Regulation on Foreign Exchange Transaction in Korea 1

Regulation on Foreign Exchange Transaction in Korea 1 1. Explanation on Term 2. Classification of Amenity (1)Amenity of Citizen (2)Amenity of Foreigner (3)Amenity of Corporate 3. Purchase & Sale by Foreign Exchange Bank (1)Foreign Exchange Purchase from Residents (2)Foreign Exchange Purchase from Non-Residents (3)Sale of Foreign Exchange 4. Remittance in Foreign Currency 5. Remittance in Won (1) Remittance in Won by Non-Residents (2) Remittance in Won by Foreign Residents

Foreign Exchange Transaction Regulation in Korea 1 1. Explanation on Terms (1) General Meaning of Foreign Exchange Foreign Payment Instruments Foreign Currency Payment Instruments indicated of foreign currency or used in foreign countries “What is Payment Instruments? ” Government Note, Bank Note, Coinage, Check, Postal Money Order, L/C, Bill of Exchange Promissory Note, Payment Order by Mail or Telegraphy, Others with Indication of Payment recognized by Minister of Ministry of Strategy & Finance Foreign Exchange Bank Refers to domestic branch running foreign exchange transactions of financial institution prescribed in Article 14 Item 1 Refers to the foreign exchange bank assigned by concerned party of Foreign Exchange Bank transaction for the activity applied of foreign exchange transaction for Assigned Transaction regulation or foreign transaction and follow-up services Authorized Transaction approved or authorized or does not require approval, etc by law, ordinance and regulation Overseas Traveler It is classified into student studying abroad, visitor in foreign countries and general overseas traveler Report • Study Abroad Students : Person staying in foreign countries with the purpose of studying in foreign education institution, research institution or training institution for over 6 months or research or training in academics and technology • Visitor in Foreign Countries : Person with purpose of commerce, culture, public affairs and technology training or overseas training of less than 6 months, etc • General Overseas Traveler : Resident whom is not study abroad students or visitor in foreign countries. Overseas traveler Document verifying the cause and Amount of the report, current transaction, etc Concerned Party of Transaction After confirmation on documents, Issuance of “Permit” record and official seal of chief of foreign exchange bank Foreign Exchange Bank

2. Classification of Amenity Standard for Amenity Classification It is determined based on the region for residence or economic activity for certain period regardless of nationality Resident • Individual with address or residence within Korea • Corporate with its headquarter in Korea Non-Resident • Individual and corporate other than resident (1)Amenity of Citizen of Korea is considered as resident in principle provided that his address is in Korea Application for Non-Resident • Person working in branch, other offices, international organization, etc In foreign countries • Person staying in foreign countries with purpose to stay Oh! Two years have already in foreign countries for more than 2 years passed… 2 years => non-resident from day after departure Study Aboard in Japan for 2 years Non-Resident from day after departure Non-resident from day after 2 year stay • Person staying in foreign countries for over 2 years with purpose of short-term visit =>non-resident from day after 2 year stay • Non-resident citizen whose temporary staying period in Korea is less than 3 months. Korean Citizen with US Green Card Non-Resident Visit to Korea less than 3 months Resident Visit to Korea over 3 months • Exception> Person departed with overseas diplomatic and consular missions is considered as resident regardless of above regulation

(2) Amenity of Foreigners Foreigner is considered as non-resident in principle provided that his address or residence is not in Korea. Application for Resident • Person working in domestic branch (office) or leading operating activity in Korea • Person staying over 6 months in Korea • Once resident foreigner who is re-entering and staying in Korea with the purpose of staying more than 6 months after his departure. (3) Amenity of Corporate Resident 1) Organization, institution, etc with its main office in Korea 2) Branch, agency and other office of non-resident in Korea 3) Diplomatic and consular office of Korea 1) Organization, institution, etc with its main office in foreign countries Non-Resident 2) Foreign diplomatic and consular office and international organizations in Korea 3) Branch (office) in foreign countries Non-Resident Headquarter in Germany Resident Branch in Korea

