10/20/2016

Filing your U.S. Taxes as an Expat in Korea: Foreign Earned Income Tax Exclusion

U.S. Taxes, Foreign Income, KoreaOften, American expats and American Permanent Residents are unaware of the fact that they, as U.S. citizens or resident aliens living abroad, are required to file U.S. tax returns even if they do not owe money to the U.S. government or earn income in the U.S.

If you are behind on filing your U.S. taxes, you can file your prior year tax returns retroactively.  If you are caught by the IRS, prior to filing your taxes, you may be subject to penalties, law fees and may be obligated to pay taxes that you were not obligated to pay if you filed for a Foreign Income Tax Exclusion.  Some may even be criminally prosecuted for not filing.  

How and When to File 
The filing deadline for IRS Tax Returns for the previous year is April 15.

As a U.S. citizen or resident alien living overseas, you are entitled to an automatic 2-month extension to file your return, bringing your deadline to June 15.  However, this extension only exempts you from late penalties – filing after April 15 will still incur an interest fee - if you owe taxes.

Exclusions 
Some expats may qualify for the Foreign Earned Income Tax and Foreign Housing exclusions, as well as the foreign Housing Deduction. The Foreign Earned Income Tax Exclusion may qualify you to exclude from income up to a certain amount of your foreign earnings.  The amount is adjusted yearly and is presently around USD 100,000.  Thus, in most cases, if you do not make over USD 100,000 - you will not be required to pay any U.S. Income Tax.  If you make over USD 100,000 you may be eligible to exclude the amount under USD 100,000 and deduct taxes paid for income earned beyond USD 100,000, thus, reducing your total taxable income.

To qualify, in short, your Tax Home (the general area of your main place of business, employment, or post of duty) must be in a foreign country and you must have "foreign earned income."

Some sources of foreign income that are not deemed "foreign earned income" include:
  • Pay received as a military or civilian employee of the U.S. Government or any of its agencies; and
  • U.S. Pension or annuity payments (including social security benefits).
Even if you do meet the eligibility requirements for these exclusions or deductions, you shall still need, in most cases, to file a tax return.  Additionally, you may be required to file an FBAR and FATCA Form 8938.   We will discuss these in future posts on this blog.

Consequences for Failing to File your Tax Returns 
At a minimum, consequences may include the loss of your tax refund or a “failure to file” penalty which could increase your bill by as much as 25 percent.  In the most serious of incidents, the IRS may investigate you as a criminal non-filer and, in order to collect on money owed, levy your property, including your home.  Some non-filers end up in the clink.

Being an expat can be a lot of fun, as you get to immerse yourself in a new country and a new culture.  However, it is important to remember that as a citizen or resident alien you should immerse yourself in an understanding of U.S. Tax Law or hire someone that is, already, immersed.

Typically, law firms, with associations with accountants will file your taxes for around USD 500 for each year.  These firms, will often, provide a discount if you file multiple years and the multiple years contains, basically, the same information each year.
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.  Sean is co-chair of the Korea Practice Team at IPG Legal.

He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.  Sean is known for his proactive New York-style street-market advice and his aggressive and non-conflicted advocacy.  Sean works with some of the leading retired judges, prosecutors and former government officials working in Korea.

Sean's profile may be found at: Sean C. Hayes

8/30/2016

Right to Publicity/Portrait in Korea: Entertainment Law Basics in Korea

Recently, the Seoul Central District Court delivered a decision that it is the violation of one right to publicity/portrait rights for a person to share an image on a public site for commercial purposes without a publisher’s consent (Seoul Central District Court 2015GaDan5324874).

FACTS
Mr. A posted photos of himself on his Instagram Page.  Mr. B re-posted those photos on Naver's Band without Mr. A’s consent.  Band is a social media site.

C company also posted the photos on Facebook without Mr. A’s consent.  Thus, Mr. A's photos were reposted from Mr. A's Instagram Page and posted on Naver's Band by an individual and posted on Facebook by a company.  Seemingly, the purpose of the re-postings was to promote the page and products of Mr. B and Company C.  The Seoul attorneys for Mr. B and Company C argued that the terms of Instagram allowed the re-posting of the pictures.

