Government to Deregulate Foreign Currency Transactions

Starting from January next year, Koreans will be allowed transfer up to $50,000 a year overseas without submitting written documents. Also, starting next year, children with foreign citizenship will be considered Korean students studying aboard, which will allow parents to send money to them more conveniently. The cap on overseas real estate investment, currently set at $3 million, will be scrapped next year, which will permit unlimited investment.

The Ministry of Finance and Economy announced its plan to improve foreign exchange regulations yesterday, and said it would be implemented by stage starting next month.

Expansion of Overseas Capital Transactions-

According to the plan, starting January, individuals will be allowed to send up to $50,000 a year overseas without any written documents by explaining the purpose of the money transfer.

Transfers of less than $1,000 will not be included in calculating the sum that an individual sends overseas within a year.

Moreover, Koreans will not have to report to the Bank of Korea their capital transactions, except for direct investment and real estate investment, if their amounts do not exceed $50,000. Currently, they must report all of their capital transactions to the central bank, regardless of the amount.

The ministry also decided to abolish the cap on overseas real estate investment next year. But it did not set a deadline for the abolition as it believes that it needs at least a year to observe if there are any side effects from the upward revision of the cap to $3 million in February this year.

Overseas real estate investment between $1 million to $3 million increased from 10 cases ($19 million) in March to 16 cases in September ($22 million).

Simplifying the Process for Money Transfers-

Starting next month, children with overseas citizenship or denizenship will be regarded as Korean students studying overseas, which will allow their parents to send them money more easily. Just like sending money to Korean students overseas, parents will only have to submit a document verifying that their children are studying overseas to banks.

The government also considers Koreans who receive residence visas in Southeast Asian countries by making cash investments there to be de facto immigrants, exempting them from submitting documents, such as business records. This is expected to encourage Koreans to move to such countries after retirement.

Furthermore, the postal service, savings banks, and credit unions will be allowed to trade in foreign exchange, which will give consumers diverse options in exchanging money.

The ministry’s plan also includes ways to facilitate institutional investment for corporations and financial institutions.

In particular, corporations whose annual exports and imports exceed $50 million will be permitted to transfer payments without documents. Currently, only those with exports and imports totaling more than $100 million benefit from the exemption.

Over-the-counter derivatives transactions that banks or insurers conduct will be exempted from reporting to the Bank of Korea as well, starting next month.

The government decided to strengthen supervision after transactions, while drastically deregulating foreign exchange transactions.

cha@donga.com