC Treasury Management Profile 2018 | South Korea                                                                                     17

                                                                                                                                      Payment
                                                                                                                                      Systems

The APN’s aim is to become a settlement network for a range             % volume of all cashless                                      Type                                                                The KFTC also operates the B2C and B2B Electronic Commerce
of retail payments across Asia. In South Korea, the initiative is       payments 2016.                                                BOK-Wire+ , South Korea’s real-time gross settlement (RTGS)         Payment systems, which support e-commerce and process
operated by KFTC.                                                                                                                     system, is operated by the BoK.                                     e-commerce transaction funds transfers.

Electronic wallets                                                                                                                    The KFTC (Korea Financial Telecommunications & Clearings            ®® The B2C system provides a real-time service for funds
Electronic money schemes are available in the form of reloadable                                                                      Institute) operates nine retail payment systems. These are             transactions between consumers and sellers. It also provides a
pre-paid cards. Post-payment and pre-paid transportation                    Credit Transfers              17%                         multilateral net settlement systems. Final settlement via BOK-         real-time enquiry service.
cards such as the K-CASH card, are popular. The K-CASH card                 Direct Debits                 3.7%                        Wire+ occurs across the participants’ accounts held at the BoK.     ®® The B2B system serves as a payment channel for the ORB
can be registered to a customer’s current/deposit account                   Cheque Cards                  26%                         The nine systems are:                                                  (online registered bill). The ORB is the most common payment
or remain unregistered. The maximum value allowed for a                     Credit Card                   44%                                                                                                made in the B2B system and combines the payment facilities
registered K-CASH card is KRW 500,000 and KRW 50,000 for an                 Cheques                       0.8%                        ®® The Cheque Clearing System: a multilateral net settlement           of a cheque with the credit function of a bill.
unregistered card.                                                          Debit Transfers               7.3%                           system consisting of 50 regional clearing houses.
                                                                                                                                      ®® The Bank Giro System: giros can be paper-based giros,            Participants
New schemes, such as the Samsung Pay Transportation Card                                                                                 electronic giros or internet giros.                              BOK-Wire+ has 132 participants, of which 59 are banks and 73
(consolidating the T-Money and Cashbee (formerly Mybi) travel                                                                         ®® IFTNET (Interbank Funds Transfer Network) system: there is a     are non‑banks.
cards), allow users to pay for their travel with their mobile phone.    % value of all cashless                                          maximum value threshold of KRW 500 million per transaction.
                                                                        payments 2016                                                    Payments are settled on a next-day basis.                        The Cheque Cleaning System has 27 direct bank participants.
Samsung Pay is the country’s leading mobile payment app.
                                                                                                                                      ®® HOFINET (Electronic Banking/Firm Banking system): there is
Launched in August 2015, in its first year of operation,                                                                                                                                                  The Bank Giro System has 25 direct bank participants.
                                                                                                                                         a maximum value threshold of KRW 1 billion per transaction
transaction volumes reached USD 2 billion (25% of this is online),
                                                                                                                                         outside of normal banking hours.
according to figures released by Samsung Pay. LG has recently                                                                                                                                             IFTNET has 17 domestic bank participants and 13 special
                                                                             Credit Transfers              93.5%                      ®® CDNET (Interbank Cash Dispenser/Automated Teller Machine
launched its mobile wallet app, LG Pay. Mobile payment apps are                                                                                                                                           participants.
                                                                             Direct Debits                 0.1%                          system): processes payments made through CD/ATM
also available from the country’s leading banks.
                                                                             Cheque Cards                  0.2%                          machines. There is a maximum value threshold of                  CDNET includes all South Korean domestic banks (with the
Other payments                                                               Credit Cards                  0.6%                          KRW 6 million.                                                   exception of the Export-Import Bank of Korea), the Post Office,
Bills of exchange                                                            Cheques                       5.4%                       ®® EFTPOS (Electronic Funds Transfer at the Point of Sale           cooperative members of the National Agricultural Cooperative
There are two kinds of bills of exchange in South Korea: bills of            Debit Cards                   0.1%                          system): there is a minimum value threshold of KRW 1,000 per     Foundation and the National Federation of Fisheries Cooperatives,
exchange and promissory notes.                                                                                                           transaction.                                                     the Korean Federation of Community Credit Cooperatives, the
                                                                       Source: ECOS Economic Statistic System, May 2017.              ®® The CMS (Cash Management Service) system: collects money         National Union Federation of Korea and the Korea Federation of
Promissory notes are used by companies in a similar fashion to                                                                           from payor’s accounts at different banks into one account held   Savings Banks. It has eight special participants.
current account cheques, i.e. as post-dated instruments for large-                                                                       in a particular bank.
value fund or tax payments.                                                                                                           ®® BANKLINE (Local Banks Shared system): enables customers          HOFINET has 24 participants, including 18 domestic direct
                                                                                                                                         to effect account transactions at any participating bank         participants, two foreign banks and four specialist institutions.
                                                                                                                                         regardless of their location. The system is designed for banks
                                                                                                                                                                                                          EFTPOS has 17 direct participants.
                                                                                                                                         without nationwide branch networks.
                                                                                                                                      ®® K-CASH (E-money card): settles debits and credits between        The CMS system has 29 bank participants and 22 asset
                                                                                                                                         financial institutions. The system has a maximum rechargeable    management/financial investment companies.
                                                                                                                                         amount of KRW 500,000 for registered cards and KRW 50,000
                                                                                                                                         for non‑registered cards.                                        BANKLINE has six participants.
1.
     ECOS Economic Statistic System, May 2017.
18                                                                         HSBC Treasury Management Profile 2018 | South Korea         HSBC Treasury Management Profile 2018 | South Korea                                                                                    19