HOLDING
Instagram notes in its terms and conditions of use, that photos placed on Instagram may be shared freely.

Nevertheless, the Seoul Central District Court ruled that Mr. A's pictures may not be shared on any other person's pages without the consent of Mr. A if the images are being utilized for commercial purposes.

Therefore, Mr. B and Company C must compensate Mr. A for damages since Mr. B and Mr. C, among other things, violated Mr. A’s portrait rights notwithstanding the rules governing Instagram.

The court awarded damages to Mr. A for the violation of Mr. A's publicity/portrait rights.
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info@ipglegal.com

8/27/2016

Korea to Rule if Pokémon GO Can Be Released Nationally in Korea

Korea awaits a decision from the government that will effect the national release of the wildly-popular Pokémon GO app.

We recently discussed the legal ramification in America that come with use of augmented reality games like Pokémon GO on our sister blog, The New York Law Blog.  Augmented reality games involve live direct or indirect views of a physical, real-world environment whose elements are augmented (or supplemented) by computer-generated sensory input such as sound, video, graphics or GPS data.  In the case of Pokémon GO, fictional creatures are projected onto a mobile device's camera through the game's app and relies on Google Maps, as part of the game's presentation, to locate various elements of the game.

Pokémon GO has yet to be released across Korea, the 4th largest gaming market in the world, because of alleged concerns for cyber security. The Ministry of Land, Infrastructure and Transport (MOLIT) is scheduled to decide whether it will allow the app access to digital mapping data.

The government facially is balancing economic and national security concerns. The issues holding up Pokémon GO’s release are allegedly rooted in South Korea’s National Security Law, which is widely discussed in our post about government monitor internet blogging.   Since 2008, Google has petitioned MOLIT for a license to export government-supplied map data for it driving and other map applications, which has been opposed by the Ministry of National Defense, National Intelligence Service, and National Geographic Institute on alleged national security grounds.  However, Goggle argues that the national-security laws benefit local competitors Naver and Kakao Corp., which only use government-supplied maps with blurred or camouflaged sections.  Google blurs similar areas in locally-used maps.

However, the argument may be moot. High-resolution maps of South Korean military installations and other sensitive government buildings already exist and can be found outside of Korea by using Google Earth. Also, Pokémon GO is currently available in  Sokcho, on the east coast of South Korea near the Demilitarized Zone and in Busan, in the southeast corner of the Korean peninsula, following Pokémon GO’s release in Japan.  According to published reports, about 410,000 Koreans have already downloaded Pokémon GO, with with more joining daily.

Thus, it would appear that government's tradition of protecting national security interests or simply, only, protecting Korean conglomerates is being tested by the market's intense desire to access more creative products.  Until MOLIT renders its decision, Korea’s Pokémon fan base eagerly awaits to access the popular new game.
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.  Sean is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.  Sean is known for his proactive New York-style street-market advice and his aggressive and non-conflicted advocacy.  Sean works with some of the leading retired judges, prosecutors and former government officials working in Korea.

Sean's profile may be found at: Sean C. Hayes

Termination of Commercial Agent/Distribution Agreements in Korea: Korea's Agent Compensation Rule

Distribution Agreement, in Korea, Terminated, in Seoul
Terminating an Agency Agreement in Korea
In many cases concerning the termination of a distribution/agent agreement in Korea compensation must be paid to the commission agent.

The law on the termination of Commission Agent-type agreement is governed, mainly, by the Commercial Act of Korea and its enforcement decrees.

The following explanation is, only, a brief overview of Korea's Distribution/ Agency Law relating to termination of a distributor/commercial agent and should, thus, not be relied on by the reader as the only source of information. Please note a much more nuanced explanation is necessary and essential for any manufacturer or supplier doing business with a commercial agent in Korea.

