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ACT ON THE REGISTRATION OF REAL ESTATE UNDER ACTUAL TITLEHOLDER’S NAME

141 (Supp. 40)

ACT ON THE REGISTRATION OF

REAL ESTATE UNDER ACTUAL

TITLEHOLDER'S NAME

Act No. 4944, Mar. 30, 1995

Amended by Act No. 5193, Dec. 30, 1996

Act No. 5371, Aug. 22, 1997

Act No. 5453, Dec. 13, 1997

Act No. 5582, Dec. 28, 1998

Act No. 5592, Dec. 28, 1998

Act No. 6073, Dec. 31, 1999

Act No. 6683, Mar. 30, 2002

Act No. 8418, May 11, 2007

Act No. 8635, Aug. 3, 2007

Article 1 (Purpose)

The purpose of this Act is to contribute to the sound development of the national economy through the prevention of antisocial actions, such as speculation, evasion of taxes and acts circumventing laws, etc. which abuse the real estate registration system, the normalization of real estate transactions, and the stabilization of real estate prices by having any ownership and other real rights to the real estate registered under the names of those having the actual rights so as to conform to the sub- stantial relation of rights.

Article 2 (Definitions)

The definitions of terms used in this Act shall be as follows:

1. The term title trust agreement means a stipulation (including cases where it is made in the form of a mandate or the sale on consignment or ratification) made between a person (hereinafter referred to as a person having real rights ) who holds, or has actually acquired or is to acquire, the ownership or other real rights to any real estate (hereinafter referred to as real rights to real estate ) and another person, to the effect that the person having the actual right holds or is to hold the real right to the real estate internally and another ACT ON THE REGISTRATION OF REAL ESTATE UNDER ACTUAL TITLEHOLDER'S NAME (Supp. 40) 142

person registers the ownership under his name (including a provisional registration; hereinafter the same shall apply): Provided, That each of the following items are excluded:

(a) Where a creditor has a real right to any real estate transferred, or makes a provisional registration of it, to secure a performance of obligation;

(b) Where two or more persons agree to specify the location and area of real estate and to hold a partition ownership, respectively, and they make a registration as co-ownership of such partition own- ership; and

(c) Where it is registered the fact that the real estate is a trust property as prescribed by the Captial Market and Financial Investment Business Act;

2. The term title truster means a person having the actual right who has any real right to his own real estate registered under another person s name, according to the title trust agreement;

3. The term title trustee means a person who registers a real right to real estate of a person having the actual right under his name according to the title trust agreement; and

4. The term real name-registration means to register any real right which used to be registered under the name of the title trustee under the title trust agreement before the enforcement of this Act under the name of the title truster after the enforcement of this Act. Article 3 (Obligation, etc. for Registration in Name of Person having Actual Right)

(1) No person shall register any real right to real estate under the name of the title trustee under the title trust agreement. (2) Where a creditor has a real right to any real estate transferred to secure a performance of obligation, he shall submit to a public official in charge of the registration an application for registration accompanied by a document specifying the obligor, amount of credit, and the fact that it is a security for the performance of obligation.

Article 4 (Effect of Title Trust Agreement)

(1) Any title trust agreement shall be null and void. (2) Any change in the real rights to any real estate by a registration made under the title trust agreement shall be null and void: Provided, 7

143 (Supp. 40)

That this shall not apply in cases where the title trustee is one of the parties to the contract to acquire the real right to real estate, and the other party thereto does not know the fact that there exists the title trust agreement.

(3) The invalidity as referred to in paragraphs (1) and (2) shall not constitute a defense to any third person.

