South Korea is one of the few Asian countries where you can purchase residential and commercial properties without restrictions as a foreigner. You will be treated similarly to the locals, which is rare in some Asian countries.
However, South Korea has enacted some rules and regulations you should pay attention to, so in this article, Ziptoss will be guiding you in what you need in order to purchase investment properties in South Korea.
South Korea has a complete and transparent property rights system, in contrast, ownership is more secure. However, investing in a property as a non-resident foreigner means that you need to comply with some additional regulations. These regulations are:
The Foreigner’s Land Acquisition
The Foreign Land Acquisition Law stipulates that purchasers must notify relevant departments within 60 days. Information should be shared after signing the SPA(sales and purchasing) contract.
Act The Registration of Real Estate Act
The Real Estate Registration Law applies to both foreigners and Korean citizens, and explains how to register real estate and sign contracts.
You will find detailed information on how to sign the following contracts:
- Property ownership
- Rental/Lease Opportunities
- Mortgages
- Easement (a person who leases land for a short period of time from the owner of the land)
The Foreign Exchange Transactions Act
Only non-resident foreigners are required to comply with this Act. The Foreign Exchange Transactions Act explains the standards and importance of foreign transactions, such as keeping Won and international payments at a “balanced” level. This act is also applicable to transactions between South Korea and other countries, which is required if you are a non-resident buyer.
Required documents when buying properties
Before you complete the purchase, you must provide a number of documents related to the listed behavior and the property registered in your name. After signing the SPA contract, you should submit the following documents to the city, country, or district office:
- Sales contract(signed)
- Alien Registration Card under your name
- A copy of the Land Register(showing the seller’s name)
Documents for land transfer:
- Alien Registration Card under your name
- Registration application
- Documents showing the reasons for registration (e.g. SPA contract)
- Land Acquisition Report Registration certificate
Taxes
You must understand the tax obligations when buying, holding and selling units before engaging in the Korean real estate market. Here are some important taxes you should know.
Value Added Tax(VAT)
When buying commercial real estate such as buildings or commercial spaces(the company can be reimbursed), multiply the sales amount by 10% of the value-added tax. Usually, the VAT should be paid by the seller, but sometimes it is passed on to the buyer.
Property Acquisition Tax
The purchase tax is usually between 1% and 4%. For commercial properties, the purchase tax usually averages 4.6% and is paid when you purchase the property.
Stamp Duty
Depending on the property value, stamp duty ranges from 50 Won to 350,000 Won (320 USD), tariffs are almost negligible. On the contrary, you also need to pay the so-called purchase tax mentioned above.
Annual Property Tax
An annual property tax of 0.07% to 5% is multiplied by the appraised value of the property. The rates vary according to the value of the property and its location.