Invest KOREA

Where parties to a transaction, including a foreigner, etc.*, enter into ① a real estate sales contract or ② a contract for supply of real estate under the Housing Site Development Promotion Act or the Housing Act, they are required to notify the relevant authority within 30 days of the date of signing the contract. (Article 3(1) of the Act on Report on Real Estate Transactions, etc. If the real estate acquisition is pursuant to Article 8(1), notification should be filed within 60 days. If the acquisition is pursuant to Article 8(2) of the same Act or Article 5(2) of Enforcement Decree of the Act, notification should be made within six months.) ◎ It is necessary to check in advance whether the land is acquirable only by reporting or is subject to prior permission for transaction. If a foreigner enters into a purchase contract without the transaction permission for the property subject to prior approval, the contract shall be nullified, and imprisonment or a fine sentence may be imposed, making it challenging to acquire the real estate. ◎ Land requiring permission for transaction by foreigners (Article 9 of the Act on Report on Real Estate Transactions, etc.) 1. Military bases and installation protection zones defined in subparagraph 6 of Article 2 of the Protection of Military Bases and Installations Act, and such other areas as may be especially necessary to limit land acquisition by a foreigner, etc. for the purposes of national defense 2. Designated cultural heritage defined in Article 2(2) of the Cultural Heritage Protection Act, and protective facilities or protection zones therefor 3. Ecological and scenery conservation areas set in subparagraph 12 of Article 2 of the Natural Environment Conservation Act 4. Special districts for protection of wildlife under Article 27 of the Wildlife Protection and Management Act ◎ Penalty provision: A foreigner, etc. who enters into any land acquisition contract without obtaining permission or after obtaining permission by illegal means shall be subject to imprisonment with labor for not more than two years or by a fine not exceeding KRW 20 million.

When a foreigner acquires real estate, applicable laws and procedures vary depending on the purpose of acquisition, residency status, and whether the buyer is a corporate or an individual. ◎ The Act on Report on Real Estate Transactions, etc. stipulates only the procedures for a foreigner to acquire real estate in Korea. When the real estate acquisition is for-profit such as property rental, in addition to the registration of real estate acquisition by a foreigner, foreign-invested company registration through foreign investment notification under the Foreign Investment Promotion Act is required. If the investor is a nonresident under the Foreign Exchange Transactions Act, an additional registration should follow for the acquisition of the real estate. ◎ When a foreign company sets up a branch in Korea, branch establishment notification under the Foreign Exchange Transactions Act is required instead of foreign investment notification under the Foreign Investment Promotion Act. After registration of a branch, purchase the real estate under the name of the branch.

It is possible to change the management institution for foreign investment and this is referred to change of delegated authority. You can submit the application form for change in delegated authority to the original institution by using attached Form 2: Application for change in delegated authority of the standards for handling business affairs related to foreign investment (Downloadable at www.investkorea.org/kr/published/presentation.do).

When registering a company’s incorporation, a certificate of deposit for payment for stock subscription should be submitted to the court. However, if the capital is less than KRW 1 billion, a balance certificate may be submitted instead ◎ Once the foreign investment is notified, a temporary account should be opened at a designated foreign exchange bank under the foreign investor's name. The temporary account serves to deposit foreigncurrency investment funds for stock subscription payment, and the designated bank can issue a certificate of payment for stock subscription. ◎ A balance certificate can be submitted for a stock company whose initial capital is less than KRW 1 billion. The investment fund should be deposited into a foreign currency account under the investor's name, and the bank can issue the balance certificate. The balance certificate is deemed to have the same effect as the certificate of deposit for payment for stock subscription to be submitted to the court registry office

There is a regulation that allows a foreign-invested company to receive remittance from the parent company for incorporation costs and repay the amount upon the corporation's registration, which is separate from the foreign investment fund. According to subparagraph 6 of Article 4-3 of the Foreign Exchange Transactions Regulations, it is permitted to make the payment to return the expenses borne by non-residents to incorporate a foreign-invested company under the Foreign Investment Promotion Act. ◎ Once the company is registered, expenses spent prior to the incorporation should be recorded in the book as business startup costs. The amount received from the parent company can be transferred back via wire transfer. In this case, the parent company should have recorded the remittance to the subsidiary or branch for its establishment as a receivable. For accounting purpose after incorporation, the initial expenditure received from the parent company should be spent under the name of the representative of the established corporation, and the supporting documents should be prepared.

The cost of incorporation includes the capital registration tax, local education tax, and fees for application for registration. ※Legal fees are not included. ◎ Seoul Metropolitan Overconcentration Control Region – Seoul, Incheon, Uijeongbu-si, Guri-si, Namyangju-si, Hanam-si, Goyangsi, Suwon-si, Seongnam-si, Anyang-si, Bucheon-si, Gwangmyeong-si, Gwacheon-si, Uiwang-si, and Gunpo-si – Enforcement Decree of the Seoul Metropolitan Area Readjustment and Planning Act [attached Table 1]

According to Article 28(2) of the Local Tax Act, the heavy taxation rate shall not apply to the types of business specified as those for which it is unavoidable to establish business facilities in a large city, and an amount equal to 0.4 percent of the paid-in capital shall be paid as license registration tax. Around 30 business types are subject to this exception, which are listed in Article 26 (Exception from Heavy Taxation on Corporations in Large Cities) of the Enforcement Decree of the Local Tax Act.

Since capital goods can be an object of investment in establishing a foreign-invested company, the foreigner should notify foreign investment to a delegated agency (a bank or KOTRA, etc.). The foreigner should prepare a written specification of the goods, etc. to be introduced into Korea and apply for the examination and confirmation thereof to the delegated agency before their import declarations are accepted by a competent customs office. Despite the related regulations of the Foreign Trade Act, a written specification of the goods, etc. to be introduced, which has been examined and confirmed by the delegated agency, shall be deemed an import approval. ◎ After import declarations are accepted, the foreigner should receive a certificate of completion of investment in kind from the Commissioner of the Korea Customs Service (or a Korea Customs Service officer dispatched to KOTRA) by submitting a certificate (copy) of the completion of import declaration. Despite Article 299 of the Commercial Act, a certificate of completion of investment in kind which certifies that the Commissioner of the Korea Customs Service (or a Korea Customs Service officer dispatched to KOTRA) has confirmed the execution of the investment in kind and the type, amount and price of the object of investment shall be deemed an inspection report by inspector following the Non-Contentious Case Procedure Act and can be submitted for registration of incorporation and for registration of foreign-invested company.

Although the submission of a lease contract is not mandatory, a fixed address is required. However, a lease contract should be submitted when applying for business registration with the competent tax office after the registration of incorporation is completed with the registry office.

Documents a foreign investor should prepare in his/her country vary depending on whether the investor is an individual or a corporation. The document requirements for foreign investors from Japan or Taiwan are the same as those for a Korean national or corporation. In addition, some of the documents required should be apostilled or notarized by a public notary and subsequently by the Korean consulate located in the home country of the foreign investor in case of a non-signatory nation of the Apostille Convention.