The B2C Electronic Commerce Payment system has 15                   EFTPOS processes all payments made via POS terminals.              K-CASH is available 24 hours a day.                                  ®® 11:00: final settlement takes place across participants’
participants.                                                                                                                                                                                                  accounts held at the BoK via BOK-Wire+. Funds are available
                                                                    The CMS system processes credit and debit transfers of all         The B2C E-Commerce system is available 24 hours a day.                  to beneficiaries on a next-day basis.
The B2B Electronic Commerce Payment system has 15                   values. Available to companies, the CMS collects money from
participants.                                                       payor’s accounts at different banks into one account held in a     The B2C E-Commerce system is available 24 hours a day                HOFINET
                                                                    customer’s main bank. There is no value threshold.                                                                                      Payments are processed 24 hours a day, seven days a week,
Transaction types processed                                                                                                            Clearing cycle details                                               although participants may choose to stop operating their system
BOK-Wire+ processes high-value and urgent KRW interbank             BANKLINE processes funds transfers and other banking               BOK-Wire+                                                            for payment processing between 00:00 and 17:00.
transfers. In addition, BOK-Wire+ effects the final settlement of   transactions for local banks. There is no value threshold.         ®® 09:00–17:30: BOK-Wire+ settles transactions in real time and
participants’ net balances originating from South Korea’s other                                                                           with immediate finality.                                          ®® 11:00: final settlement takes place across participants’
clearing houses. There is no value threshold except for transfer    K-CASH processes K-CASH electronic money card transactions.        ®® 11:00: final settlement of all net obligations.                      accounts held at the BoK via BOK-Wire+. Funds are available
entries of third-party funds that have a minimum threshold of                                                                                                                                                  on a real-time basis.
KRW 1 billion.                                                      The B2C Electronic Commerce Payment system processes               Final settlement takes place across the participant banks’
                                                                    funds transfers between retailers and customers in real time.      correspondent accounts at the BoK.                                   CDNET
JPY and USD-denominated interbank payments are also                                                                                                                                                         ®® Operates 24 hours, seven days a week.
processed, providing banks have a foreign currency deposit          B2B Electronic Commerce Payment system deals with                  Cheque Clearing System                                               ®® 11:00: final settlement takes place across participants’
account at the BoK.                                                 contract information between businesses. It both issues and        Cheques are truncated into electronic items before being                accounts held at the BoK via BOK-Wire+ on a next-day basis.
                                                                    processes ORBs and interbank fund transfers.                       processed by the Cheque Clearing System.
The Cheque Clearing System processes all KRW-denominated                                                                                                                                                    The CMS system
current account cheques, cashier’s cheques, bills of exchange       Operating hours                                                    Cheques are transmitted to the system for overnight clearing.        Debit transfers:
and promissory notes. There is no value threshold.                  BOK-Wire+ operates from 09:30 to 17:30 local time, Monday to       Clearing takes place until one hour before the start of the
                                                                    Friday. The BoK may extend operating times if necessary. The BoK   following business day; settlement data is then transmitted to the   ®® 17:00 D-1: cut-off time for next-day withdrawal.
The Bank Giro System processes giros, paper-based and               plans to extend the current BoK-Wire+ operating hours by one       BoK via the internet.                                                ®® 12:00 D: cut off for same-day withdrawal.
electronic credit transfers, direct debits, standing orders and     hour in 2017/18.
