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FAQ

  • Title
    When a foreigner sells acquired real estate, can the proceeds be freely remitted to overseas?
  • Content
    ① If the real estate was purchased with fund that came from overseas through normal bank transaction, the proceeds from its sales is subject to overseas remittance without any restriction. 
     
    1. Import and export of proceeds from real estate purchase & sales for non-residing foreigners 
     
    1) When brining in fund from overseas to purchase real estate, it must be reported to the president of foreign exchange bank. When the real estate is purchased with reported fund, its proceeds from sales can be taken out of the country, as long as such act is reported. ( validating documents must be provided ) 
     
    2. Import and export of real estate purchasing fund for residing foreigners 
     
    1) One can freely bring in fund to purchase real estate. Proceeds from its sales, as well as income generated from leasing the real estate must be reported to governor of the Bank of Korea. 
  • Title
    What are the types of real estate tax, and tax benefits provided to foreigners when they purchase land? ( Ministry of Strategy and Finance, National Tax Service )
  • Content
    Real estate tax 
    - At the land purchasing stage : Acquisition tax (2%), registration tax (2%), special tax for rural development (10% of acquisition tax) and local education tax (20% of registration tax). National housing bond needs to be purchased, except when registered as a foreign invested company. 
     
    - At the ownership stage : Property tax (land: 0.07~4%, building: 0.25~4%, housing: 0.15~4%, ship/ plane: 0.3%/5%), comprehensive Real Estate Holding Tax (housing: 1~3%, land: 0.6~4%),  local education tax (20% of property tax), special tax for rural development (20% of comprehensive real estate holding tax) 
     
    - When selling : Transfer income tax (9~36%) and residence tax (10% of transfer tax) for individuals, corporate tax (13~25%), special tax on capital gains (10~40%), and corporate income-proportional resident tax for corporations
    Tax benefit for real estate acquisition 
     
    - For investment in service sector deemed essential for enhancing national competitiveness, land acquisition for high-tech project, land acquisition within foreign investment zones, acquisition tax, registration tax, property tax and comprehensive real estate holding tax are waived. ( 100% for the first 5 years, 50% for the next 3 years) 
     
    - For real estate registration of foreign invested companies, tax is waived entirely for those subject to tax benefit. For others, tax is waived according to their investment ratio. 
     
    부동산 관련 조세
    <Real estate-related tax>
    Stage Tax items Remarks

    Acqui-

    sition

    ·

    Regi-

    stration

    Acquisition tax Standard tax rate
    4.0% of acquisition price 
    ※ House acquisition via capital transaction (from Aug. 28, 2013) : 1~3%
    Increased
    Acquisition of real estate for construction and extension of factories in overpopulation control areas in metropolitan areas 1/3 of standard tax rate - 100/200 of heavy tax rate 
    Acquisition of real estate for use as headquarters of companies in overpopulation control areas in metropolitan areas Standard tax rate + 100/200 of heavy tax rate 
    Luxury real estate such as golf courses, vacation houses, etc : Standard tax rate + 100/400 of heavy tax rate 
    Decreased Reduced taxes for businesses accompanying high technologies, industrial support service business, and foreign investment zones
    Surtax
    Farming and fishing village special tax, local educational tax, and etc.
    ※ Stamp tax for the real estate ownership transfer certificate: 2~350,000 won
     
    Value added tax
    10% of building acquisition price (can be deducted as purchase tax when business is maintained)
    Exempted for acquisition of a house, smaller than the national housing size (85m2)
    National housing bond Purchasing price For land with standard market price of more than 100 million won(50/1 of standard market price in metropolitan areas,45/1 of standard market price in other areas)
     
