Market Price 1.57 Billion, Official Price 1.1 Billion: 'Top 2%' Single-Homeowners Likely to Pay Comprehensive Real Estate Tax

Top 2% of Combined Detached and Multi-family Houses Have Official Price of 1.07 Billion KRW... Rounded to 1.1 Billion KRW
Considering Up to 3 Months for Enforcement Decree Revision, Applicable from This Year's Comprehensive Real Estate Tax

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Moon Chaeseok] If the ruling party's proposal to set the comprehensive real estate tax (CRE tax) threshold for first-home owners at the top 2% passes the National Assembly, the tax threshold for this year will be a publicly announced price of 1.1 billion KRW. The ruling party is aiming to pass the CRE tax law amendment in the National Assembly this month.

The CRE tax law amendment, proposed by 23 lawmakers including Yoo Dong-su of the Democratic Party of Korea, stipulates that the CRE tax imposition threshold for first-home owners will be the publicly announced price corresponding to the top 2% of homes. After setting the top 2% threshold of the total publicly announced real estate prices for individuals, first-home owners below that threshold will be excluded from CRE tax imposition.

When combining the publicly announced prices of detached houses and apartments this year, the threshold corresponding to the top 2% for the housing portion of the CRE tax was identified as 1.068 billion KRW. Since the amendment states that amounts below 100 million KRW are rounded, the threshold becomes 1.1 billion KRW. The range between 1.068 billion KRW and 1.1 billion KRW is not subject to CRE tax. Applying a 70% price realization rate, a publicly announced price of 1.1 billion KRW corresponds to a market price of approximately 1.571 billion KRW. For single-name first-home owners, whether they are subject to CRE tax will be borderline around a market price of 1.57 billion KRW.

For couples with joint ownership, the threshold is a publicly announced price of 1.2 billion KRW (market price 1.71 billion KRW). This is because each spouse applies the general CRE tax deduction amount of 600 million KRW, totaling 1.2 billion KRW in deductions combined. Since the 2% threshold for first-home owners (1.1 billion KRW) is lower than the joint ownership deduction amount of 1.2 billion KRW, the joint ownership threshold remains at 1.2 billion KRW.

The amendment stipulates that the top 2% threshold will be adjusted every three years. Therefore, the threshold will remain at 1.1 billion KRW for the next two years. However, if the publicly announced price rises or falls by more than 10% compared to the previous year, adjustments can be made.

Additionally, the amendment includes provisions allowing deferral of tax payment until the house is sold or gifted for individuals who are ▲first-home owners, ▲registered residents and actual occupants of the house, ▲aged 60 or older, ▲with a comprehensive income of 30 million KRW or less in the previous tax period, and ▲whose CRE tax payment exceeds 2.5 million KRW.

Considering that revising the enforcement decree takes 2 to 3 months, the law and regulations can be amended by December, the CRE tax payment deadline this year, so the new rules are expected to apply starting with this year's CRE tax.