                                                                                                                                                                                                            ®® 11:00 D+1: final settlement takes place across participants’
                                                                                                                                       ®® 11:00: final settlement takes place across participants’
internet giros. There is no value threshold.                                                                                                                                                                   accounts held at the BoK via BOK-Wire+.
                                                                    The Cheque Clearing System operates overnight from 17:00 to           accounts held at the BoK via BOK-Wire+ on a next-day basis.
                                                                    08:00, local time, Monday to Friday.                               ®® 12:00: Holders of cashier’s cheques can withdraw funds.
IFTNET processes KRW-denominated cashier’s cheques, cash,                                                                                                                                                   Credit transfers:
irregular credit transfers and cashier’s cheque information                                                                            ®® 14:20: Withdrawal of funds for all other bills and checks.
                                                                    The Bank Giro System operates from 09:00 to 22:00 local time,
enquiries. There is a maximum value threshold of KRW 500                                                                                                                                                    ®® 14:00: cut-off time for credit payments to be sent to the KFTC.
                                                                    Monday to Friday.                                                  Bank Giro System
million per transaction.                                                                                                                                                                                    ®® 11:00: final settlement takes place across participants’
                                                                                                                                       ®® 09:00–16:00: the KFTC clears bank paper and electronic giro          accounts held at the BoK via BOK-Wire+ on a next-day basis.
                                                                    IFTNET operates from 09:00 to 16:00 local time, Monday to
HOFINET processes domestic currency payments made through                                                                                 transactions.
                                                                    Friday.
electronic banking, which includes mobile, internet and phone                                                                          ®® 00:30–23:30: internet giros are cleared.
banking. There is a maximum value threshold of KRW 1 billion        CDNET operates 24 hours, seven days a week.                        ®® 11:00: final settlement takes place across participants’
per transaction outside of normal banking hours. Payments are                                                                             accounts held at the BoK via BOK-Wire+. Funds are available        Currency centre holidays
typically settled on a real-time basis.                             EFTPOS operates 08:00 to 23:30 local time, seven days week.           to beneficiaries within two to three business days.
                                                                                                                                                                                                             2018                   1, 15–17 Feb, 1 Mar, 1, 7, 22 May, 6 Jun,
                                                                    HOFINET is available 24 hours a day.                                                                                                                            15 Aug, 24–26 Sep, 3, 9 Oct,
CDNET processes payments and transactions made via CD/ATM                                                                              IFTNET
                                                                                                                                                                                                                                    25, 31 Dec
terminals. There is a maximum value threshold of KRW 6 million                                                                         ®® 09:00–16:00: a customer’s account is instantly debited and
                                                                    BANKLINE operates from 09:00 to 16:00 local time, Monday              credited when a payment instruction is made.                       Source: www.goodbusinessday.com.
per fund transfer.
                                                                    to Friday.
20   HSBC Treasury Management Profile 2018 | South Korea   HSBC Treasury Management Profile 2018 | South Korea                                                                                    21