We suggest taking a look at an article we wrote on the selection of a Korean Distributor.  The article may be found at: Finding a Distributor or Agent in Korea.  Additionally, it is advisable to read an article we wrote on distribution agreements.  The article may be found at: Distribution/ Agent Agreements in Korea.  Also, a brief search in the field at the top right will bring up numerous other articles including an article on how, merely, choosing foreign law is not a solution to this issue.  The article may be found at: Choice of Law Issues in Agency/Distribution Agreements. 

Termination of a Distributor in Korea: Korean Commission Agent Termination Rule
Under Korea's Distribution Law, normally, a termination of a Commission Agent Agreement requires the providing of, at least, two-months notice and compensation equal to one year of commissions (agent) or profits (distributor).  Exceptions do exist.  The one year of commission/profit calculation is calculated, in most cases, by averaging the past five years of commissions/profit.

This Korean Commission Agent Termination Rule allowing termination of Korean Commission Agent agreements with, at least, two-month notice period is, on rare occasions, not followed by Korean courts based on interpretations by Korean courts of the Monopoly Regulation and Fair Trade Act.

The Supreme Court of Korea has noted that the Enforcement Decree of the Monopoly Regulation and Fair Trade Act Article 36(1) (Table 1, subparagraph 6(d)) should interpret a violation of this Act as meaning, in part, acts that abuse one’s transactional position to the disadvantage of the other party by considering the following factors:
"specific aspects such as the intention, objective, effect and influence of the act; characteristics of the goods; situation of transaction; degree of the prevailing position of the enterpriser; and contents and degree of disadvantage of the other party. Furthermore, such a determination must take into consideration whether there was a deviation from the practice of normal transactions and whether this impeded fair trade."
This Commission Agent Termination Test allows broad discretion to Korean courts to broadly interpret acts by manufacturers/suppliers as acts that violate these general tenants of fair trade. However, the Supreme Court of Korea has noted that a mere refusal to take part in a transaction with another party is, typically, not a violation of basic Korean fair trade principles.

However, the Korean Supreme Court noted that this general rule can be negated:
"in cases where such a refusal would negate the transactional opportunity of a specific enterpriser and possibly cause difficulties to its business operations, or in cases where a powerful enterpriser abuses its position by exercising such a refusal with the sole intent of causing difficulties to a specific enterpriser, or in cases where the refusal of transaction is an unjust act that aims to realize a purpose prohibited by the Fair Trade Act, such as to coerce a transaction."
This vague test leads to risk that is not easy to evaluate, because of the vague nature of the test and the lack of a long history of consistent jurisprudence on this issue by the Supreme Court of Korea, the high courts and district courts in Korea.

Most risks can be substantially mitigated by the drafting of a Korea-nuanced Agency Agreement and some good old fashion business savvy.  Please don't just use your foreign templates in Korea - get a good business-savvy and street-smart attorney that is on-the ground in Korea to assist.
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.  Sean is known for his proactive New York-style street-market advice and his aggressive and non-conflicted advocacy.  Sean works with some of the leading retired judges, prosecutors and former government officials working in Korea.

Sean's profile may be found at: Sean C. Hayes

8/22/2016

Top 10 Rules for Doing Business in Korea: Korean Business Ethics Basics

The following guest post contains some great business advice from Tom Coyner on Korean Business Ethics.  Tom works with us as a business adviser and, also, in these golden years he is, also, pursuing his passion - photography.

