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  • Title
    Can a foreign corporation acquire land in Korea without setting up a separate corporation or a corporation branch?
  • Content
    Acquisition with a non-profit purpose 
    1. It is possible without setting up a separate corporation or a corporation branch, but in this case, acquired land cannot be used for profitmaking purpose. 
    Acquisition with a profitmaking purpose (lease etc) 
    1. Pursuant to article 614 of the Commercial Act, establishment of corporation or a corporation branch in Korea is a must.
    <.>Article 614, paragraph 1 of the Commercial Act : When a foreign company wishes to do business in the Republic of Korea, its representative must be decided and business site must be established. 
    <.>If the foreign corporation set up a separate corporation to make profit after purchasing the real estate, acquisition & registration fee needs to be repaid, due to the name change. Therefore, when real estate is purchased for profitmaking business, it is better to set up a corporation or a corporation branch in Korea first and purchase the real estate under the corporation name. 
    <.>Due to financial difficulties, corporations occasionally sign a sale & lease contract with foreign corporations. In this case, sale is considered a profitmaking behavior, and the foreign corporation must set up either a corporation or a corporation branch in Korea. 
    2. Foreign corporations without a business site in Korea can also register for the real estate. In this case, registry number for foreigner’s real estate registration is issued by city/district office within the jurisdiction of land. 
    <.>Required documents : written verification of corporate registration issued by the government, written verification of corporate executive or representative status, address verification document of corporate executive or representative
  • Title
    When a permanent resident requires land in Korea, what are the procedures and documents required?
  • Content
    Because permanent residents are not foreigners pursuant to the Foreigner’s Land Acquisition Act, they are not required to report acquisition of real estate or its rights in Korea. But because they are classified as non-residents according to the Foreign Exchange Transactions Act, they need to notify importing and exporting of fund from sales, pursuant to the Foreign Exchange Transactions Act. 
    Required documents when registering transfer of ownership 
    1) When resident registration record is maintained : same as Korean nationals 
    2) When resident registration is cancelled : following additional documents are required 
    A. Proof of address or certificate of residence confirmation ( either issued by overseas            government institute or notarized overseas ) 
    B. Registry number for foreigner’s real estate registration, issued by Seoul central district court 
    <.>When applying for a registry number, a copy of Registration for Overseas Korean Nationals, family registry and power of attorney(if the work is entrusted to a 3rd person) are required. 
  • Title
    What are the cases where the amounts of reduced or exempted taxes, such as the corporate tax, are recollected?
  • Content

    The following is the summary of the related cases where the reduced or exempted taxes are recollected. For specific information, please refer to the Restriction of Special Taxation Act Article 121-5.

    - Where a registration is revoked or the relevant foreign-invested company closes down its business

    - Where the standards for tax deduction or exemption under the Restriction of Special Taxation Act are not satisfied

    - Where a person, who has received a corrective order as he/she failed to implement the contents of reports, fails to comply with it 

    - Where a foreign investor transfers the stocks, etc. which he/she owns under the Act to a national or a corporation of the Republic of Korea

    - Where the payment of investments, acquisition of long-term loans or employment of workers conducted by a foreign-capital invested enterprise engaged in a business other than that listed in the Restriction of Special Taxation Act within five years (three years for standards for tax deduction or exemption relating to employment) 

    - Where the subject matter of investment is used for other purpose than the reported ones or disposed of

    - Where the ratio of the stocks, etc., of foreign investors falls short of the ratio of the stocks, etc., at the time of deduction or exemption, after the taxes have been reduced or exempted 

  • Title
    Does the minimum tax rate apply to a company which is subject to the tax deduction or exemption for foreign investment?
  • Content

    The Restriction of Special Taxation Act Article 121-5 provides that such case is not subject to the minimum tax rate.

