MoEF Rejects 'Exclusion of Transfer Tax Surcharge'... Transition Team Says "To Be Pursued After New Government Inauguration"

View of apartments from Namsan on the 11th. Photo by Moon Honam munonam@

The temporary easing of the capital gains tax surcharge imposed on multi-homeowners is expected to be implemented after the inauguration of the Yoon Suk-yeol administration on the 10th of next month. The Presidential Transition Committee requested the current government to implement this measure this month, but the Ministry of Economy and Finance rejected the request.

On the 11th, the Transition Committee stated, "The current government announced today that it rejects the Transition Committee's proposal to temporarily exclude the capital gains tax surcharge on multi-homeowners during April," adding, "As mentioned on the 31st of last month, we plan to start revising the enforcement decree immediately upon the new government's inauguration and apply it retroactively from May 11."

Earlier, the Transition Committee requested the current government to temporarily exclude the capital gains tax surcharge on multi-homeowners for one year starting this month.

Under the current Income Tax Act, a 20 percentage point surcharge is imposed on two-homeowners in addition to the basic tax rate (6?45%), and a 30 percentage point surcharge on those owning three or more homes. As a result, multi-homeowners selling properties in regulated areas must pay up to 75% of their capital gains as tax. Including local taxes, the rate reaches 82.5%. The Transition Committee expects that excluding the capital gains tax surcharge for one year will reduce the tax burden on multi-homeowners and increase the supply of properties.

However, the Ministry of Economy and Finance expressed opposition to this proposal in a press release on the same day, stating that "it is preferable to implement this measure immediately after the new government takes office."

The Ministry explained, "To achieve the highest goals of real estate policy?stabilizing the real estate market and citizens' housing?various policies related to real estate, including housing supply, finance, taxation, and the three major lease laws, are organically linked and need to be pursued consistently. In this context, the temporary exclusion of the capital gains tax surcharge on multi-homeowners should also be reviewed and implemented in connection with other policies under a comprehensive real estate policy roadmap prepared under the new government's policy direction after its inauguration."

Accordingly, the temporary exclusion of the capital gains tax surcharge is expected to be implemented after the new government's inauguration on May 10. Choi Sang-mok, the economic division chief of the Transition Committee, stated at a briefing on the 31st of last month, "If the current government does not take action, we will revise the enforcement decree immediately after the new government takes office so that the exclusion applies for one year starting from the day after the government's inauguration on May 10."