We use cookies to ensure we give you the best experience on our site. If you continue without changing your settings, we assume you're happy to receive all cookies on this site. If you would like to, you can manually change your cookie settings at any time.
Continue15th March 2022
MSI's South Korean law member Ahnse Law Offices provides an overview of the rules & regulations when purchasing a property in South Korea.
1.1 It is possible for foreigners (individuals and corporations) to purchase property in Korea; however, there are detailed rules and regulations which need to be taken into consideration.
1.2 Generally, lawyers are not involved in most real estate transactions in the same way that they would in say the UK, or the USA, where a separate lawyer would represent the seller and the buyer; and the buyer’s lawyer would also likely act for the mortgagee. In Korea, a real estate agent may act for both parties. This may be anathema to some.
1.3 It is highly recommended absent detailed knowledge of the law and the market that a lawyer is engaged in any purchase (or sale) to protect the buyer’s interests and to navigate the rules and regulations and of course the language and culture.
2.1 The primary legislation governing the acquisition of property by “foreigners” in Korea is as follows:
Some property acquisitions are prohibited; others require prior approval and others require post acquisition notification.[1]
This act details the rules for reporting and registering property transactions.
Korea has foreign exchange control laws. There are restrictions on money coming into and going out of the country. The laws are administered by the Bank of Korea which in turn delegates many of its oversight duties to designated foreign exchange banks. In practical terms, the FETA is not contentious; there are simply reporting requirements but the various documentary requirements do need to be satisfied.
This was enacted following the Asian financial crisis of the late 1990s. It was a revision of pre-existing legislation and which was designed to further induce inward foreign investment to Korea. As the title of the act suggests, it is for the benefit of “for profit” corporations.
3.1 The basic possible methods for a foreigner to purchase and hold property in Korea are as follows:
3.1.1 Direct purchase of property in Korea from the home country; or
3.1.2 Incorporation of a “for profit” corporation in Korea and subsequent purchase of land by the same.
4.1 If property is purchased direct from the home country, then notifications are required pursuant to the Foreign Exchange Transactions Act, the Foreigners’ Land Acquisition Act and the Act on the Report of Real Estate Transactions.
4.2 In Korean property law, land and buildings are discrete and are registered separately. No VAT is chargeable on the acquisition of land. VAT is however payable on the acquisition of commercial buildings thereon.
5.1 It is possible to establish a local corporation for the purpose of the land acquisition. Given the acquisition would undoubtedly exceed KRW100 million, then the investment would qualify as a “foreign direct investment” under the Foreign Investment Promotion Law.
5.2 No VAT is payable on the acquisition of land; it is however payable on the buildings thereon. The VAT would be recoverable by the for profit corporation.
5.3 There are certain reporting requirements under the Foreigners’ Land Acquisition Act and Report of Real Estate Transactions Act.
There are some circumstances in which a foreign individual may make a property acquisition and for this to provide a pathway to a visa and ultimately to permanent residence.
| A: Direct Purchase | B: For profit | |
| Property Acquisition Tax | 4%: unclear for non-resident | 4% |
| Annual Property Tax | 0.07-0.4% (as above) | 0.07-0.4% |
| Corporation Tax | 10-25% (depends on amount of profit) | 10-25% |
Notes
[1] For example, agricultural land should not be leased under Farm Land Protection Act. It may only be used by either a farmer or an agricultural corporation. If the holding company leases agricultural land, it may incur criminal sanctions and a sale may be forced by the local government.
Ahnse is a Seoul based international law firm. We advise government ministries, multinationals, corporations, SMEs and individuals on a broad range of legal issues. We aim to provide our clients with clear, strategic and well-priced commercial and legal solutions.