    Decreased
    When businesses registered as foreign-invested companies register business purpose real estate, the obligation to purchase bonds is reduced according to the investment ratio
    Holdings
    Property tax Standard tax rate
    Houses: 0.1-0.4%(4% for vacation house) 
    Construction: 0.25-0.5%(golf courses, 4% for luxury video arcade, 1.25% for factory establishment in overpopulation control areas for five years)
    Land: 0.2-0.5% of general aggregate tax base, 0.2-0.4 of special aggregate tax base, 0.07-0.2 of separate taxation (4.0% for golf courses and luxury video arcades)
    Decreased Same as reduction of acquisition taxes
    Increased 5 times increase for five years when establishing and extending factories in overpopulation control areas
    Gross real estate taxes
    Houses (Notified price exceeding 600 million won) : 0.5-2.0% of standard tax base 
    Land (general aggregate exceeding KRW 500 mn, special aggregate exceeding KRW 8 bn) : 0.75-0.2% of general aggregate tax base, 0.5-0.7% of special aggregate tax base
    Other value-added taxes
    Local educational tax (20% of property tax)  
    Farming and fishing village special tax (20% of gross real estate tax)
    Sales
    Individual
    Capital gains tax
    Unregistered assets: 70% 
    Less than one year after registration: 50%
    More than one year and less than two years after registration: 40%
    More than two years after registration: 6%-35%
    Corporation
    Corporate tax 
    Trading profit is imposed as corporate tax
    Additional corporate tax (10%, unregistered 40%) is levied on the capital gains and transfer of houses (except for rental houses, company houses etc.) and non-business land
    Local income tax 10% of capital gains tax and corporate tax
    Value added tax
     
    10% of construction transfer price

    ※ The tax base and the rate of real estate-related taxation may differ due to frequent changes in the law. For further details, please contact the National Tax Service (126), or refer to the Local Tax Act or the Value-Added Tax Act.

     

  • Title
    Can a foreign-invested company benefit from tax deduction under Article 121.2 of the Restriction of Special Taxation Act and also from Article 6 of the Act for startup small businesses?
  • Content

    A foreign-invested company shall choose either foreign investment tax deduction or startup small business tax deduction if the company can benefit from both of them. 

    However, if the company can differentiate the business that benefit from foreign investment tax deduction from other businesses and the income generated from these businesses, the company can receive tax deductions for both foreign investment business and other businesses. 

  • Title
    What is the real estate agent fee?
  • Content
    ① Real estate agent can receive client fees for real estate brokerage, such as real estate sales or lease. Actual expense involved in guaranteeing fulfillment of returning liabilities, such as contract fee, can be requested. However, the agent cannot receive these if the contract is cancelled due to his/her fault, both intended and unintended. 
     
    ② Brokerage fee is calculated by the trading price multiplied by the fee rate. If the fee exceeds the maximum limit, it is calculated within the maximum limit. 
     
    1. Fee rate and its maximum limit of general housing ( Seoul ) 
     
    1) For buying & selling : 0.6% of housing price of less than KRW 50 Million ( Max. KRW 250,000 ), 0.5% of housing price of more than KRW 50 Million and less than KRW 200 Million ( Max. KRW 800,000 ), 0.4% of housing price of more than KRW 200 Million and less than KRW 600 Million 
     
    2) For lease : 0.5% of housing price of less than KRW 50 Million ( Max. KRW 200,000 ), 0.4% of housing price of more than KRW 50 Million and less than KRW 100 Million ( Max. KRW 300,000 ), 0.3% of housing price of more than KRW 100 Million and less than KRW 300 Million 
     
    2. Brokerage fee for real estate excluding general housing, as well as high end residence with purchase price of more than KRW600 Million and lease price of more than KRW 300 Million is decided upon mutual contract signed between the client and agent, within the maximum legal limit of brokerage fee. ( 0.9% for buying and selling and exchange , 0.8% for lease ) 
  • Title
    When is the deadline for applying for tax deduction of a foreign-invested company and can the company receive tax deduction if it has applied for tax deduction after the deadline?
  • Content

    The deadline for applying for tax deduction is the closing date of the tax year that includes the opening date for business of the foreign-invested company. 

    If a foreign-invested company applies for tax deduction after the deadlines, the company can receive tax deduction within the period left excluding the tax year that includes the date of applying for tax deduction. The company will not receive tax rebate for the tax paid before the decision for the tax deduction. 

  • Title
    What do I need to do to invest in Korea’s SOC project? (Division of private investment policy, Ministry of Strategy and Finance )
  • Content
    So far, the Korean government has been making various efforts to achieve substantive performance in private asset project-through policy reform and investment fair etc. As a result, there are 72 government-led projects and 96 others managed by provincial governments. 

