[Breaking News] Real Estate Tax Bomb for Multi-Homeowners... Comprehensive Real Estate Tax 6%·Capital Gains Tax 72%

'2020 Tax Law Amendment Confirmed'
Highest Capital Gains Tax Rate for Multi-Homeowners at 72%

[Asia Economy Reporter Jang Sehee] The government plans to raise the maximum comprehensive real estate tax rate from the current 3.2% to 6%, and increase the capital gains tax surcharge rate for owners of three or more homes to as high as 72%.

On the 22nd, the Ministry of Economy and Finance held a Tax System Development Committee meeting at the Bankers Hall in Myeongdong, Seoul, and finalized the "2020 Tax Law Amendment" centered on these measures.

The government expanded the capital gains tax rates on short-term home ownership under two years: from 40% to 70% for less than one year, and up to 60% for less than two years. The surcharge rates for multi-homeowners in regulated areas were also increased, with two-homeowners facing an additional 20 percentage points on top of the basic capital gains tax rate (up to 42%), and owners of three or more homes facing an additional 30 percentage points, raising the maximum rates to 62% and 72%, respectively. However, to allow time for home disposal, the implementation date was set for June 1 of next year.

For owners of three or more homes and two-homeowners in designated adjustment areas, comprehensive real estate tax rates will be applied ranging from 1.2% to 6.0%. Additionally, to reduce the burden on genuine single-homeowners, the elderly deduction rate will be expanded to 20-40%, and the long-term holding deduction will be increased to 20-50%.

The special long-term holding deduction rate for single-home households will be maintained at a maximum of 80% (for 10 years), but residency requirements will be added to the eligibility criteria. Until this year, an 8% deduction rate per year of ownership was applied, but starting next year, the deduction will be split into 4% per year of ownership and 4% per year of residency, applying different deduction rates based on ownership and residency periods.

The comprehensive real estate tax on corporate-owned homes has been further strengthened. A flat 6% tax rate will be applied to multi-home corporate ownership. If a corporation owns one home, a 3% comprehensive real estate tax rate will apply. Furthermore, there will be no upper limit on the tax burden when taxing corporate-owned homes.

The government raised the additional tax rate applied upon disposal of corporate homes to 20%, resulting in a maximum tax of 45% on capital gains from corporate home sales.

Meanwhile, starting next year, pre-sale rights will also be included in the count of housing units. However, the government decided to apply this only to pre-sale rights acquired after the enforcement of the law.