On February 10, 2023, the Ministry of Economy and Finance (the “MOEF”), together with various agencies in the financial sector, announced the Plan to Reform the Foreign Exchange Transaction Regulations (Link). As a follow up thereto, the MOEF announced its “Plan for Partial Reform of the Foreign Exchange Transaction Regulations” (the “Reform Plan”) on June 8, 2023. Among the various policies set forth in the Reform Plan for the purpose of relaxing the foreign exchange regulations, we provide below a summary of major items in connection with domestic and overseas real estate investments projects.

1.   Increasing the Reporting Threshold for Foreign Currency Loans by Resident Borrowers
 

• Under the current foreign exchange regulation regime, a resident borrower intending to borrow foreign currency loans of up to USD 30 million must file a report in advance to foreign exchange banks. Moreover, large-scale foreign currency loans exceeding USD 30 million in aggregate per year must be reported to the MOEF in advance (in this regard, when the loan is intended for real estate investment, there have been substantial difficulties in obtaining the clearance).

• Under the Reform Plan, the reporting threshold was increased to USD 50 million. Therefore, for foreign currency loans of up to USD 50 million, the reporting can be made with the designated foreign exchange banks within one month of receiving the loan. That is, reporting in advance is also no longer required in this case. Only for foreign currency loans exceeding USD 50 million, reporting in advance is still required with the MOEF.
   

2.   Relaxation of the Burden of Ex Post Facto Reporting for Foreign Direct Investments
 

• Under the current regulations, Korean companies undertaking foreign direct investments by way of establishing an overseas entity or acquiring 10% or more shares in an overseas corporation must file reports in advance for such investments and also submit ex post facto reports under certain conditions (amendment reports upon occurrence and a regular annual report).

• Under the Reform Plan, the ex post facto reporting was consolidated to annual reporting only (the amendment reports are abolished). Moreover, the obligation to submit stock a valuation opinion from an accounting firm in case of direct foreign stock investment as part of the annual report is also abolished.

• Also under the Reform Plan, for (i) the transfer of direct foreign investment stocks between residents, which has been subject to the obligation to report in advance to foreign exchange banks under the current system, and (ii) foreign investments of up to USD 50 million on cumulative basis, which have been subject to ex post facto reporting within one month of investment under the current system, regulations will be changed to allow ex post facto reporting within three months of the transaction date. 
   

The Reform Plan is expected to take effect from July 2023 with the specific effective date and the final provisions of the amended Regulations to be further clarified in the coming days.

[Korean Version]