Foreign institutional investors may find interesting that Korea improves accessibility to the Korean stock market, by relaxing the eligibility requirements for opening a foreign omnibus account (FOA). As a result, foreign investors are now permitted to trade Korean equities directly through their local securities firms without opening separate accounts with Korean brokerage firms.
Key changes in the Foreign Omnibus Account system
- 2025 Guidelines: The new FOA framework eliminates the requirement for foreign financial investment firms to be controlling shareholders or affiliates of Korean firms. Now, foreign investors can trade Korean stocks directly via their local brokers, significantly simplifying the process.
- Operational efficiencies: A global custodian can now open consolidated settlement accounts for foreign investors, reducing administrative burdens. Moreover, foreign corporate investors face fewer verification requirements, such as simplified identity checks and reduced notarization procedures.
- First successful implementation: In August 2025, Korea’s first foreign omnibus account was launched through a partnership between a Korean securities firm and a Hong Kong-based firm. This has led to growing interest among other foreign firms.
Tax considerations and WHT benefits
Although the revised FOA system facilitates operational access, foreign investors should be aware of the tax treatment. Korean-source income from investments through FOAs is subject to the standard 22% WHT on dividends, but eligible investors can seek tax treaty benefits, reducing this rate (e.g., from 22% to 15% under the Korea-Germany tax treaty).
Investors must file a retroactive WHT refund application within five years of the tax imposition to claim the reduction. Supporting documentation, such as a certificate of residence, must be submitted to the relevant tax authorities. Although foreign investors cannot receive immediate WHT relief at the source, the post-tax refund process offers a pathway to lower tax rates.
How Lee & Ko and WTS Global can help
Lee & Ko (LK) has substantial experience in assisting overseas investment funds and non-resident investors with refund claims for Korean withholding taxes under the relevant double tax treaty, including numerous successful cases involving Korean equity investments by foreign investors.
Based on its extensive experience and established working relationships with the Korea Securities Depository (KSD) and Korean securities firms - both of which are key participants in the foreign omnibus account business for non-resident investors and foreign brokerage firms - LK is well positioned to provide practical guidance on Korean market practice and to support efficient and effective WHT refund claims for foreign securities firms and non-resident investors interested in investing in Korean equities through foreign omnibus account structures.
LK and WTS Global in cooperation offer assistance to overseas investment funds and non-resident investors, including:
- analysis of WHT obligations and tax treaty applicability;
- preparation and support of refund claims for excess WHT;
- review of documentation and contractual arrangements with Korean securities firms; and
- engagement with Korean tax and regulatory authorities throughout the investment process.
