TITLE : FAQ ON FDI IN KOREA 2023 (Q76~Q81)
페이지 정보
작성일
2023
2023-11-07
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■ FAQ on FDI in Korea 2023 (Q76~Q81)
RealE state Acquisition
Q76 | Is it necessary for a domestic branch of a foreign corporation to report real estate acquisition by foreigners? Also, how can the acquisition cost be introduced? |
A76 | A domestic branch of a foreign corporation should report real estate acquisition by foreigners. |
- Under the Act on Report on Real Estate Transactions, etc., a foreigncorporation’s domestic branch is deemed a foreigner, hence reporting ofa real estate acquisition is required.
- In this case, when introducing funds into Korea from overseas to acquiredomestic real estate, the domestic branch is classified as a residentunder the Foreign Exchange Transaction Act. In this regard, the branchcan introduce the operational funds from its overseas headquartersthrough a designated foreign exchange bank without reporting the realestate acquisition under the Foreign Exchange Act (Article 9-34 of theForeign Exchange Transactions Regulations).
Q77 | If a majority of executives for a Korean corporation are foreign nationals, should the company report the real estate acquisition? |
A77 | Yes, a report of real estate acquisition by a foreigner is required. |
- Even if a company is a domestic corporation, if half or more of itsexecutives are foreign nationals or half or more of its shares are heldby foreign nationals or foreign corporations, the domestic corporationis classified as foreigner, etc. under the Act on Report on Real EstateTransactions, etc. Therefore, the company is subject to report real estateacquisition by foreigners.
Q78 | If a domestic corporation with a foreign ownership ratio of 50% or more acquires real estate in Korea, should the company report the real estate acquisition under the Foreign Exchange Transactions Act? |
A78 | The company should report real estate acquisition by foreignersunder the Act on Report on Real Estate Transactions, etc.However, real estate acquisition report under the ForeignExchange Transactions Act is not necessary. |
- In this case, the company is classified as a foreigner under the Acton Report on Real Estate Transactions, etc., but as a resident underthe Foreign Exchange Transactions Act. Therefore, the company doesnot need to report the real estate acquisition stipulated in the ForeignExchange Transactions Act.
- It is important to note that foreign investors who plan to register aforeign-invested company will be subject to the Foreign InvestmentPromotion Act. That means if the company intends to bring in capital orlong-term loans for the real estate purchase, the foreign funds can betransferred to Korea only after the notification of foreign investment.
Q79 | Should a foreigner obtain permission from the head of the relevant local government when partitioning land within a Foreign Investment Zone (FIZ)? |
A79 | The foreigner does not need to obtain permission from thehead of the relevant local government. |
- Under Article 56 (1)4 of the National Land Planning and Utilization Act,a person who intends to engage in certain development activities shallobtain permission for development activities from the head of the localgovernment. Certain development activities mentioned above includeconstruction of buildings, erection of structures, changes in the formand quality of any land, extraction of earth and stone, and partition of land. However, the partition of land within an FIZ is possible withoutpermission from the head of the local government (Article 20(1) of theForeign Investment Promotion Act).
Q80 | Can a foreign-invested company own farmland? |
A80 | According to Article 6 (1) of the Farmland Act, farmland shall be owned only by a person who uses or will use it for his/her own agricultural management. Therefore, only agricultural corporations may own farmland. An agricultural corporation can register as a foreign-invested company by receivingequity investment from foreigners, such a foreign-invested agricultural company can own farmland. |
- The Rules on Foreign Investment (the Ministry of Trade, Industry andEnergy, 2021) specify that foreign investment is permitted in agriculturalbusiness with the exception of rice and barley cultivation. Consequently,a foreign-invested agricultural company may be restricted in itsownership of rice and barley farmland.
- According to the Farmland Act, only agricultural corporations can ownfarmland. However, Article 6 (2) of the same Act lists exceptions that allowa person to own farmland even if it is not used for his/her own agriculturalmanagement. A non-agricultural corporation may acquire farmland if theland has obtained permission or completed consultation to divert, whichmeans the purpose of the land use is changed from farmland such as fieldor rice field to land on which construction is permitted.
Q81 | Can a foreigner acquire real estate in Korea and engage in real estate lease business? |
A81 | A foreigner intending to engage in real estate lease business inKorea can establish a foreign-invested company and acquire real estate in the name of the company. In this case, rental income can be transferred to foreign countries in the form of dividends after the settlement of accounts. |
- However, an individual foreigner or a foreign corporation intending toengage in real estate lease business by directly acquiring real estate canengage in real estate lease business under the name of a foreigner afteracquiring real estate pursuant to the Foreign Exchange Transactions Actor the Act on Report of Real Estate Transactions, Etc. and appointing atax manager. This does not constitute a foreign investment under theForeign Investment Promotion Act.
- When intending to acquire real estate for the purpose of possession, aforeigner (individual or foreign corporation) should notify the acquisitionof real estate to the head of a foreign exchange bank in accordancewith the Foreign Exchange Transactions Act, together with documentcertifying the real estate transaction
< Foreigners’ real estate acquisition and related Acts >
Act on Report of RealEstate Transactions, Etc | Foreign Investment Promotion Act | Foreign Exchange Transactions Act (Real Estate) | |
Applicable parties | A foreigner, etc. (an individual of foreign nationality, a foreign corporation, a domestic corporation with not less than 50% foreign ownership, a foreign government, an international organization, etc.) | A foreigner, etc. (an individual of foreign nationality, a foreign corporation, a permanent resident of a foreign country, and an international organization for economic cooperation) | A non-resident |
Key regulations | Notification required when real estate in Korea is acquired by aforeigner | Notification required when a foreigner acquires real estatethrough a foreigninvested company after reporting on foreign investment and the registration of a foreign-invested enterprise | Notification required when a non-resident acquires rights relatedto real estate in Korea (a right to use property based on lump-sum deposit (jeonse) contract, mortgage, etc.) |
Where to report | Si/Gun/Gu office having jurisdiction over the property | Foreign exchange bank and KOTRA | Foreign exchange bank and Bank of Korea |
Reporting period | Within 30 days of the conclusion of a contract | Prior to bringing in investment funds | At the time of withdrawal of funds |
Governing authorities | Ministry of Land, Infrastructure and Transport | Ministry of Trade, Industry and Energy | Ministry of Economy and Finance |