The government will tighten information management on foreigners who buy and sell real estate in Korea. It will check whether they have stayed in the country for more than six months (183 days) and require that to be stated in the transaction contract, along with the type (category) of visa. If the funds to purchase real estate were raised by selling virtual assets such as Bitcoin, the specific amount obtained from the sale of virtual assets must also be written in the "funding and move-in plan" (funding plan). If foreign currency is brought into Korea to purchase real estate, related documents such as a foreign exchange report (confirmation) certificate must be attached to the transaction.
The government's policy is seen as an attempt to correct abuses in which some foreigners acquire real estate with illegally sourced funds.
According to government ministries on the 17th, in on the previous month the Ministry of Land, Infrastructure and Transport prepared a "partial amendment to the Enforcement Rule of the Act on Report, etc., of Real Estate Transactions" and is preparing reviews by the Ministry of Government Legislation and the Regulatory Reform Committee (RRC). An official at the Ministry of Land, Infrastructure and Transport (MOLIT) said, "We are aiming to amend the enforcement decree within this year," adding, "The enforcement decree will be revised as soon as the reviews by the Ministry of Government Legislation and the RRC are completed."
The enforcement decree that the Ministry of Land, Infrastructure and Transport (MOLIT) seeks to amend includes measures to closely track the source of funds for foreigners' real estate purchases. First, the "funding and move-in plan for acquiring dwellings," which must be submitted within 30 days from the real estate contract date, will require detailed identification of foreigners' funding sources. If overseas deposits were remitted to Korea, the name of the overseas financial institution used for the remittance must be specified. It also requires entries on ▲ the size of proceeds from the sale of virtual currency ▲ whether the funds are from gifts or inheritances and whether gift or inheritance taxes were reported ▲ whether there was a report of bringing in foreign currency. In addition, when foreign currency is brought in, a foreign exchange report (confirmation) certificate or a report on the import (change) of means of payment, etc., must be submitted separately.
Whether the person has an appropriate stay status will also be included in the real estate transaction contract. In the space for the buyer, the "visa code," an alphanumeric code indicating the purpose of entry, must be entered. For example, C-4 for short-term employment and F-2 for residence.
It must also be clearly distinguished whether the person has an address in Korea or has had a place of residence for 183 days (six months) or more. For foreigners, eligibility to engage in leasing varies by stay status. Also, if they have an address or have resided for 183 days or more, they are recognized by law as "residents" and can receive tax benefits such as capital gains tax exemption for one household with one dwelling. However, until now, there was no transaction report form that distinguished residents from nonresidents, so resident status could not be verified.
The reason the Ministry of Land, Infrastructure and Transport (MOLIT) intends to scrutinize the source of funds and stay status in foreign real estate transactions is that there have been recurring cases of purchasing domestic real estate with illegally introduced funds, such as tax evasion. Explaining the reason for amending the enforcement decree, the ministry said, "As illegal real estate activities become more complex and sophisticated, there have been calls to expand the reporting items for funding plans to prevent speculation through illegal funding," and added, "Accordingly, we intend to improve and supplement deficiencies in the operation of the current system and its forms by expanding the reporting items in the funding plan."
Earlier, according to an investigation by the Ministry of Land, Infrastructure and Transport (MOLIT) in Dec. last year, from Jun. 2023 to Jun. 2024, 433 suspected violations were detected in 282 transactions (50.6%) out of 557 transactions by foreigners involving dwellings, land, and officetels. The findings included ▲ illegal inflow of overseas funds ▲ circumvention via gifts ▲ misappropriation for purposes other than stated in loans ▲ false reports of transaction amounts and contract dates.
Kim Hak-ryeol, head of the Smart Tube Real Estate Research Institute, said, "The intent to tax by confirming where foreigners obtained their money, where they invested it, how much profit they earned, and how they reinvest it into real estate is reflected in the strengthened transaction reporting."