SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
is exempt if a property is purchased on condi - tion that it will be donated to the state or a local
• a cultural relic protection area; • a natural ecology protection area; or • a wildlife protection area.
government. Stamp Duty
Foreign investors acquiring 50% or more of shares in a land-owning company are required to file a report to that effect. However, the fil - ing of this report may not be required if the for - eign investors elect to file a general real estate transaction report with the local government in accordance with RRETA.
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 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 shareholder’s ownership percentage, as if it has directly acquired such real estate. In addition, the seller of shares in a share deal must pay a securities transaction tax, which is equal to 0.35% of the sale price. 2.11 Legal Restrictions on Foreign Investors Foreign investors acquiring land are required to file a report with the local government in Korea within 60 days of the execution of the sale and purchase agreement, or to obtain approval in
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Acquisitions of commercial real estate are financed through both debt and equity financ - ing. In particular, institutional investors such as investment banks, public pension funds, mutu - al aid associations, securities companies and insurance companies are a significant source of financing for such acquisitions, as well as foreign investors. In addition to conventional debt and equity financing by various investment vehicles (as described in 5. Investment Vehicles ), there are some financing options more tailored for acquisitions involving large real estate assets. For example, real estate securitisation using asset-backed securities (ABS) or asset-backed commercial paper (ABCP) is common in Korea. Sale-and-leaseback transactions have also been a commonly used alternative financing method in Korea. 3.2 Typical Security Created by Commercial Investors Investors borrowing funds to acquire or develop real estate typically use a mortgage on the real
cases where the land is located in: • a military facilities protection area;
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