SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
Project Financing Vehicle A project financing vehicle (PFV) may be clas - sified as a stock corporation, and it is required to manage its assets through an asset manage - ment company that is a shareholder of the PFV, or a company set up by a shareholder of the PFV. Tax Benefits and Costs Stock corporations and limited liability compa - nies are required to pay a corporate registration tax of 0.48% of the par value of shares issued upon establishment and, thereafter, upon each capital increase. If a company is established in an overpopulated control area or a company increases its capital within five years of its estab - lishment, a stepped-up capital registration tax rate of 1.44% (ie, triple the normal rate) applies. However, CR-REITs, general REITs, RECFs and PFVs are not subject to such tripling of capital registration tax nor the stepped-up acquisition tax normally applied to real property located in overpopulated control areas. Land owned by a public REIT or a public fund for their business use is not separately taxed for property tax purposes and is not subject to com - prehensive real estate tax. However, this excep - tion does not apply to PFVs. As to corporate income tax benefits applicable to each type of entity, please refer to 5.5 Appli- cable Governance Requirements . 5.3 REITs REITs are real estate investment vehicles that are actively used in Korea. Both private and public offerings are available, and general REITs in par - ticular are required to offer at least 30% of their shares to the public, as described in 5.5 Appli- cable Governance Requirements . Furthermore, there are 19 REITs listed on the stock market. Foreign investment is also permitted (please
refer to 5.5 Applicable Governance Require- ments regarding requirements for qualification). 5.4 Minimum Capital Requirement The minimum capital requirement for each type of entity is as follows: • stock corporation – not applicable (KRW100 million for foreign invested companies); • limited liability company – not applicable (KRW100 million for foreign invested compa - nies); • CR-REIT – KRW5 billion; • general REIT – KRW5 billion; • RETF – not applicable; • RECF – KRW100 million; and • PFV – KRW5 billion. 5.5 Applicable Governance Requirements The ownership limitation for each type of entity is as follows: • stock corporation – not applicable; • limited liability company – not applicable; • CR-REIT – not applicable; • general REIT – up to 50% by any one share - holder (with certain exceptions); • RETF – must be owned by more than two investors (with certain exceptions); • RECF – must be owned by more than two investors (with certain exceptions); and • PFV – at least 5% of the shares must be owned by financial institution(s). There are no public offering related requirements that apply to the various types of entity except for: • general REIT – at least 30% of the shares must be put up for public offering (with cer - tain exceptions).
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