3. Purchase & Sale by Foreign Exchange Bank (1)Foreign Exchange Purchase from Residents Case where bank purchases cash or check in foreign currency brought by client or amount remitted from overseas with application of customer rates • Confirmation in Foreign Exchange Purchase 1)Confirmation on Real Name (Voucher for Real Name Confirmation – Resident Registration Card, Passport, 2) Etc) → Confirmation may be waved in case amount of foreign currency purchase is less than 1 million won. 2) In case purchase amount is over USD 1, 000, confirmation on acquisition by authorized transaction → In case amount is over USD 20, 000 (single borrower, single person, single store), request for verification document of authorized transaction (except the inherited fund) → Request for verification document is unnecessary for the transaction less than USD 20, 000 (single borrower, single person, single store) with which description on transaction by the concerned party is completed → Transaction over USD 20, 000 (single borrower, single person, single store) for which verification document for acquisition route cannot be submitted Request for ‘receipt confirmation’ (foreign currency or foreign T/C is excluded from request target) → In case cause of receipt is unknown within 3 business days of remittance with unknown location of beneficiary, request for receipt confirmation is waved and execute purchase considering it as ‘previous transaction’ →In case verification document for acquisition route is not submitted for the foreign exchange over USD 20, 000 from foreign residents, purchase after reporting to president of Bank of Korea (except purchase by inward remittance amount and withdrawal of foreign account) →In case of purchasing foreign currency with unknown purpose of disposition from foreign residents, purchase as ‘foreign asset intake fund’ 3) In case of purchase over USD 10, 000 (single borrower, single person), telegraphic notification to National Tax Service within 10 th of next month • Case where inward remittance amount to resident (excluding foreign residents) is paid as foreign payment instrument or deposited to resident account in name of person himself => same procedures as purchase • Issuance of foreign exchange purchase certificate/receipt/calculation in case purchase from foreign resident – limited to 1 time (2) Foreign Exchange Purchase from Non-Residents • Confirmation in Foreign Exchange Purchase 1) Confirmation on Personal Information 2)Confirmation on acquisition including carried-in foreign currency in current year (remittance receipt), etc → State purchase on foreign currency report (confirmation) certificate → Confirmation on acquisition route is waved for purchase of foreign payment instrument of less than USD 20, 000 → Confirmation on acquisition route is waved for the non-resident exempted of report duty such as foreign officials and consular (including diplomat) in Korea, international organization, US Army in Korea, Etc → Confirmation on foreign currency report (confirmation) certificate is unnecessary for withdrawal, purchase from inward remittance amount and foreign account → In case verification document for acquisition rout is not submitted for the foreign exchange over USD 20, 000 from foreign residents and non-residents, purchase after reporting to president of Bank of Korea → In case of purchasing foreign currency with unknown purpose of disposition from non-residents, purchase as ‘foreign asset intake fund’ 3) In case of purchase over USD 10, 000 (single borrower, single person), telegraphic notification to National Tax Service within 10 th of next month 4) Issuance and transfer foreign exchange purchase certificate /receipt /calculation => Issuance and transfer to non-resident is limited to 1 time

(3) Sale of Foreign Currency • Sales of Foreign Currency to Residents 1) Sale to be used in authorized transaction or payment 2) In case of selling to foreign residents, it is within amount prescribed in foreign exchange transaction regulation Article 4 -4 (payment of non-resident or foreign resident) of travel expense within USD 10, 000 3) Sale of foreign currency and T/C to citizen resident 4) Sale for deposit to resident account (no limit) 5) Sale of foreign exchange for transfer to other foreign exchange bank → restricted to authorized transaction in case of transfer to foreign account and foreign trust account of non-resident • Sale of Foreign Exchange to Non-Residents 1) With sales performance after recent date of entry : → It is within range of confirmed sales performance by foreign exchange purchase certificate and details of remittance is stated on the same certificate → If there is entry and departure of non-resident after sales of foreign exchange or amount sold with remittance to Korea before entry is not included in sales performance after recent date of entry thus it is not subject of foreign remittance → Sales performance of foreign exchange by non-residents is limited to following cases *Range of foreign exchange sales performance sold to foreign exchange transaction handling institution, etc after recent date of entry *Range of foreign exchange performance sold to overseas branch of foreign exchange bank, local corporate, etc with domestic currency or T/C in won as its cost *Advance service amount in won by Foreign issued credit card (debit card) 2) In case there is no sales performance : within USD 10, 000 (statement in passport) 3) Within range of amount prescribed in Foreign Exchange Transaction Regulation Article 4 -4 (payment of non-resident or foreign resident) 4) For foreign payment followed by authorized transaction • Payment of Non-Residents or Foreign Residents • For cases where verification document for acquisition route is submitted and confirmation of chief of foreign exchange bank is received, payment is available when it falls under following cases. 1)Within range of received or carried-in foreign payment instruments from foreign countries → Restricted to received or carried-in foreign payment instruments after recent date of entry for non-residents → Performance of spouse and linear ascendants or descendants is included foreign residents 2) Within range reported to president of Bank of Korea 3) Domestic Pay (Income) → Subject designated by foreign exchange transaction bank → Request for verification document to prove pay confirmed by employer, etc: wage statement, receipt for earned income tax withholding, etc → Certificate of Income, Certificate of Tax Payment ( in case of self-employed) ※ Submission duty of employment and income confirmation document is waved in case accumulated payment is less than USD 20, 000 per year 4) Social security & guaranteed benefits or pension → Remittance of social security, guaranteed benefits or pension and similar income in Korea (Ex: Disability insurance from Korea Worker’s Compensation & Welfare Service, etc) 5) Consular revenue received by diplomatic institution in Korea and payment of other fee 6) Within range of sales performance of diplomat, ambassador, etc including the official residents of foreign government, international organization, US Army in Korea, civilian employee, etc 7) Payment to official resident of foreign government, international organizations, diplomat, etc. 8) Payment of fund acquired in Korea followed by other authorized transaction 9) Within USD 20, 000 yearly in case not falling under cause of 1)~ 8) → Designated subject of foreign exchange transaction bank (Remittance of domestic income is same as designated bank)

