SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
• RETF – the business plan is required to be confirmed by an appraisal company; • RECF – the business plan is required to be confirmed by an appraisal company; and • PFV – it is required to invest all of its assets in real estate development projects. The applicability of corporate income tax to each type of entity is as follows: • stock corporation – taxable; • limited liability company – taxable; • CR-REIT – deemed dividend deduction; • general REIT – deemed dividend deduction; • RETF – not taxable; • RECF – deemed dividend deduction; and • PFV – deemed dividend deduction (applicable through the fiscal year ending on or before 31 December 2025). The governing law of each type of entity is as follows: • stock corporation – the KCC; • limited liability company – the KCC; • CR-REIT – the Real Estate Investment Trust Act (REITA) and KCC; • general REIT – REITA and the KCC; • RETF – the Financial Investment Services and Capital Markets Act (FISCMA) and KCC; • RECF – FISCMA and the KCC; and • PFV – the Special Tax Treatment Control Act and KCC. The implications of the Corporate Transparency Act may extend to US contributors investing off - shore, including those investing directly or indi - rectly in Korean real estate. Their compliance obligations regarding disclosure, reporting and enhanced due diligence for anti-money launder - ing purposes may potentially affect their strate - gic decisions regarding the ownership structure,
investment timeline and deal structuring. Given that US contributors may be required to disclose the beneficial ownership of the Korean target they are investing in under the CTA, it would be important for Korean sponsors to recognise that such information concerning their identity and ownership could potentially be reported to US authorities. Korean counterparts may also need to provide their co-operation so that US con - tributors can provide the information required to fulfil their disclosure obligations under the Cor - porate Transparency Act. 5.6 Annual Entity Maintenance and Accounting Compliance The main items in annual maintenance costs for special investment vehicles are the fees paid to the asset management companies, custodians and business trustees. As an example, for REITs, annual fees paid to asset management compa - nies are typically within 0.2% to 0.4% of the total property purchase price, while annual fees paid to custodians and business trustees typically add up to 0.04% of the total property purchase price. Fees paid by other special investment vehicles do not vary significantly. The annual accounting compliance cost for special invest - ment vehicles is typically around KRW10 million or lower, although this may vary slightly depend - ing on the asset size and the accounting period. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time Arrangements for the occupancy and use of real estate include a lease on real estate, an ease - ment on land and a superficies on land.
943 CHAMBERS.COM
Powered by FlippingBook