Press Release

MINISTRY OF STRATEGY AND FINANCE

www.mosf.go.kr

Embargo: Morning paper, Thurs

April 21 Release Date: April 20

Contact Information: Jung Kyu-sam (02-2150-4753/ Foreign Exchange Policy Division)

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1, 2011

The Partial Amendment Law to the Foreign Exchange Transactions Act, passed at the National Assembly on April 5, was announced to be enforced from August 1. With the passage of the amendment at the National Assembly, the Macro-prudential Stability Levy will be imposed on non- deposit foreign currency liabilities held by domestic and foreign banks.

The levy

The subject of the levy, non-deposit foreign currency liabilities, will not include non-deposit foreign currency liabilities which are not relevant enough to the purpose of the taxation, to reduce volatility in capital movement. The tax exemption will be given on the basis of finance ministry’s decision.

Korea Development Bank, Korea Exim Bank, Industrial Bank of Korea, National Agricultural Cooperative Federation, National Federation of Fisheries Cooperatives, Korea Finance Cooperation as well as commercial banks are subject to the tax on their foreign currency liabilities.

Tax rates will be 20 basis points for less than 1 year foreign liabilities, 10 basis points for 1-3 year liabilities, 5 basis points for 3-5 year liabilities, and 2 basis points for more than 5 year liabilities.

Local banks will be given 50 % tax reduction on their non-deposit foreign currency liabilities taken out from domestic banks.

Less than 100 basis points of additional tax will be imposed in case of a sudden surge in foreign capital inflows and increasing volatility in the international financial market.

Press Release