  • Title
    What are the regulations related to acquisition / use / development of land in Korea?
  • Content
    Regulation on land acquisition 
    1. Approval of land acquisition by major or head of district office 
    1) Military base & military facility conservation area pursuant to article 2-6 of the Military Installation Facilities Protection Act, and other areas designated by the Presidential decree where land acquisition by foreigners must be restricted with the national defense purpose.   
    2) Designated cultural properties / heritage and its conservation device or area pursuant to article 2-2 of the Cultural Heritage Protection Act
    3) Ecological scenery conservation area pursuant to article 2-12 of the Natural Environment Conservation Act
    4) Wildlife reserve pursuant to article 27 of the Wildlife Protection and Management Act 
    2. The Farmland Act does not designate farmland ownership limit, and farmland acquisition certificate is required when acquiring a farmland. 
    <.>Farmlands can be acquired only when agricultural management is possible, so foreigners not residing in Korea practically cannot acquire farmlands. 
    Regulation on land use 
    1. Development projects subject to development charge 
    1) Housing site development project ( including residential complex development project)
    2) Industrial complex development project
    3) Tourism complex development project 
    4) Urban environment renewal project
    5) Distribution facility site project 
    6) Hot spring development project
    7) Passenger vehicle terminal project 
    8) Golf course construction project 
    2. Development charge is 25/100. However, when a development project is carried out within a development restriction zone pursuant to article 38 of the National Land Planning and Utilization Act, and if the project developer was the land owner since the zone was designated as development restriction zone, development charge is 20/100.
  • Title
    What are the required documents when registering a foreign-invested company, and how long does it take?
  • Content

    The following documents are required for foreign-invested company registration. The registration procedure normally takes three days.

    - A copy of report of incorporation and business registration application form

    - A certified copy of corporate register

    - A copy of office lease contract

    - A copy of shareholder statement or investor statement

    - A copy of business license and certificate of completion of report (a copy of permission and registration form or a business plan are required for the relevant company) 

    - A copy of cash investment statement (in case the applicant invests cash)

    - A copy of foreign investment notification form or a copy of certificate of purchase of foreign exchange

    - Foreigner registration card or a copy of passport (In case the representative of the company is a non-resident)

  • Title
    What are the methods of figuring the arm’s length standard that are recognized by the Korean tax authority?
  • Content

    The Adjustment of International Taxes Act allows companies to choose the most reasonable method from the below:  

    1. Comparable Uncontrolled Price Method

    1. Comparable Uncontrolled Price Method

    2. Resale Price Method

    2. Resale Price Method

    3. Cost Plus Method

    3. Cost Plus Method

    4. Profit Split Method

    4. Profit Split Method

    5. Transactional Net Margin Method

    5. Transactional Net Margin Method

    6. Other methods deemed reasonable as prescribed by Presidential Decree

    Other methods shall be applied only when computing arms’ length price is not possible under the methods mentioned above.

  • Title
    What is the transfer price taxation system?
  • Content

    In order to prevent international tax evasion of for example multinational companies, Korea has a system to protect its country’s tax rights. If a company has a special relationship with a company A and sells goods at a cheaper price or buys goods at a higher price (actual price) compared to other trading partners (arms-length price), the tax rate levied will correspond to the arms-length price and not the actual price.

  • Title
    How is the amount of tax reduced and/or exempted calculated if a foreign-invested company operates both tax deduction business and businesses that do not receive tax deduction?
  • Content

    For this case, the foreign-invested company shall differentiate the tax deduction business from other businesses and amount of tax assessment of the corporate tax is multiplied by the tax base of the relevant business from the total tax standard, which is then multiplied by the tax deduction ration. 

    The formula is as the following: 


    Amount of tax reduced and/or exempted = amount of tax assessment × (tax base of the relevant business ÷ total tax standard)

    × deduction rate


    Tax deduction ratio = foreign investment rate × deduction rate (100%, 50%)

  • Title
    Should purchase of apartments or studio flats(‘officetels’) be registered as acquired land?
  • Content
    ① Purchasing of apartments and studio flats should also be registered as acquired land, the same way ordinary land is purchased and registered. 
    1. Within 60 days of signing the contract, land acquisition must be notified to city/district office within jurisdiction area with land acquisition notification, transcript of the land register, and contract. In this case, acquired land area will become the land portion of the apartment or studio flat. If the contract is made through a certified real estate agent and the agent notifies the land acquisition according to the Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act, land acquisition notification is deemed complete. 
    2. Registration of ownership transfer can be made at the registry office within jurisdiction area, usually within 60 days after the balance payment is complete.


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