How high are realtors’ and lawyers’ fees in South Korea? What about other property purchase costs?
|Legal Fees||0.25 - 1%||buyer|
|Estate Agent´s Commission||0.4% - 0.6%||buyer|
|Special Tax for Rural Development||0.2%||buyer|
|Costs paid by buyer||20.57% - 22.42%|
|Costs paid by seller||nil|
|ROUNDTRIP TRANSACTION COSTS||20.57% - 22.42%|
| See Footnotes
Source: Global Property Guide
Upon conclusion, a property sale contract must be recorded by the foreigner to the head of the Shi/Kun/Ku (city/county/ward). If the property is located in military installation protection areas, designated cultural properties, and ecosystem conservation areas, foreigners “shall obtain permission from the head of Shi/Kun/Ku before the conclusion of the contract” .
However, remittance of revenue or profit from property in Korea is not allowed. A foreigner who wants to enjoy rental income has two options. One is to establish a ‘stock company’ or corporation (JooSik hoesa), which is the same as a U.S. stock company. A foreigner can purchase the property through the stock company, and then remit the revenue out of the country in the form of dividends. The minimum capital required for a ‘stock company’ is KRW50 million (US$49.895), and each share must have a minimum par value of KRW5,000 (US$5) for it to be sold without court approval.
Another way is to register a ‘limited liability company’ (YooHan hoesa), and pay the tax before remitting the money. The minimum capital required for a ‘limited liability company’ is KRW10 million (US$9,979). A ‘limited liability company’ cannot have more than 50 partners.
This issue of remittance is one reason why foreigners tend to hold Korean property through a ‘stock company’ or a ‘limited liability company’.
Non-residents can open Korean Won bank accounts only for a limited range of purposes, which includes withdrawing Korean Won after depositing Korean Won acquired in Korea. However, individual and corporate residents can hold unlimited amounts of foreign currency in local foreign-currency bank accounts.
The Real Property Registry has some inherent limitations. For example, it does not show whether there has been a break in the chain of title caused by acts such as a forgery of the rightful owner’s seal or an unlawful sale of the property by a third party.
Without proper title registration, the occupier of real estate may take ownership through one of the following types of adverse possession:
The following information is contained in the registry:
ESTATE AGENT´S COMMISSION
|less than KRW50 million||0.60%|
|KRW50 million to 200 million||0.50%|
|KRW200 million to 600 million||0.40%|
ESTATE AGENT´S COMMISSION
|PROPERTY VALUE (KRW)||KRW||US$|
|less than 10 million||(less than US$10,294)||0||0|
|KRW10 million to 30 million||(US$10,294 -30,882)||20,000||20.59|
|KRW30 million to 50 million||(US$30,882 -51,470)||40000||41.18|
|KRW50 million to 100 million||(US$51,470 -102,940)||70,000||72.06|
|KRW100 million to 1 billion||(US$102,940 -1,029,400)||150,000||154.41|
|more than KRW1 billion||(US$1,029,400 or more)||350,000||360.29|
The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.
South Korea uses South Korean Won. Exchange rate is at US$1 = KRW1,002.10 as of 26th June 2006.
Value Added Tax:
10% of the price for buildings.
National Housing Bonds:
Buyers are required to purchase National Housing Bonds at a rate of about 5% of the purchase price of the real estate. In practice, these bonds are immediately sold at a discounted price of 10% - 15% less than the purchase price of the Bonds.
Between KRW100,000 and KRW 250,000 per hour of work. A typical lawyer will charge between 5 and 10 hours to prepare the sale agreement.
Registration tax for acquisition of rights by purchase is 3%.
2% of purchase price.
20% of the registration tax.
Special Tax for Rural Development:
Also known as Agriculture and Fisheries Tax. 10% of Acquisition Tax.
The GPG thanks the South Korea Tax Authority for their valuable input for this article.
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