TITLE : FAQ ON FDI IN KOREA 2023 (Q73~Q75)
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■ FAQ on FDI in Korea 2023 (Q73~Q75)
Real Estate Acquisition
Q73 What is the procedure for a foreign investor’s acquisition of real estate in Korea?
A73 When a foreigner acquires real estate, applicable laws andprocedures vary depending on the purpose of acquisition, residency status, and whether the buyer is a corporate or an individual.
- The Act on Report on Real Estate Transactions, etc. stipulates only theprocedures for a foreigner to acquire real estate in Korea. When the realestate acquisition is for-profit such as property rental, in addition to theregistration of real estate acquisition by a foreigner, foreign-investedcompany registration through foreign investment notification under theForeign Investment Promotion Act is required. If the investor is a nonresident under the Foreign Exchange Transactions Act, an additionalregistration should follow for the acquisition of the real estate.
- When a foreign company sets up a branch in Korea, branch establishmentnotification under the Foreign Exchange Transactions Act is requiredinstead of foreign investment notification under the Foreign InvestmentPromotion Act. After registration of a branch, purchase the real estateunder the name of the branch.
< Foreigners’ real estate acquisition and related Acts >
Act on Report on Real Estate Transactions, etc. | Foreign Exchange Transactions Act (Real estate) | Foreign Investment Promotion Act | |
Acquirer |
(※ Excluding permanent residence card holders) |
※ Excluding permanent residence card holders |
※ Including permanent residence card holders |
Subject | Acquisition of real estate | Acquisition of rights to land, building and real estate | Registration of a foreign-invested company |
Reporting authority and timing |
※ Within 60 days for the acquisition under Article 8 (1), within 6 months under Article 2 |
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Contents | Procedures forforeigners to acquirereal estate in Korea | Matters related to the inflow and outflow of foreign currencies forreal estate purchase in Korea by foreigners | Foreign investment notification procedure, tax reduction & exemptions, and benefits on state property sales when a foreign-invested company acquires real estate in Korea |
Q74 As a foreigner intending to purchase land in Korea, what should I be most cautious of when signing the contract?
A74 Where parties to a transaction, including a foreigner, etc.*,enter into ① a real estate sales contract or ② a contract for supply of real estate under the Housing Site Development Promotion Act or the Housing Act, the y are required to notify the relevant authority within 30 days of the date of signing the contract. (Article 3 (1) of the Act on Report on Real EstateTransactions, etc. If the real estate acquisition is pursuant to Article 8 (1), notification should be filed within 60 days. If the acquisition is pursuant to Article 8 (2) of the same Act or Article 5 (2) of the Enforcement Decree of the Act, notification should be made within six months.)
- It is necessary to check in advance whether the land is acquirable only by reporting or is subject to prior permission for transaction. If a foreigner enters into a purchase contract without the transaction permission for the property subject to prior approval, the contract shall be nullified, and imprisonment or a fine sentence may be imposed, making it challenging to acquire the real estate.
- Land requiring permission for transaction by foreigners (Article 9 of the Act on Report on Real Estate Transactions, etc.)
- Military bases and installation protection zones defined in subparagraph6 of Article 2 of the Protection of Military Bases and Installations Act,and such other areas as may be especially necessary to limit landacquisition by a foreigner, etc. for the purposes of national defense
- Designated cultural heritage defined in Article 2 (3) of the Cultural HeritageProtection Act, and protective facilities or protection zones therefor
- Ecological and scenery conservation areas set in subparagraph 12 ofArticle 2 of the Natural Environment Conservation Act
- Special districts for protection of wildlife under Article 27 of theWildlife Protection and Management Act
- Penalty provision: A foreigner, etc. who enters into any land acquisition contract without obtaining permission or after obtaining permission by illegal means shall be subject to imprisonment with labor for not more than two years or by a fine not exceeding KRW 20 million.
* The term "foreigner, etc." means any of the following individuals, corporations, or organizations:
- An individual who is not a national of the Republic of Korea
- A corporation or organization incorporated under the statutes of aforeign State
- A corporation or organization at least a half of whose employees ormembers fall under item (1)
- A corporation or organization at least a half of whose executiveofficers, such as managing general partners or directors, fall underitem (1)
- A corporation or organization in which persons falling under item (1)or corporations or organizations falling under item (2), hold at leasta half of its capital or a half of the voting rights
- A foreign State
- An international organization prescribed by Presidential Decre
Q75 . If a foreigner signs a contract to acquire real estate in Korea, must he/she report it?
A75 Yes.
- Parties to a transaction including a foreigner, etc., entering into a contractto acquire real estate in Korea shall report to the relevant report-receivingauthority within 30 days from the transaction contract date. (Article 3 (1)of the Act on Report on Real Estate Transactions, etc.)
- However, when a foreigner, etc. enters into a contract on acquisition ofany real estate under Article 8 (1) of the Act on Report on Real EstateTransactions, etc., he/she shall file a report thereon with the reportreceiving authority within 60 days from the acquisition date of the realestate. If the real estate acquisition is by means of inheritance, auction,or any cause other than contracts under Article 2 of the Act on Report onReal Estate Transactions or Article 5 (2) of the Enforcement Decree ofthe Act on Report on Real Estate Transactions, the report shall be madeto the report-receiving authority within six months.
- If a national of the Republic of Korea who possesses any real estatewithin the territory of the Republic of Korea or a corporation ororganization incorporated under the statutes of the Republic of Koreabecomes a foreigner, etc., and if the relevant foreigner, etc. intends topossess the relevant real estate, etc. continuously, the foreigner, etc.shall file a report thereon with the report-receiving authority within sixmonths from the date of change to a foreigner, etc. as prescribed byPresidential Decree.
- Penalty for failure to report acquisition
- A person who fails to report the real estate transaction under acontract shall be punished by an administrative fine not exceedingKRW 5 million, and a person who files a false report by anadministrative penalty not exceeding 5% of the acquisition value of therelevant real estate, etc. (Article 28 (2), 28 (3) of the Act on Report onReal Estate Transactions)
- A person (foreigner, etc.) who fails to file a report under Article 8(1)or files a false report shall be punished by an administrative fine notexceeding KRW 3 million (Article 28 (4) of the Act on Report on RealEstate Transactions).
- A person (foreigner, etc.) who fails to report a real estate acquisitionby means of inheritance, auction, or any cause other than contractsor files a false report shall be punished by an administrative fine notexceeding KRW 1 million (Article 28 (5) of the Act on Report on RealEstate Transactions).
- A person (foreigner, etc.) who fails to file a report on continuouspossession of land or files a false report shall be punished by anadministrative fine not exceeding KRW 1 million (Article 28 (5) of theAct on Report on Real Estate Transactions).