When Age and Long-Term Holding Deductions Apply
Comprehensive Real Estate Tax on 1.8 Billion Won House About 800,000 Won
If No Deductions Are Received, 4 Million Won
[Asia Economy Reporter Kangwook Cho] It has been revealed that the amount a single-homeowner holding an apartment worth approximately 2.6 billion KRW in market price must pay in comprehensive real estate tax (종합부동산세) this year varies by about five times, ranging from a minimum of 800,000 KRW to a maximum of 4 million KRW. This is because the deductible tax amount differs depending on age and long-term ownership status. Accordingly, criticism has arisen that it is difficult to generalize the government's claim that a single-homeowner holding the same apartment pays around 700,000 KRW in tax this year.
According to the comprehensive real estate tax simulation results from the real estate tax calculation service 'Sellimon' on the 29th, the comprehensive real estate tax for a single-homeowner holding a house with a publicly announced price of 1.8 billion KRW, corresponding to a market price of about 2.6 billion KRW, is estimated at a minimum of 812,000 KRW. This figure is derived by applying the maximum age and long-term ownership deductions of 80%, which are only applicable to single-homeowners with sole ownership.
The current comprehensive real estate tax law operates by calculating the tax amount by subtracting the basic deduction from the total publicly announced price of all houses owned nationwide by one person, then calculating deductions based on age and ownership period. For the age deduction, which applies only to single-homeowners with sole ownership, 20% is applied for ages 60-65, 30% for ages 65-70, and 40% for those over 70. The long-term ownership deduction is 20% for 5-10 years, 40% for 10-15 years, and 50% for over 15 years. The combined limit for these two deductions is a maximum of 80%.
In other words, to receive the maximum deduction of 80%, one must be aged 65-70 and have owned the property for over 15 years, or be over 70 years old and have owned it for more than 10 years. Previously, the government cited a case in its explanatory materials on comprehensive real estate tax, stating that the tax for a house with a publicly announced price of 1.8 billion KRW this year would be 700,000 KRW, assuming a 68-year-old who has owned the property for 23 years.
However, if no age or ownership deductions are applied, the tax can increase up to five times. For example, a person under 60 years old who has owned the property for less than 5 years would face a comprehensive real estate tax burden of 4,061,000 KRW. Including property tax, the total holding tax would be around 10 million KRW. Those receiving a 20% deduction pay 3,249,000 KRW this year, 40% deduction pay 2,436,000 KRW, and 60% deduction pay 1,624,000 KRW. Additionally, a single-homeowner holding an 1.8 billion KRW house jointly with their spouse (50/50 ownership) would pay a combined comprehensive real estate tax of 1,867,000 KRW this year.
On the other hand, even if the combined publicly announced price per person is the same 1.8 billion KRW, a two-homeowner holding one house in Seoul (publicly announced price 1.4 billion KRW) and one house in a regulated area in the provinces (publicly announced price 400 million KRW) would face a comprehensive real estate tax burden of a staggering 21,591,000 KRW this year. Although the total publicly announced price is the same, a two-homeowner pays 26 times more in comprehensive real estate tax.
The significant difference in holding tax burden increase between single-homeowners and multiple-homeowners is due to the extent of the comprehensive real estate tax rate increase and whether the baseline adjustment was made. The government raised the comprehensive real estate tax rate for single-homeowners this year from 0.5?2.7% to 0.6?3.0%, an increase of 0.1?0.3 percentage points. In contrast, the tax rate for two-homeowners or three-or-more-homeowners in regulated areas was nearly doubled from 0.6?3.2% to 1.2?6.0%, an increase of 0.6?2.8 percentage points. In particular, the government treats multiple-homeowners as de facto speculators and applies punitive taxation principles. While the tax base threshold for a single-homeowner was raised from 900 million KRW to 1.1 billion KRW, the general tax base threshold applied to multiple-homeowners remained at 600 million KRW.
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