[Changes from the Second Half of the Year] Property Tax Reduction for Assets Under 600 Million KRW... Mortgage Loan Access Expands

- Legal Maximum Interest Rate Reduced from 24% to 20%
- Official Implementation of Electronic Donation Receipt System

[Sejong=Asia Economy Reporter Son Sunhee] Starting from the 1st of next month, the property tax rate for single homeowners with a publicly announced property price of 600 million KRW or less will be reduced by 0.05 percentage points. This measure aims to ease the tax burden on low-income and genuine buyers amid an increase in the number of taxpayers due to the government's policy to reflect the actual market value in real estate public prices.

The government announced on the 28th that it has published a booklet titled "Changes Starting from the Second Half of 2021," which clearly summarizes various systems and laws changing from the second half of this year. The booklet contains a total of 166 policies under the jurisdiction of 34 government agencies.

In the fields of finance, fiscal affairs, and taxation, major policy changes from the second half of the year include property tax relief, easing of mortgage loan (Judaemae) requirements, reduction of the statutory maximum interest rate, and the introduction of the electronic donation receipt system.

Property tax rates will be reduced by 0.05 percentage points for each tax base bracket only for single homeowners with a publicly announced property price of 600 million KRW or less. Accordingly, the special tax rates based on the publicly announced price will be ▲0.05% for 100 million KRW or less ▲0.1% for 100 million to 250 million KRW ▲0.2% for 250 million to 500 million KRW ▲0.35% for 500 million to 600 million KRW. The maximum tax reduction is expected to be up to 180,000 KRW depending on the housing price.

From the 1st of next month, the preferential mortgage loan benefits for non-homeowners who are genuine buyers will also be eased. The combined income standard for couples will be raised from 80 million KRW or less to "90 million KRW or less," and for first-time buyers, from 90 million KRW or less to "less than 100 million KRW."

Additionally, the price criteria for mortgage loans will be relaxed from 600 million KRW or less to "900 million KRW or less" in speculative overheated districts, and from 500 million KRW or less to "800 million KRW or less" in regulated areas.

If these conditions are met, the preferential loan-to-value ratio (LTV) benefits will be expanded from the existing 10 percentage points to a maximum of 20 percentage points. Accordingly, in speculative and overheated districts, loans can be obtained up to an LTV of 50% (60% for properties priced 600 million KRW or less), and in regulated areas, up to 60% (70% for properties priced 500 million KRW or less). The maximum loan limit is 400 million KRW.

From the 7th of next month, the statutory maximum interest rate will be lowered to 20% per annum. This is the first reduction in about 3 years and 5 months from the previous 24% per annum. It will apply not only to lenders and credit finance institutions but also to private money transactions of 100,000 KRW or more. The government expects that the interest burden of 2.08 million borrowers currently paying interest rates exceeding 20% will be reduced by approximately 483 billion KRW annually due to this reduction in the statutory maximum interest rate.

Along with this, the 'Electronic Donation Receipt System' will be introduced for the first time in the second half of this year. When a donation organization receives a donation, it issues donation receipts electronically through the National Tax Service's Hometax system. After a pilot operation since April, it will be officially implemented on the 1st of next month.

From now on, donors will not need to separately submit electronic donation details, as they will be automatically reflected in the year-end tax settlement simplification service. Donation organizations will be exempt from the legal obligations to prepare, store, and submit issuance details and other statutory forms starting from the issuance of electronic donation receipts. The government expects that by granting issuance authority only to public interest corporations eligible for donation receipts under tax law, false receipt issuance will be prevented in advance, thereby making the donation culture more transparent.

Additionally, starting from July, daily worker income payment statements and simplified payment statements for business income subject to withholding tax must be submitted monthly. Previously, daily worker income payment statements were submitted quarterly, and simplified payment statements for business income subject to withholding tax were submitted semiannually, but the submission frequency has been reduced to "monthly." This is intended to grasp income information according to the national employment insurance roadmap. To ease the tax cooperation burden on businesses due to this system implementation, the government decided to reduce the penalty rates (from 1% to 0.25% for non-submission, and from 0.5% to 0.125% for late submission). Small businesses will be temporarily exempt from penalties until June next year.