Article 5 (Penalty)

(1) A penalty within the limit of the amount equivalent to 30/100 of the value of the related real estate shall be imposed on persons who fall under any of the following subparagraphs:

1. A title truster who violates the provisions of Article 3 (1); and

2. A creditor who violates the provisions of Article 3 (2) and an actual obligor who has the document prescribed in the said paragraph of the said Article submitted with a false obligor described therein. (2) The value of the real estate as referred to in paragraph (1) shall be based on the value falling under any of the following subparagraphs as of the day on which the penalty is imposed: Provided, That where a person who has violated the provisions of Article 3 (1) or 11 (1) has already terminated title trust relations or made a real name registration on the day the penalty is imposed, it shall be the value of the real estate at the point of the title trust relations termination or the real name registration:

1. In case of ownership, the standard market price as prescribed in Article 99 of the Income Tax Act; and

2. In case of any real right other than ownership, the amount evaluated by such method as determined by the Presidential Decree under Articles 61 (5) and 66 of the Inheritance Tax and Gift Tax Act.

(3) The criteria for imposition of penalty under paragraph (1) shall be prescribed by the Presidential Decree by taking account of the value of real estates under paragraph (2) (hereinafter referred to as the assessed value of real estates ), the period of violating the provisions of paragraph (3), and whether or not it has been done for the purpose of dodging taxes or avoiding the restrictions under the Acts and subordinate statutes, etc.

ACT ON THE REGISTRATION OF REAL ESTATE UNDER ACTUAL TITLEHOLDER'S NAME (Supp. 40) 144

(4) If the amount of the penalty as referred to in paragraph (1) exceeds the amount as determined by the Presidential Decree, the excess part may be paid in kind under the provisions of the Presidential Decree. (5) The penalty as referred to in paragraph (1) shall be imposed and collected by the head of Si/Gun/Gu having jurisdiction over the location of the real estate concerned. In this case, it shall be imposed without delay after the offense is confirmed.

(6) If the penalty as referred to in paragraph (1) is not paid within the time limit of the payment, it shall be collected according to the example of a disposition of local taxes in arrears.

(7) Matters necessary for the imposition, collection, etc. of the penalty as referred to in paragraph (1), shall be prescribed by the Presidential Decree.

Article 6 (Forced Performance Charges)

(1) Any person on whom the penalty as prescribed in Article 5 (1) 1 is imposed, shall register without delay the real right to the real estate concerned under his name: Provided, That this shall not apply in a case which falls under the proviso of Article 4 (2), and if there is any justifiable reason not to register it under his own name, he shall register it under his own name without delay after such cause has disappeared. (2) If a person violates the provisions of paragraph (1), the amount equivalent to 10/100 of the assessed value of real estates shall be imposed on him as the forced performance charges when one year has passed from the date on which the penalty is imposed (in the case as referred to in the latter part of the proviso of paragraph (1), it refers to the time when the cause not to make a registration disappears) and the amount equivalent to 20/100 of the real estate value respectively if another one year has passed thereafter without paying it.

(3) The provisions of Article 5 (4) through (7) shall be applied mutatis mutandis to forced performance charges.

Article 7 (Penal Provisions)

(1) Any person who falls under any of the following subparagraphs and who instigates a person to violate such provisions, shall be punished by imprisonment for not more than five years, or by a fine not exceeding two hundred million won:

1. A title truster who has violated the provisions of Article 3 (1); and

2. A creditor who has violated the provisions of Article 3 (2) and any 7

145 (Supp. 40)

actual obligor who has another person submit a document as prescribed in Article 3 (2) with a false obligor described therein. (2) Any title trustee who has violated the provisions of Article 3 (1) and any person who instigates a title trustee to violate such provisions shallbe punished by imprisonment for not more than three years, or by a fine not exceeding one hundred million won.

(3) Any person who has aided and abetted a violation of the provisions of Article 3, shall be punished by imprisonment for not more than one year, or by a fine not exceeding thirty million won. Article 8 (Special Case for Families of Same Clan and Spouse) The provisions of Articles 4 through 7, and 12 (1) and (2) shall not apply in any case which falls under any of the following subparagraphs and is not involved in evading any tax, avoiding any compulsory exe cution, or evading any legal restrictions:

1. Where the real right to any real estate held by a family of the same clan is registered under the name of a person other than the family of the same clan (including a case where the registration is made with the family of the same clan and its representative indicated together); and

2. The real right to any real estate is registered under the name of a spouse.

Article 9 (Investigation)

(1) If it is deemed necessary, the head of Si/Gun/Gu may conduct an investigation to confirm whether the provisions of Articles 3, 10 through 12 and 14 have been violated or not.

