Acquisition and Transfer of Real Estate of Foreigners in Korea
In case a non-resident foreigner acquires land in Korea, applicable statues and procedures vary according to the purpose of acquisition, place of residence (in Korea or overseas), and whether he/she is a natural person or legal person. In case the foreigner is acquiring real estate for the purpose of profit-making (e.g. rental property), foreign invested report should be filed in addition to real estate acquisition report. And if the foreigner is a non-resident in pursuant to the Foreign Exchange Transactions Act, real estate acquisition report must be additionally filed.
The most important process in acquiring and transferring of real estate of non-resident foreigner is 1) filing to financial institution in pursuant to the Foreign ExchangeTransactions Act, 2) preparing every documents to conduct registration process related to the acquisition and transfer, and 3) reviewing tax issues properly related to the acquisition and transfer.
We will look into the reporting process of acquisition of real estate as non-resident foreigner, tax issues occurring by the acquisition, holding, and transfer, and preparation of documents of register of acquisition and transfer of ownership, etc.
1. Reporting to the financial institute
(1) In case of non-residents
In the case of acquisition of real estate in the Republic of Korea or any rights related thereto by non-residents, the case falls into the category of capital transactions of the Foreign Exchange Transactions Act, which should be reported according to the article 18 of the same act. In this case, reporting institution differs by source of funds, etc. and documents should be submitted including real estate acquisition report and other documents proving real estate transaction.
① Where to report
The source of funds to acquire real estate determines where to submit the real estate acquisition report. If the entire funds are from overseas by remittance or carriage, the report should be filed to the Governor of the foreign exchange bank and if any of the funds are from domestic source, the report should be filed to the Governor of the Bank of Korea.
② Required documents
Declaration form, statement of reason, ID Verification including ID card of the buyer and the seller, property purchase agreement, real estate appraisal, certified copy of realestate registration, etc.
③ Report unnecessary
- Acquisition deemed necessary in pursuant to the Submarine Mineral Resources Development Act
- In case non-residents are acquiring for residence purpose
- In case non-residents are South Korean
- In case non-residents are acquiring real estate excluding land from non-residents inKorea
- In case non-residentsare acquiring through inheritance or bequest
(2) In case other than non-residents
① Profit-making foreign companies or foreigners
In case a foreigner is acquiring real estate upon establishment of corporation in Korea, additional reporting process in accordance with the Foreign Exchange Transactions Act is needed.
② Foreigners with residency
In the case of foreigners with residency rights, they can acquire real estate by reporting to the city hall, county office, or district office where the real estate is located and report process according to the Foreign Transactions Act is unnecessary.
2. Korean tax system
Foreigners and Koreans are subject to pay the same taxes, including but not limited to, acquisition tax, property tax, and transfer tax.
(1) Tax imposed at purchase stage
① Acquisition tax (1 to 3% of acquisition price for housing, 4% of the acquisition price for acquisition for value)
As surtax of acquisition tax, special tax for rural areas and local education tax are levied.
(*) Rate of acquisition tax of housing and other real estate
|Type of Acquisition||Area||Acquisition Tax||Special tax for rural dev.||Educational Tax||Total||Application Period|
|Housing (Acquisition for value)||Under 600 million won||Under 85m2||1.0%||-||0.1%||1.1%||* refer to heavy acquisition tax|
|600 - 900 million won||Under 85m2||1.01 - 3.0%||-||0.2%||1.21 - 3.2%|
|Over 85m2||1.01 - 3.0%||0.2%||0.2%||1.41 - 3.4%|
|Over 900 million won||Under 85m2||3.0%||-||0.3%||3.3%|
|Acquisition for value except housing||-||4.0%||0.2%||0.4%||4.6%|
(*) Heavy acquisition tax of multiple home owners and corporate housing
Corporate housing or four homes or more Regulated area
1 - 3%
12% Non-regulated area
1 - 3%
1 - 3%
② VAT (10% of the acquisition value of the building, in case of business person it can be reimbursed, but not for summary tax payers)
(2) Tax imposed at holding stage
1) Property tax and local education tax (20% of the property tax) are levied. In case of establishing factories in overpopulation control area of Seoul metropolitan area, property tax shall be five times heavier for five years.
① Land subject to general aggregate tax: 0.2% - 0.5% (non-business purpose land including vacant land)
② Land subject to separate aggregate tax: 0.2% - 0.4% (business purpose land, including but not limited to, building, commercial building, and office affiliated land)
③ Land subject to separate tax: 0.07% (for farmland and orchard), 4% (for golf course and high-class amusement place), and 0.25% (for other buildings)
-Home: 0.1% - 0.4% (a house for a family: 0.05% - 0.35%)
- Villa or lodge: 4%
- Golf course orhigh-class amusement place: 4%
- Factory buildings: 0.5%
- Other buildings: 0.25%
② General aggregate tax is imposed when real estate exceeds a certain amount (600 million won for housing, 500 million won for land subject to general aggregate tax, 8 billion won for land subject to separate aggregate tax). In case of housing, 0.6% - 6.0% of tax base is levied and in case of land, 1.0% - 3.0% of general aggregate tax base or 0.5% - 0.7% of separate aggregate tax base is levied. And2 0% of general aggregate tax is special tax for rural development.
Basic amount of taxation for general aggregate tax
|Taxables||Aggregate Method||Basic amount of Taxation|
|Housing (including housing affiliated land)||Aggregate by generation||declared value of individual home (600 million won)|
|Land subject to general aggregate tax||declared value of individual home (500 million won)|
|Land subject to separate aggregate tax||Aggregate by person||declared value of individual home (8 billion won)|
(3) Tax imposed at transfer stage
① If an individual transfers holding real estate, transfer income tax will be levied for the profit and applicable basic tax rate will be the same with home owners (6% - 45%, in case the holding period is over 2 years).
Like domestic companies, foreign corporations also pay corporate tax for the generated profit of real estate. However, in case of a legal person, 20% of the additional tax will be levied onto generated profit of certain properties including housing or non-business purpose land.
② In case of a natural person, unregistered transferring property, registered property with less than one year of the registration period, and registered property with one to two years of the registration period may have 70%, 50 - 70%, 40 - 60% of applicable tax rate, respectively.