non-boolean type specified in a context where a condition is expected, near WHEN

You may give";" to the end of your statement:

MERGE KNA1 AS Target 
USING #TMP_KNA1 AS Source 
ON (Target.KUNNR = Source.KUNNR) 
        WHEN MATCHED THEN 
                UPDATE SET Target.LAND1 = Source.LAND1, Target.NAME1 = Source.NAME1, Target.NAME2 = Source.NAME2, 
                        Target.ORT01 = Source.ORT01, Target.PSTLZ = Source.PSTLZ, Target.STRAS = Source.STRAS, 
                        Target.ADRNR = Source.ADRNR 
        WHEN NOT MATCHED THEN 
                INSERT (LAND1,NAME1,NAME2,ORT01,PSTLZ,STRAS,ADRNR) VALUES (Source.LAND1,Source.NAME1,Source.NAME2
                ,Source.ORT01,Source.PSTLZ,Source.STRAS,Source.ADRNR);

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