(2) If any one is deemed to be suspected of tax evasion, the Commissioner of the National Tax Service may conduct an investigation to con firm whether the provisions of Articles 3, 10 through 12 and 14 have been violated or not.

(3) If a public official has discovered in the course of his duties the fact that the provisions of Articles 3, 10 through 12 and 14 have been violated, he shall notify the fact to the Commissioner of the National Tax Service and the head of Si/Gun/Gu having jurisdiction over the location of the real estate concerned.

Article 10 (Penal Provisions, etc. against Persons Making No Registration for Long Time)

ACT ON THE REGISTRATION OF REAL ESTATE UNDER ACTUAL TITLEHOLDER'S NAME (Supp. 40) 146

(1) With regard to any person subject to the provisions of Articles 2 (1) and 11 of the Addenda of the Act on Special Measures for the Registration of Real Estate, and Article 2 of the Addenda of the same Act, Act No. 4244, who is entitled to the registration, and has failed to apply for an ownership transfer registration within three years from the day falling under any of the following subparagraphs (hereinafter referred to as the person making no registration for a long time ), a penalty within the limit of the amount equivalent to 30/100 of the assessed value of real estates (where a fine for negligence under Article 11 of the Act on Special Measures for the Registration of Real Estate has already been imposed, referring to the amount obtained by deducting it) shall be imposed on him: Provided, That this shall not apply in a case where there has occurred a new cause to apply for the registration because the registration is not effective under the provisions of the text of Articles 4 (2) and 12 (1) and where there exists any justifiable reason why it is impossible to apply for registration:

1. If the contracting parties bear a mutual equivalent obligation of performance, the day on which the performance of the consideration has actually been completed; and

2. If only one of the parties bears the obligation, the day on which the contract has taken effect.

(2) The criteria for imposing a penalty under paragraph (1) shall be prescribed by the Presidential Decree, by taking account of the assessed value of real estates, the period of failing to make an ownership transfer registration, whether or not it is intended to dodge taxes or avoid the restrictions under the Acts and subordinate statutes, and whether or not a fine for negligence under Article 11 of the Act on Special Measures for the Registration of Real Estate has been imposed, etc.

(3) The provisions of Article 5 (4) through (7) shall be applied mutatis mutandis to the penalty as referred to in paragraph (1).

(4) If the person making no registration for a long time has failed to apply for the ownership transfer registration even after the penalty has been imposed on him under paragraph (1), the forced performance charges 7

147 (Supp. 29)

shall be imposed on him by applying mutatis mutandis the provisions of Article 6 (2) and (3).

(5) Any person making no registration for a long time (excluding the persons falling under the proviso of paragraph (1)) and any person who has instigated the said person not to apply for the ownership transfer registration in violation of the provisions of paragraph (1) shall be punished by imprisonment for not more than five years, or by a fine not exceeding two hundred million won, and any person who has aided and abetted another person not to apply for the ownership transfer registration in violation of the provisions of paragraph (1) shall be punished by imprisonment for not more than one year, or by a fine not exceeding thirty million won. Article 11 (Change of Registration Made by Existing Title Trust Agreement to Real Name Registration)

(1) Any title truster who has registered, or has another person register the real right to any real estate under the name of the title trustee according to the title trust agreement, before this Act enters into force (hereinafter referred to as the existing title truster ) shall make an actual name registration within a period of one year as of the enforcement date of this Act (hereinafter referred to as the grace period ): Provided, That this shall not apply in case where the right to real estate is transferred to a third person from the title trustee due to an appropriation for public use, judicial decision, public auction, or provision of other Acts (excluding the case of an inheritance), and in case of real estate the title of which is entrusted by a religious organization, a local school annexed to a Confucian shrine, etc., with no intention of tax evasion, any evasion of compulsory execution, etc., under the provisions of the Presidential Decree. (2) A real name registration shall be considered to have been made under paragraph (1) in a case which falls under any of the following subpar- agraphs:

1. Where an existing title truster has performed any act, such as sale or other act of disposal, with respect to a real right to any real estate, and has transferred the registration thereof directly to a person who has acquired it through such act of disposal within the grace period; and

2. Where the existing title truster has entrusted the head of Si/Gun/ Gu having jurisdiction over the location of the real estate concerned with the sale of the real estate pursuant to the provisions of other Acts, or has entrusted the Korea Assets Management Corporation ACT ON THE REGISTRATION OF REAL ESTATE UNDER ACTUAL TITLEHOLDER'S NAME (Supp. 29) 148

established under the Act on the Efficient Disposal of Insolvent Assets, etc. of Financial Institution and the Establishment of Korea Assets Management Corporation with such sale under the provisions of the Presidential Decree, within the grace period unless the entrustment of the sale has been withdrawn.

(3) If it is impossible to make the real name registration or the disposal by sale as referred to in paragraphs (1) and (2) pursuant to the provisions of other Acts, without any reason attributable to the person having the actual right, the actual name registration or the disposal by sale shall be made within one year after such cause has disappeared. (4) If litigation as to the real right to real estate has been instituted before this Act enters into force, or during the grace period, the actual name registration or the disposal by sale as referred to in paragraphs (1) and (2) shall be made within one year after the final and conclusive judgment on the litigation has been made (including a case which has the same effect as the said judgment).

Article 12 (Effect, etc. of Violation of Obligation for Actual Name Regis- tration)

(1) If the actual name registration or the disposal by sale has failed to be made within the period as prescribed in Article 11, the provisions of Article 4 shall apply to the effect of the title trust agreement, etc. after such period has elapsed.

(2) The provisions of Articles 5 and 6 shall apply to any person who has violated the provisions of Article 11, according to the example of the person who has violated the provisions of Article 3 (1). This paragraph which was decided to be incompatible with the Constitution by the Constitutional Court on May 31, 2001 is amended following the amendment of Article 5 (1) by Act No. 6683, March 30, 2002

(3) If a person who has never made a registration under a title trust agreement before this Act enters into force makes the registration under the pretence of an actual name registration as prescribed in Article 11, he shall be punished by imprisonment for not more than five years, or by a fine not exceeding two hundred million won.

Article 13 (Special Cases of Imposition of Tax on Actual Name Registration) (1) If the real estate registered under an actual name under Article 11 is a single registration and its value is not more than fifty million won, any tax exempted already or imposed insufficiently or not imposed shall 7

149 (Supp. 29)

not be collected additionally if it falls under any of the following subparagraphs. In this case, the scope of the real estate on which the actual name registration is made and the calculation of the value thereof shall be prescribed by the Presidential Decree:

1. Where a title truster and a household living together with him are exempted from tax due to transfer of one house by one household, before this Act enters into force, under previous provisions of subparagraph 6 of Article 5 of the Income Tax Act (referring to the provisions prior to the amendment by Act No. 4803; Amended Act of the same Act), but he does not become entitled to the said tax exemption due to the actual name registration on the day he transfers the house; and

2. Where the gift tax liable for payment before this Act enters into force is imposed on the holder of the title under Article 32-2 of the previous Inheritance Tax Act (referring to the Act prior to the amendment by Act No. 5193; Amended Act of the same Act).

(2) If real estate registered in the actual name falls under real estate for non-business use and if it is used directly for the proper operation of the juristic person concerned until the grace period (in the case as prescribed in Article 11 (3) and (4), it refers to a period of one year after the cause has disappeared), the tax rate under the previous provisions of Article 112 (2) of the Local Tax Act (referring to the provisions prior to the amendment by Act No. 6312; Amended Act of the same Act) shall not be applicable, notwithstanding the provisions of Article 10 of the Addenda of the Act No. 6312; the Amended Act of the Local Tax Act.