Top 10 Business Rules for Building a Successful Business in Korea
  1. Thou shall always have a Formal Introduction.
    If you are in Korea, it is most important and advisable to have a formal introduction to any person or company with whom you want to do business. Whenever possible, obtain introductions, using a proper intermediary, when possible, in your business meetings.
  2. Thou Shall Not Be Without Business Cards.
    In Korea, a businessperson is not comfortable until he or she knows what company and what position the person he or she has just met. Have a large supply of name cards made prior to visiting companies. Exchange your card with the other person’s taking a moment to closely examine the person’s name, title, etc. as a way of showing you hold the other party in respect. Exchange cards with both or the right hand – never with your left hand. After the exchange, you should place the cards on the table in front of you as you proceed with the meeting, using them for further reference.
  3. Thou Shall Not Assume Everything You Say in English Is Completely Understood. Remember that the level of comprehension of many English-speaking business people may not be as good as their courtesy implies. Emphasize and repeat your key points for their understanding. Try speaking in short, grammatically correct sentences using simple vocabulary. Sometimes it is a good idea to ask questions to verify the other person’s understanding while taking care not to embarrass the other person in front of others. Try diagramming your points rather than simply using English. Exchanging notes after meetings is very helpful for this purpose.
  4. Thou Shall Restrain Pushing Your Position Too Hard.
    Be prepared to be patient, gentle but firm, and as dignified as possible at a negotiating table. Do not try to push your position too hard. Sensitive issues and details may be skipped for future discussions, preferable by a go-between or by your staff, if available. Use of go-betweens can be very valuable especially in delicate dealings where financial negotiations are involved. Allow sufficient time for your counterparts.
  5. Thou Shall Build Human Relationships.
    Legal documents are not as important as human rapport and relationships. Koreans do not like detailed contracts. They prefer, and often insist, that contracts be left flexible enough that adjustments can be made to fit changing circumstances. Therefore, it is very important to develop and foster good relationships based on mutual trust and benefit in addition to the business contract.
  6. Thou Shall Respect Your Partner.
    Koreans are extremely sensitive people. Never cause them to "lose face" by putting them in a difficult position. On the contrary, offer praise for their recently earned prosperity. Their state of good feelings or "kibun" can do wonders far beyond your expectations. At the same time, be aware there are smooth "foreigner handlers" who flatter by insisting that you ``understand Korea better than other foreigners.’’
  7. Thou Shall Entertain and Be Entertained.
    Entertainment should always be accepted, and in some way reciprocated in due time. Parties are often like drinking competitions. You may be expected to get intoxicated but you have the right to politely hold the line. Legitimate reasons for drinking little or none may include personal health conditions and religious beliefs. At the same time, symbolic or token drinking can be done as a substitute when accompanying by a positive and friendly attitude. The giving of small gifts is also an accepted practice and is recommended.
  8. Thou Shall Try to Know Your Counterpart.
    Try to personalize all business relationships. An informal agreement with a trusted party can be considered far more secure than any written document. Try to find out as much about your counterparts as possible: their family status, hobbies, philosophies, birthdays, etc. Try balancing your social life with regular activities with Koreans and not simply people of your own or similar cultures. Since Korea is a tight-knit society, what may begin as an association for non-business reasons may evolve over time into important introductions to others important to your future business.
  9. Thou Shall Temper Use of Western Logic.
    Do not try to appeal too much to Western logic, but try instead to find "emotional common denominators." Feelings and "face" are often far more important in local business dealings. A willingness to compromise without giving up your core values is an invaluable skill anywhere but it is an ability that will serve you particularly well in Korea. Spend some time in reading up on Confucianism to get a fundamental understanding of the other persons’ perspectives.
  10. Thou Shall Keep Fully Informed.
    With increasing affluence and the development of mass communication, the lifestyle of Korean consumers is changing rapidly. Accurate market research and other advice concerning future trends are often only as good as tracking a starting point of fast-moving trajectory. Korea is a world leader in the common use of broadband Internet communications. Events and trends often change at "Internet speed."

    BONUS: Foreigners Are Different Than Koreans.
    While the first Ten Commandments definitely apply to Koreans, foreigners are placed involuntarily on a different plane. A foreigner should always respect the Ten Commandments, but a foreigner has a bit more wiggle room than his Korean peer.

    When possible try to do things the Korean way since in the long run it is not only proper but easier. But if proceeding along Korean methods is genuinely impossible, do your homework on the market and the other party’s needs – and then proceed with caution as circumstances demand. It is even more important to work with a flexible-minded Korean partner should you be forced to break some of the rules as you move forward. This may not be the easiest way to do business in Korea, but out of necessity has come unconventional paths to success. Foreigners are able to act differently, and they can bring new insights to Korean business.

