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Procedure for reporting violations and post-acquisition notification of foreign real estate acquisition
Today, I’d like to write about a topic that many overseas Koreans ask about, namely the violation of the non-resident alien real estate acquisition report.
Real Estate Acquisition Reporting Obligations under the Foreign Exchange Transactions Act
When a non-resident foreigner acquires domestic real estate, he or she must notify the foreign exchange bank or the Bank of Korea of the acquisition of foreign real estate in accordance with the Foreign Exchange Transactions Act. If you fail to report the acquisition of real estate, you will be fined 2% to 4% of the transaction price, and you may face difficulties in the process of disposing of the property or transferring money abroad after disposition.
However, real estate agents, lawyers, pre-sales agents, and even bank representatives are often unaware of this fact during the process of acquiring real estate in Korea, and the problem of undeclared transactions is exacerbated by the fact that overseas Koreans often have bank accounts from their past as Korean nationals or can easily use the accounts of family members in Korea.
Penalties for non-filing
- Disposal funds cannot be transferred overseas due to lack of real estate acquisition report certificate
- Problems with property registration/disposal/loan/lease/foreign exchange transactions
- Fines or, in severe cases, criminal penalties for violating the Foreign Exchange Act.
Administrative fine if caught
In most cases, non-resident alien real estate acquisition notifications are monitored by agencies such as the National Tax Service or the Financial Supervisory Service, or are reported because the violation is discovered during a banking transaction.
| Violations | Violations before 7.17.2017 | Violations after 7.17.2017 |
| Foreign Exchange Bank Failure to Report | 1% of purchase price | 1% of the purchase price |
| Bank of Korea Unreported | 2% of the purchase price | 4% of the purchase price |
| Voluntary report | -20 | -50 |
A procedure for reporting violations
| Procedure | Duration | |
| A statement of facts, Writing a report | Reporters | Document preparation |
| The fact-finding | Foreign exchange banks | 1 month (Additional docs if incomplete) |
| Investigation report submission | Financial Supervisory Service (FSS) | |
| Final fine amount decision | Financial Services Commission(FSC) | |
| Fine payment notice sent | Bank of Korea | |
| Payment of fine | Reporter |
Documents required for violation report
- A statement of facts, Writing a report of violation facts
- Real estate fund source documents
- Real estate documents
- Proof of nationality (some apostille required)
- Certificate of Immigration Records
- Passports, etc.
- Power of attorney, If you’re delegating
Real cases of violation reports
- Violation case occurred when a non-resident overseas Korean purchased an apartment in Korea and made a direct overseas remittance to the sales office to receive an early payment discount.
- A non-resident overseas Korean holding a residence card acquired an apartment, including a jeonse lease, by remitting foreign exchange through a personal bank account, and later made a domestic remittance to return the jeonse deposit; however, the funds were frozen by the bank.
- Married to foreign wife and acquired apartment in joint name with domestic funds -> Wife violation
Post-reporting after violation notification
The initial reporting procedure is not difficult, but resolving the issue after being caught involves numerous proof documents and can result in significant fines. If you have foreign nationality, you should definitely report and obtain a receipt for the report to avoid unjust penalties.