"To Avoid This Year's Property Tax, Move-In Must Be Delayed"... Dispute Over Shinbanpo Central Xi Completion Date

Scheduled for Completion at the End of April: Seocho-gu Sinbanpo Central Xi Union Member
"If Completion Date Adjusted After June 1, Tax Savings of 10 Million KRW Per Household"
Union and Contractor "Reviewed but No Delay Due to Some Opposition"

[Asia Economy Reporter Donghyun Choi] Residents of high-priced reconstruction complexes in the Gangnam area are reportedly considering delaying their move-in dates to avoid the rapidly increasing property tax burden. The rationale is that by postponing the move-in until after June 1, the property tax assessment date, they can avoid the tax burden for this year.

According to the maintenance industry on the 4th, the members of the Sinbanpo Central Xi cooperative in Jamwon-dong, Seocho-gu, Seoul, which is scheduled for completion at the end of April, are in conflict over delaying the completion date. This apartment complex, which reconstructs the former Sinbanpo Hanshin 6th complex, consists of a total of 781 households. It is located on the southern end of Banpo Bridge and is noted as a station-area complex right in front of the Express Bus Terminal Station, a transfer station for subway lines 3, 7, and 9.

The controversy over adjusting the move-in schedule in this complex arose due to the December 16 real estate measures last year. Following the announcement of the "2020 Real Estate Price Disclosure and Enhancement of Public Price Reliability Plan" the day after the measures, it was anticipated that the property tax burden would significantly increase this year, strengthening the opinion that the completion date should be adjusted to after June 1. Members of reconstruction and redevelopment complexes only have to pay property tax on the land until the apartment is completed. However, after completion, the building constructed on the land is officially recognized as a residence, and property tax on the building must also be paid. Especially since the market price of new apartments around the area with a 59㎡ (exclusive area) size far exceeds 2 billion KRW, residents of Sinbanpo Central Xi will all be subject to comprehensive real estate tax in addition to property tax after moving in. If completion is not achieved by June 1, the comprehensive real estate tax for that year is exempted. One cooperative member said, "Our own simulation showed that if the completion date is postponed to after June 1, about 10 million KRW per household can be saved in taxes, excluding acquisition tax."

There is another reason for advocating the delay of the completion date. There is concern that general buyers might intentionally delay the payment of the remaining balance to shift the comprehensive real estate tax burden onto the cooperative. For general buyers, whether they are subject to property tax is determined based on the payment date of the remaining balance; if they leave part of the balance unpaid and pay it after June 1, they do not pay the comprehensive real estate tax. This portion is borne by the cooperative, the project entity.

In particular, the completion date of Sinbanpo Central Xi is only about a month apart from the tax assessment date, so general buyers usually do not bear the late payment fee (typically 10% of the unpaid balance) if they fail to pay the remaining balance within the two-month move-in period after completion. In similar past cases, there were instances where about 1 million KRW of the balance was left unpaid until June 1 to avoid comprehensive real estate tax, leading administrative authorities to impose taxation through official interpretations, but currently, there is no clear standard. Woojin Lee, CEO of the tax firm Ire, explained, "Even if part of the balance remains unpaid, there have been cases where it was considered that the balance was 'substantially' settled, and taxation was imposed as ownership of the residence. The key is who the current owner is as of June 1, and whether the cooperative or the general buyer should pay the tax is a matter to be agreed upon between the two parties through contracts at the sales and move-in stages."

However, the cooperative side has stated that there are no plans to postpone the existing move-in date. In a recent notice sent to cooperative members, the cooperative said, "Although we considered adjusting the move-in date due to changes in finishing materials and real estate policies, we will start moving in on April 29 without any changes," citing opposition from some cooperative members and general buyers as reasons. This was to settle the controversy surrounding the move-in date. GS Construction, the contractor, is also reportedly opposed to delaying the completion date.

An industry insider said, "The fact that cooperative members are even considering delaying the move-in date means the property tax burden is that heavy," adding, "Once this year's official prices are announced, the controversy surrounding this issue will continue."