    In 1987 the "Ten Commandments for Doing Business in Korea" by SH Jang was published in a local magazine and again in the following year in his book, The Key to Successful Business in Korea.  Business Ethics in Korea.
Other articles that may be of interest:
info@ipglegal.com

8/18/2016

"Probationary Periods" in Korean Employment Contracts for Newly-Hired Workers

Korean companies should consider negotiating stipulations to create "probationary periods" at the start of employment to train and assess newly-hired workers.

Often companies wish to evaluate workers over a set period of time after concluding a labor contract to assess the worker's abilities and intelligence, and to allow the worker time to gain familiarity with the work.  This period of employment is called a "probationary period."

Probationary periods, in KoreaThe practice is relatively unregulated by the government. The Labor Standards Act of Korea provides, among other things, minimum standards for conditions of employment, prohibits discrimination and the use of force or violence against workers.  But, it provides little guidance on regulating "probationary periods."  The only guidance the Labor Standards Act provides can be found within Article 35, which states that employers do not need to provide 30 day notice of dismissal to workers under a "probationary period" and within Article 77, which protects "workers in training, workers on probation or any other apprentice" from abuse.

Prior versions of the Labor Standards Act once referenced "probationary periods" of three months or less in duration, which led many companies in Korea to conform their internal regulation of worker's employed to include 3-month "probationary periods."

However, there is no express prohibition or limitation in Korean Labor Law to this time period.  In fact, the Ministry of Labor stated that "probationary period" are not restricted by time period, and can be adjusted based upon the nature of jobs and within reason.  Thus, "probationary periods" can be longer or shorter than 3 months, or even extended or shortened, depending upon the needs of the company.  However, still the, typical, and most accepted by the Ministry of Labor is a three-month probationary period.

If your company may benefit from instituting a "probationary period" for proper assessment and training, we recommend adding stipulations within your Korean labor contracts setting reasonable time frames that fit your business's need.  We also recommend specifically setting parameters within your company's internal rules and regulation so that company and worker clearly understand each other's expectations within this "probationary period."

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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.  Sean is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.  Sean is known for his proactive New York-style street-market advice and his aggressive and non-conflicted advocacy.  Sean works with some of the leading retired judges, prosecutors and former government officials working in Korea.

Sean's profile may be found at: Sean C. Hayes

8/16/2016

Korea's Anti-corruption/Anti-Graft Law: Kim Young-ran Law Implementation in Korea

Korea's Anti-graft Law shall be effective on most companies doing business in Korea on September 28, 2016.  Call your lawyer in Korea and get your lawyer to write you a memo on the issue.  The law will have, immediate, effects on most companies doing business in Korea.

Korea, based on calls from civic groups and some in the media criticized the powers that be in Korea that Korea was lax on white-collar crime.  These individuals, among other arguments, claimed it is near impossible to succeed in business in Korea without resorting to corruption.

Antigraft, in korea, corruption, Korea
The Chair of the Anti-Corruption and Civil Rights Commission - retired Supreme Court Justice Young-ran Kim - motioned the National Assembly of Korea to implement a broad-based anti-corruption law.  A watered-down version of the law passed the Korean National Assembly after much debate.  Challenges filed to the Constitutional Court were dismissed by the Court.

This Anti-graft law will, likely, effect any business doing business with government, quasi-government agencies or educational institutes.  Additionally, any companies engaging media consultants that actively engage with the media - may also find themselves on the wrong side of this law.

Please get your Korean attorney to explain the law to you.  Sanctions under the law are, in many cases, steep and because of recent changes at the Korean Immigration Services, sanctions can lead to the deportation of foreign executives that find themselves or their staff running foul of the law.

The law imposes a burden on any individual providing a gratuity over a certain mandated amount to any national or local government official, member of a quasi-government organization, media company and educational institutes (some exceptions exist).

Please check back soon - more to come on this issue in the near future.
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.  Sean is known for his proactive New York-style street-market advice and his aggressive and non-conflicted advocacy.  Sean works with some of the leading retired judges, prosecutors and former government officials working in Korea.

Sean's profile may be found at: Sean C. Hayes