                                                           Cash
                                                           Management

                                                           Domestic                                                             Short-term investments
                                                           Notional pooling                                                     ®® Interest can be earned on resident and non-resident demand
                                                           Notional pooling is permitted in South Korea.                           deposit accounts.
                                                                                                                                ®® Time deposits are available to residents in KRW or major
                                                           Cash concentration                                                      foreign currencies, with maturities ranging from overnight to
                                                           Cash concentration is permitted between resident and non-               five years. Non‑resident entities are not permitted to invest in
                                                           resident companies with zero balancing the most commonly used           KRW-denominated time deposits with maturities of less than
                                                           cash management technique.                                              one year.
                                                                                                                                ®® Certificates of deposit are offered by commercial banks,
                                                           It is prohibited to trade the KRW outside of South Korea.
                                                                                                                                   with maturities of 30 days to five years. Most are issued
                                                           Collections                                                             for three months. The minimum investment amount is
                                                           Collection accounts can be held by companies at different               KRW 10 million.
                                                           local banks, allowing them to settle an account by making an         ®® Treasury bills are issued with maturities up to 20 years.
                                                           internal transfer within the selected bank. Once collected, cash        The minimum investment amount is KRW 10 billion.
                                                           management providers automatically concentrate balances in           ®® Monetary Stabilisation Bonds are issued by BoK,
                                                           each collection account to a master account.                            with maturities ranging from 14 days to two years.
                                                                                                                                ®® Money market funds are widely available.
                                                           Cross-border
                                                                                                                                ®® Repurchase agreements are available.
                                                           Cross-border payment instructions are routed via SWIFT and
                                                           settled through accounts held with correspondent banks abroad.
                                                                                                                                Custody and securities settlement1
                                                           Cross-border payments can also be made via a foreign currency
                                                                                                                                Depository
                                                           demand draft.
                                                                                                                                ®® Korea Securities Depository (KSD).
                                                           The KFTC operates the Extended Korea Payment Network (EXK),
                                                                                                                                The KSD is the sole central securities depository of Korea,
                                                           which links domestic and overseas payment and settlement
                                                                                                                                providing a wide range of post-trade services for the Korean
                                                           networks. The system enables domestic bank customers to
                                                                                                                                securities market.
                                                           use payment services, such as cash withdrawal and balance
                                                           enquiries, in other countries. EXK services are available in the     Settlement cycle
                                                           USA, the Philippines, Malaysia, Vietnam and Thailand.                KOSPI Market
                                                                                                                                ®® T+2 for stocks.
                                                           A number of banks have entered into bilateral correspondent
                                                           banking relationships in order to provide international services,    ®® T+1 for government bonds.
                                                           including TARGET and the European Banking Association’s              ®® T for general bonds.
                                                           EURO1, STEP1 and STEP2 services.
                                                                                                                                KOSDAQ Market
                                                           Lifting fees                                                         ®® T+2 for stocks.
                                                           Lifting fees are applied on funds transfers between resident and     ®® T+1 for derivatives (options, futures).
                                                           non-resident accounts either as a flat fee for a range of transfer
                                                           values, or as a percentage of the total transaction value.           1.
                                                                                                                                     Data as at February 2017.
22                                       HSBC Treasury Management Profile 2018 | South Korea       HSBC Treasury Management Profile 2018 | South Korea   23

Electronic
Banking

     There were             Electronic banking is available in South Korea and offered by all
                            of the country’s banks. There is no bank-independent electronic
                            banking standard.

     7.8 million business   All electronic banking users must sign an electronic banking
                            agreement with their bank before using internet or phone banking
     internet banking       services. Under the terms of the Digital Signature Act, all internet
                            transactions made with digital certificates are legally valid in

     customers and
                            South Korea.

                            Internet and mobile banking is offered by all of the country’s

     114.8 million          leading banks for both corporate and retail purposes. However,
                            PC-based internet banking is rapidly being replaced by
                            smartphone-based mobile banking. According to BoK:

     individual internet    ®® There were 7.8 million business internet banking customers
                               and 114.8 million individual internet banking customers in
     banking customers in      2016, a year-on-year increase of 9.7% and 4.6% respectively.
                               Over the same period, there were three million internet

     2016, a year-on-year
                               banking transactions, with a total value of
                               KRW 154,703.8 billion, an increase of 16.9% and 5.3%
                               respectively on 2015 figures.

     increase of 9.7% and   ®® In Q1 2017, the number of internet and smartphone
                               banking service users had increased 2.3% to approximately
                               125.3 million. Over half of all the users (77.3 million) were
     4.6% respectively.        smartphone-based banking users.
                            ®® There were 57.3 million smartphone transactions processed
                               per day in Q1 2017, a 7.3% increase on the previous quarter.
                               The value of transactions rose 8.3% to KRW 3.62 trillion.
                            ®® 40.7% of internet banking services are used for depositing,
                               withdrawing or remitting money.

                            Individuals are limited to making a one-off transfer of
                            KRW 100 million. There is a daily limit of KRW 500 million.
                            Corporate users are limited to making a one-off transfer of KRW 1
                            billion. Corporates have a daily limit of KRW 5 billion.

                            South Korea has an internet penetration rate of approximately
                            99%1. Smartphone penetration is 70.4%2.