Article 14 (Obligation, etc. of Holder of Existing Security Right for Transfer, for Presentation of Documents)

(1) If a creditor has a real right to real estate transferred to secure the performance of an obligation, before this Act enters into force, he shall submit to the public official in charge of the registration the document specifying the obligor, claim amount and the purport that the security is for liquidation of the obligation within a period of one year after this Act has entered into force. (2) The penalty within the limit of an amount equivalent to 30/100 of ACT ON THE REGISTRATION OF REAL ESTATE UNDER ACTUAL TITLEHOLDER'S NAME (Supp. 29) 150

the assessed value of real estate shall be imposed on a creditor who violates the provisions of paragraph (1) and the actual obligor who has another person submit the document as referred to in paragraph 1 (1) with a false obligor described therein.

(3) The criteria for imposing a penalty under paragraph (2) shall be prescribed by the Presidential Decree, by taking account of the assessed value of real estates, the period of violating the provisions of paragraph (1), whether or not it is intended to dodge taxes or avoid the restrictions under the Acts and subordinate statutes, etc.

(4) The provisions of Article 5 (4) through (7) shall apply mutatis mutandis to the penalty as referred to in paragraph (2).

Article 15 Deleted. ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on July 1, 1995.

Article 2 (Examples of Application)

(1) The provisions of Articles 3 and 13 shall be applicable to cases registered after this Act enters into force.

(2) The provisions of Article 4 shall be applicable even to a case where the title trust agreement is made before this Act enters into force, and the registration is made pursuant to such agreement after this Act enters into force.

Article 3 (Transitional Measures concerning Persons Making No Regis- tration for Long Time)

If the day as prescribed in subparagraphs of Article 10 (1) has elapsed before this Act enters into force, the period of three years as prescribed in Article 10 (1) shall be calculated from the enforcement date of this Act.

Article 4 Omitted.

Article 5 (Transitional Measures concerning Penal Provisions Incidental 7

151 (Supp. 29)

to Amendment of Other Acts)

The application of the penal provisions to those who have violated the provisons of Article 7 of the previous Act on Special Measure for the Registration of Real Estate, before this Act enters into force, shall be governed by the previous provisions.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on January 1, 1997. Articles 2 through 15 Omitted.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force three months after the date of its prom ulgation.

Articles 2 through 9 Omitted.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on January 1, 1998. (Proviso Omitted.) Article 2 Omitted.

ADDENDA

(1) (Enforcement Date) This Act shall enter into force on January 1, 1999. (2) through (5) Omitted.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. Articles 2 and 3 Omitted.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. Articles 2 and 3 Omitted.

ACT ON THE REGISTRATION OF REAL ESTATE UNDER ACTUAL TITLEHOLDER'S NAME (Supp. 40) 152 (160)

ADDENDA

(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.

(2) (Application Example) The amended provisions of Articles 5 (1) and (3) (including the case applied under Article 12 (2)), 10 (1) and (2) and 14 (2) and (3) shall apply from the portion of imposing the penalty for the first time after the enforcement of this Act: Provided, That it shall also apply to a disposition of penalty imposed under the previous provisions (limited to those for which an administrative appeal or an administrative litigation has been filed).

ADDENDA

(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.

(2) (Application Example) The amended provisions of Article 5 (2) (including the cases applied under Article 12 (2)) shall apply from the portion of the penalty imposed first after the enforcement of this Act: Provided, That it shall also apply to a disposition of penalty imposed under the previous provisions (limited to those for which an administrative appeal or an administrative litigation was filed and the procedures thereof have not been completed).

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force one year and six months after the date of its promulgation. (Proviso Omitted.)

Articles 2 through 44 Omitted.