    *SOC projects mainly saw participation of construction companies, but recently financial investors and foreign investors are increasingly taking part in the following projects; 

    - Incheon International airport bridge construction project (AMEC, United Kingdom), Busan new port project 1st stage ( CSX World Terminal, United States ), Sewage treatment plants construction in Songdo and Mansu in Incheon (Veolia Water, France), Daejeon Riverside Expressway (Egis, France), Busan new port project 2nd & 3rd stage (Bouygues, France) 
    - Foreign corporations or investors wishing to invest in new SOC projects in Korea can access information through various channels. 
    - Korea Development Institute (http://pimac.kdi.re.kr) supports foreign investment promotion activities of private investment projects, through investment consultations for foreign private investors, foreign investor meetings, and overseas investment fair. 
    - Investment possibilities, relevant information, contact points can be accessed through KOTRA 
    Various incentives for private investment projects  
    - For government initiated projects, 75% of estimated operating revenue is guaranteed for the first 5 years, and 65% in the next 5 years. ( This is not valid if the actual operating revenue is less than 50% of the estimated revenue) 
    - If construction or management of social infrastructure is impossible due to natural disasters and other inevitable incidents, requests can be made to the central or local governments to buy off the project of that year. 
    - Taxation benefits
    *Zero tax rate applies to the value added tax of social infrastructure construction projects, and separate taxation applies to bond interest profit. 
    - Subsidy or long term loan is provided to the project operator. (Article 37 of the Private Investment Act stipulates beneficiaries) 
    - Eminent domain is provided to the business operator. The business operator is given an option to use and generate profit from public properties. 
    - Easing of regulation on antitrust, fair trade, insurance & securities trading and infra fund 
    Investment based on the Act on Private Participation in Infrastructure
    - Article 2 of the Act on Private Participation in Infrastructure stipulates 48 types of facilities for private investment projects. The competent administrative agency will designate a project as a private investment project only when the facility has been decided under Article 2.1, meets the priority set by the mid-to-long-term plan and national investment project related to SOC and when the project can create enough profit to encourage the participation of the private sector. (Article 8.2.1 of the Act on Private Participation in Infrastructure)
    - Whether the type of the project promoted by the competent administrative agency meets Article 2.1 of the Act on Private Participation in Infrastructure will be decided by considering the project policy direction of the competent department and the statutory purpose and interpretation of the Act on Private Participation in Infrastructure for the SOC. It would be impossible to promote a project with a facility not regulated under the Act on Private Participation in Infrastructure.
  • Title
    Even if a foreign-invested company receives tax deduction for five to seven years, the company does not generate profit in the initial stage of business due to its large-scale investment. Therefore, would not the tax deduction be ineffective?
  • Content

    Tax deduction shall be applied to the initial year of generating income of the business that is subject to tax deduction, not from the opening date for business. Therefore, the tax deduction is very effective to the recipient. 

    However, if there is no profit from the relevant business in the fifth year of the opening date for business, the tax deduction shall be applied from the fifth year of the opening date for business. 

  • Title
    What are the differences in tax between a foreign-invested company and a branch office in Korea?
  • Content

    There is no difference in the tax rate and the report and payment of taxes between a foreign-invested company and a branch office except for the scope of the obligation. 

    A foreign-invested company is a domestic corporation. Therefore, it is required to pay corporate taxes for all income generated at home and abroad. However, a branch office in Korea shall only pay taxes for the amount of income generated in Korea. 

    A branch office in Korea may have to pay branch tax depending on the tax treaty with the relevant country and it shall be benefit from tax deductions under the Restriction of Special Taxation Act like other Korean corporations. 

  • Title
    What are the requirements and the scope of income for a foreign worker to become a resident obliged to pay taxes under the Income Tax Act?
  • Content

    According to the Income Tax Act, a resident is anyone regardless of his or her nationality who has an address in Korea for more than a year. 

    The Income Tax Act defines an address as one’s place of residence in Korea. Also, a permanent address is a place where the resident resides in for a certain period of time but not closely related to his or her daily lives.  

    A resident is obliged to pay income tax defined under the Income Tax Act. However, for a foreigner who has lived less than five years in Korea and has generated income in Korea, he or she shall pay tax only for the income generated in Korea or income that has been transferred to Korea. 

  • Title
    Must a foreign employee of a foreign-invested company pay income taxes in Korea as well as in his or her home country? Would not this be unfair to foreign workers?
  • Content

    In general, taxes are paid in both countries. However, it is possible to receive a tax deduction for a considerable amount of the taxes paid in Korea. 

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