                            1.
                                 Ministry of Science, ICT and Future Planning, 2016.
                            2.
                                 www.eMarketer.com, 2016.
24                              HSBC Treasury Management Profile 2018 | South Korea            HSBC Treasury Management Profile 2018 | South Korea                                                                                                       25

Trade
Finance

     Buyers need the     Imports
                         Documents
                         In order to import goods into South Korea, a bill of lading,
                                                                                               Exports
                                                                                               Documents
                                                                                               In order to export goods from South Korea, a customs
                                                                                                                                                                        Key import partners

     bank’s financing    customs declaration, commercial invoice, certificate of origin, and
                         packing list are required.
                                                                                               declaration, commercial invoice, certificate of origin, bill of lading
                                                                                               and packing list are required.
                                                                                                                                                                            China                     20.7%

     support for their   Licences
                         The majority of goods can be imported into South Korea without
                                                                                               Licences
                                                                                               Excluding items on the negative list, all products can be exported
                                                                                                                                                                            Japan
                                                                                                                                                                            USA
                                                                                                                                                                                                      10.5%
                                                                                                                                                                                                      10.1%
                                                                                                                                                                            Germany
     importation of
                         a licence.                                                            without restriction.                                                                                   4.8%
                                                                                                                                                                            Saudi Arabia              4.5%
                         Taxes/tariffs and other fees                                          Taxes/Tariffs and other fees

     crude oil/gas       South Korea is a member of the 21-member Asia-Pacific
                         Economic Cooperation (APEC) forum, which intends to lift all
                         trade and investment barriers in the region.
                                                                                               No taxes are charged on exports from South Korea.

                                                                                               Prohibited exports                                                       Key export partners

     and other goods.    South Korea has signed a free trade agreement (FTA) with the
                                                                                               A negative list (of products that may not be exported) is in
                                                                                               operation.
                         Association of Southeast Asian Nations (ASEAN). Almost all trade

     Sellers need the    with ASEAN nations is tariff free.                                    Financing imports and exports
                                                                                               Imports                                                                      China                      26%
                                                                                                                                                                            USA                        13.3%
     bank’s financing
                         South Korea has also signed an FTA with Canada, China, the EU,        The buyers in Korea need the bank’s financing support for their
                         Turkey, the USA and Vietnam, and a Comprehensive Economic             importation of crude oil/gas and other goods.                                Hong Kong                  5.8%
                         Partnership Agreement has been signed with India.                                                                                                  Vietnam                    5.3%

     support for their
                                                                                               Exports                                                                      Japan                      4.9%
                         South Korea classifies imported goods using the Harmonised            The sellers in Korea need the bank’s financing support for their
                         Customs System. Most products are assessed on an ad valorem           export of goods to the buyers in all regions.

     export of goods.
                                                                                                                                                                        Source: The World Factbook. Washington, DC: Central Intelligence Agency, 2017
                         basis. The average customs duty paid is about 13.3%.                                                                                           (https://www.cia.gov/library/publications/resources/the-world-factbook/index.html).

                         The Korean Customs Service publishes an annual list of goods
                         that are liable for adjustment tariffs. Currently 14 items are
                         subject to anti‑dumping duties.

                         South Korea has eight operational free economic zones: Incheon,
                         ChungBuk, East Coast, Busan-Jinhae, Gwangyang Bay Area,
                         Yellow Sea, Daegu‑Gyeongbu and Saemangeum Gunsan.

                         Prohibited imports
                         A negative list (of products that may not be imported) is in
                         operation. It is prohibited to import certain commodities into
                         South Korea, in order to protect fauna and flora, and for national
                         security and moral reasons.
26                                                               HSBC Treasury Management Profile 2018 | South Korea   HSBC Treasury Management Profile 2018 | South Korea                                                                                                                              27

Useful
Websites

 Bank of Korea                                              www.bok.or.kr

 Leading banks:        Industrial Bank of Korea             eng.ibk.co.kr

                       KB Kookmin Bank                      www.kbstar.com

                       KDB Bank                             www.kdb.co.kr

                       Shinhan Bank                         www.shinhan.com/en

                       Woori Bank                           www.wooribank.com

 Financial Supervisory Commission                           www.fsc.go.kr/eng/

 Korea Federation of Banks                                  wwww.kfb.or.kr

 Korea Association for Chief Financial Officers             www.cfokorea.org

 Ministry of Strategy and Finance                           english.mosf.go.kr

 Ministry of Knowledge Economy                              www.koisra.co.kr                                           Disclaimer

 Korea Chamber of Commerce and Industry                     http://english.korcham.net/nChamEng/                       This document has been produced by HSBC Bank plc and members of the HSBC Group (“HSBC”), together with their third-party contributor, WWCP Limited. We make no
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 Korea International Trade Association                      www.kita.org                                               legal, tax or other professional advice. You should not act upon the information contained in this document without obtaining your own independent professional advice. The
                                                                                                                       information contained in this document has not been independently verified by HSBC.
 Invest Korea                                               www.investkorea.org
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