SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
development agreements with the relevant pub - lic authorities. A typical example would be the development of non-governmental rental hous - ing in accordance with the Special Act on Non- Governmental Rental Housing. 2.9 Condemnation, Expropriation or Compulsory Purchase The government’s taking of land (including by an industrial site development project enterprise) is permitted for public interest projects as stipu - lated in the Act on Expropriation of Land, etc, for Public Works and Compensation (AELPWC). To expropriate property, the government must make a public announcement of the properties to be expropriated, notify the property owners and implement a compensation plan. The gov - ernment must assess the compensation amount and negotiate with the property owners. If an owner agrees to transfer their property at the price offered by the government based on the government’s assessment, an agreement for the property transfer may be executed at such a price. However, if an owner does not accept the government’s proposal, the government may file, or must file at the request of the owner, a motion to determine the appropriate purchase price for the relevant property with the Central Land Expropriation Committee, which will exam - ine the value of the property, assign a certified appraiser to assess the property, and consider briefs from the government and the property owner. In approximately three to four months, the Com - mittee renders a decision on the purchase price for the property subject to the expropriation. The government must then pay the purchase price as determined by the Committee. Ownership of the expropriated property is then transferred to the government on the expropriation date indi -
cated in the Committee’s decision, even if the owner files an objection or a lawsuit regarding the decision. 2.10 Taxes Applicable to a Transaction Acquisition and Recordation Tax When a company or an individual acquires real property in Korea, it must pay an acquisition tax of 4.6% (inclusive of surtax) of the purchase price (ie, actual acquisition cost) reported at the time of the acquisition. However, if the real prop - erty is located in a specific region designated as an overpopulated control area, a stepped-up tax rate of 9.4% will apply. The acquisition tax is inclusive of a recordation tax. Acquisition tax is exempt if a property is purchased on condi - tion that it will be donated to the state or a local Stamp duty of up to KRW350,000 is payable on the contract for the acquisition of real estate and generally paid by the buyer. The buyer must also purchase national housing bonds at a rate of approximately 5% of the purchase price of the real estate. In practice, these bonds are imme - diately resold at a 10% to 15% discount on the purchase price of the bonds. Additional Taxes government. Stamp Duty Additional taxes apply to share deals and par - tial ownership transfers, to the extent that the buyer (and its related parties) becomes a major - ity shareholder of a target company holding real estate. A deemed acquisition tax is imposed when an entity (along with its related parties) becomes a majority shareholder of a target com - pany by acquiring more than 50% of its shares, and the majority shareholder is required to pay deemed acquisition tax of 2.2% (inclusive of sur - tax) of the book value of the real estate held by the target company in proportion to the majority
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