SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
Since the parties may execute lien waivers at any time by mutual agreement, a comprehen - sive lien waiver is often executed in advance for convenience. If a comprehensive lien waiver is executed, a monthly/periodic lien waiver is not required. While there is no statutorily prescribed form for a lien waiver, the waiver will typically contain the location and other details of the subject prop - erty, and an expression of intent to waive a lien. 7.7 Requirements Before Use or Inhabitation Under the relevant laws, a use permit must be obtained before a completed project may be inhabited or used for its intended purpose. A use permit (or temporary use permit) may be obtained from the competent authority after the completion of construction. For the transfer of a building, VAT is levied at the rate of 10% of the transfer price, and the transferor must collect this amount of VAT from the transferee. However, no VAT is imposed on a transfer of land, which is exempt from taxa - tion. In the case of a comprehensive transfer of a business, including all rights and obligations therein, no VAT is imposed even if the transferred assets include a building. 8.2 Mitigation of Tax Liability If an investment vehicle such as a REIT or a PFV distributes 90% or more of its distributable income as dividends, the disbursed dividend amount may be deducted from the income cal - culated for the relevant business year. For PFVs, this tax benefit is applicable through the fiscal 8. Tax 8.1 VAT and Sales Tax
year ending on or before 31 December 2025. An REF is a pass-through entity, and thus not a tax - able entity, and is also exempt from the tripling of the acquisition tax or the corporate registra - tion tax in an overpopulated control area such as Seoul Metropolitan City. 8.3 Municipal Taxes If a corporate entity occupies premises where it continuously conducts business, with its employees working there and its facilities being installed at the location, the business owner reg - istered in the tax ledger must pay the property tax portion of the resident tax, in the amount of KRW250 per square metre of gross floor area of the business premises. If the business owner is not the owner of the building where the busi - ness premises are located, then the owner of the building may become secondarily liable for unpaid tax. However, any business premises with an area under 330 square metres is tax exempt. In addition, the corporate entity must pay a per capita resident tax, at the rate of 0.5% of the aggregate monthly salaries paid to employees, to the municipal government of the location of the business premises. The per capita resident tax may be increased or decreased by up to 50% in accordance with the rules set by the municipal government. 8.4 Income Tax Withholding for Foreign Investors Regarding a foreign corporate entity’s income generated from Korean domestic sources, depending on the category of income, either the person/entity providing the income must withhold and pay income tax to the govern - ment, or the foreign corporate entity itself must report and pay the income tax. Rental income from real estate constitutes income generated
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