The South Korean government is pursuing real estate tax reforms to reduce tax benefits concentrated on single ultra-high-value homes, while protecting average-priced primary residence owners. The reforms under review would differentiate comprehensive real estate tax and capital gains tax burdens based on home price and actual residence status. Kim Yong-beom, Chief of Policy Office at the presidential office, stated in a radio interview on the 27th that the government is considering various proposals including setting limits on long-term holding special deductions and providing exit routes for multi-home owners. The current system allows single-home owners to receive extensive tax benefits regardless of home price or actual use purpose, prompting the government to integrate actual residence purpose more actively into the taxation process.
Current Single-Home Tax Benefit Structure
Under the current system, single-home owners receive comprehensive real estate tax and capital gains tax deductions regardless of home price. Single-household single-home owners pay comprehensive real estate tax on amounts exceeding a 1.2 billion won deduction from the official home price. Long-term ownership allows tax credit of 20-50% of calculated tax for owners holding homes for 5 years or more, with an additional 20-40% senior citizen deduction for owners aged 60 or older, up to a combined 80% limit. When selling, owners receive long-term holding special deductions of 12-40% of capital gains based on ownership period for homes held 3 years or more, plus an additional 8-40% deduction based on actual residence period for 2 years or more, reaching a maximum combined deduction rate of 80%.
Government Reviews Comprehensive Real Estate Tax Adjustments
The government is reviewing increases to comprehensive real estate tax burdens on ultra-high-value homes while reducing burdens on average primary residence owners. The ultra-high-value home threshold is discussed in the range of 3-5 billion won in market value. The government is examining raising the basic deduction amount from the current 1.2 billion won to reflect recent home price increases, which would remove general single-home owners slightly above the taxation threshold from taxation or reduce their tax burden. The government is reviewing subdividing tax rate brackets to make higher-priced homes face progressively larger tax burdens. The current individual residential comprehensive real estate tax rates are divided into 7 brackets from taxable base of 300 million won or less to over 9.4 billion won. Single-home owners with taxable base exceeding 5 billion won up to 9.4 billion won all receive the same 2% tax rate, meaning ultra-high-value homes with price differences reaching tens of billions of won in market value fall into the same tax rate bracket. The government is examining dividing high-value taxable base brackets more finely so tax burden increases progressively as home prices rise. Raising the fair market value ratio is discussed as a direction. The fair market value ratio, currently applied at 60%, is the proportion of the amount after excluding the basic deduction from the official home price that is reflected in the actual taxable base. The government is expected to review adjusting basic deductions and tax rate brackets together to produce tax increase effects centered on ultra-high-value homes.
The government is reviewing restructuring comprehensive real estate tax long-term ownership tax credit centered on actual residence. The government is examining reducing or eliminating deductions based on simple ownership period and determining deduction rates according to actual residence period. Weight is placed on maintaining age-based deductions considering the tax payment capacity of seniors with reduced income after retirement.
Capital Gains Tax Long-Term Holding Deduction Faces Overhaul
Capital gains tax long-term holding special deduction is expected to undergo major revisions. The government is examining applying lower deduction rates to ultra-high-value homes or capital gains above a certain scale, or placing caps on the deductible amount itself. The government is expected to provide temporary exit routes for multi-home owners to encourage sales.
Policy Announcement Scheduled for the 30th
The government plans to discuss the direction of real estate tax reforms through government-party consultation on the 30th and then announce the final plan. Kim Yong-beom stated that various constructive opinions emerged from real estate discussion forums including setting limits on long-term holding special deductions, opening exit routes for multi-home owners to release properties when strengthening holding taxes, and reducing tax burdens for those relocating to regional areas after retirement, and the government is considering appropriately reflecting these in policy.
FAQ
What is the South Korean government's plan for ultra-high-value single homes?
The government is reviewing increasing comprehensive real estate tax burdens on ultra-high-value homes with market values discussed in the 3-5 billion won range, while protecting average-priced primary residence owners. The reforms would subdivide tax rate brackets more finely for high-value homes and restructure long-term ownership tax credits to focus on actual residence rather than simple ownership period.
When will the real estate tax reform plan be announced?
The government plans to discuss the direction of real estate tax reforms through government-party consultation on the 30th and then announce the final plan. Kim Yong-beom, Chief of Policy Office at the presidential office, confirmed on the 27th that the government is considering various proposals from real estate discussion forums for appropriate policy reflection.