4. Remittance in Foreign Currency Remittance of Foreign Residents & Non-Residents • Less than USD 20, 000: not limit (single person, single borrower) What is single person and single borrower? In case a client requests for remittance several times a day, check whether or not total transaction amount in a day exceeds the USD 20, 000 • Over USD 20, 000 : Limited to cases confirmed by foreign exchange report (confirmation) certificate and statement of remittance on the same report (confirmation) certificate • Remittance of foreign fund deposited to foreign account : no limit 5. Remittance in Won (1)Remittance of Non-Residents in won • In case there is sales performance after recent date of entry 1) It is within sales performance confirmed based on the foreign exchange purchase certificate, etc, statement of remittance on the same certificate 2) If there is entry and departure of non-resident after sales of foreign exchange or amount sold with remittance to Korea before entry is not included in sales performance after recent date of entry thus it is not subject of foreign remittance 3) Foreign exchange sales performance of non-residents is limited to following cases *Range of foreign exchange sales performance sold to foreign exchange transaction handling institution, etc after recent date of entry *Range of foreign exchange performance sold to overseas branch of foreign exchange bank, local corporate, etc with domestic currency or T/C in won as its cost *Advance service amount in won by Foreign issued credit card (debit card) - Range of foreign exchange sales performance to foreign exchange transaction handling institution, etc after recent date of entry - Range of foreign exchange performance sold to overseas branch of foreign exchange bank, local corporate, etc with domestic currency or T/C in won as its cost - Advance service amount in won by foreign issued credit card (debit card) - In case of non-resident including the diplomat in Korea, etc prescribed in Ordinance Article 10 Item ② Issue 1 and Issue 6, confirmation on identification with passport and amount in confirmation of the person himself • In case there is no sales performance Within USD 10, 000 (statement on passport) However, no limit for diplomat in Korea, etc • Remittance of fund deposited non-resident free-won account No Limit Linear ascendants or descendants is family system within Korea. (2)Remittance of Foreign Residents in won Remittance of Foreign Residents In Won It refers to the ascendants including the mother, father, grandmother, etc and descendants including the son, daughter, grandson, granddaughter, etc. In case foreign residents (including the spouse and linear ascendants or descendants) demands the payment within range of sales performance of foreign exchange, payment can be made regardless of authorized transaction

Cases for reporting without restriction in sales performance 1) Remittance of domestic pay (income) - Target for designated foreign exchange transaction bank - Request for verification document to prove pay confirmed by employer, etc: wage statement, receipt for earned income tax withholding, etc - Certificate of Income, Certificate of Tax Payment ( in case of self-employed) ※ Submission duty of employment and income confirmation document is waved in case accumulated payment is less than USD 20, 000 per year 2) Payment of income including the social security, pension, etc - Remittance of social security, guaranteed benefits or pension and similar income paid to foreign residents in Korea (Ex: Disability insurance from Korea Worker’s Compensation & Welfare Service, etc) 3) Payment of overseas travel expense - Exchanged amount equivalent to USD 10, 000 or less shall be indicated on passport and indication can be waved for the sales of foreign currency equivalent to 1 million won or less - Foreign residents with staying period in Korea of over 5 years can remit overseas staying expense, study abroad expense 4) Inherited remittance of resident - Limited to foreign residents with staying period in Korea of over 5 years ※Staying period in Korea of less than 5 years: No inherited remittance, payment available within range of sales performance