[7·10 Real Estate Measures (Q&A)] Taxation Strengthens... How Much Will My Taxes Increase?

Archive photo / Photo by Mun Ho-nam munonam@

Among the real estate measures announced by the government on the 10th, most of the tax increases target multi-homeowners, but they also include higher tax rates on short-term transactions under two years. The contents of this measure are explained in a Q&A format.

▲How exactly will the comprehensive real estate holding tax (종합부동산세) increase be implemented?

=For individuals, it applies if they own '3 or more homes' or '2 homes in regulated areas.' When the total market value of owned homes is between 800 million and 1.22 billion KRW (tax base up to 300 million KRW), the current rate of 0.6% will increase to 1.2%. For 1.22 billion to 1.54 billion KRW, the rate rises from 0.9% to 1.6%, and for 1.54 billion to 2.33 billion KRW, from 1.3% to 2.2%. For 2.33 billion to 6.9 billion KRW, it goes from 1.8% to 3.6%, for 6.9 billion to 12.35 billion KRW, from 2.5% to 5.0%, and above 12.35 billion KRW, from 3.2% to 6.0%. The basic deduction of 600 million KRW remains the same. Owners of two or more homes in regulated areas will have a tax burden cap increased up to 300% compared to the previous year.

▲What is the standard for corporate real estate?

=Multi-homeowner corporations, unlike individuals, are not assessed by tax base but are subject to the highest additional tax rate of 6%. This was previously announced in the June 17 measures. The basic deduction of 600 million KRW that applies to individuals does not apply to corporations.

▲When will the increase in the comprehensive real estate holding tax take effect?

=The Real Estate Holding Tax Act must pass the National Assembly. Once the bill is approved in the plenary session, the revised tax rates will apply. Since the tax assessment date for this year has passed, the tax will be applied based on the assessment date of June 1 next year.

▲How will the capital gains tax rate increase for homes held under two years change?

=If a home is held for less than one year, the capital gains tax rate will be 70%. For holdings between one and two years, it will be 60%. Previously, the rates were 40% for less than one year and 6-42% for one to two years.

▲How will the additional capital gains tax rates apply when multi-homeowners sell homes in regulated areas?

=The additional tax rate applied on top of the basic rate (6-42%) will be increased by 10 percentage points from before: 20 percentage points for two-homeowners and 30 percentage points for those owning three or more homes.

▲When will the strengthened capital gains tax be implemented?

=To encourage listings, implementation is deferred until June 1, 2021, the next comprehensive real estate holding tax assessment date. Sales before May 31, 2021, will be subject to the previous tax rates.

▲What if cases arise where apartments are gifted to spouses to avoid capital gains tax?

=The government is separately considering measures to address issues such as increased gifting.

▲What if the Real Estate Holding Tax Act and Income Tax Act amendments do not pass in the July National Assembly session?

=The government aims to submit the amendments as member bills and have them processed in the July extraordinary session. However, since the strengthened measures are scheduled to apply from the 2021 tax payment year, with the tax base date on June 1 next year, if the bills are passed before the end of May next year, the measures will be implemented as planned.

▲What about benefits for existing registered rental business operators?

=Tax benefits will be maintained until the registration cancellation date for already registered homes. The types abolished by this system revision are 'short-term rental (4 years)' and 'long-term general purchase rental (8 years) apartments.' Therefore, new registrations for short-term rentals will not be accepted, and existing short-term rentals cannot be converted to long-term rentals (conversion will not provide tax benefits). For long-term rentals other than apartments that remain, the mandatory period will be extended from 8 to 10 years, strengthening public obligations. If registration was made before the abolished types, registration will be automatically canceled upon expiration of the mandatory period.