This Year’s Comprehensive Real Estate Tax Burden Reduced... Fair Market Value Ratio Lowered from 100% to 60%

Resolution of the Cabinet Meeting on the Enforcement Decree of the Comprehensive Real Estate Tax and Income Tax Act
If Rent is Raised Within 5%, Capital Gains Tax Exemption Benefit When Selling the House Later

[Asia Economy Sejong=Reporter Kwon Haeyoung] To alleviate the rapidly increasing comprehensive real estate tax (종합부동산세, Jonghap Budongsanse) burden, the government will lower the fair market value ratio for this year's housing comprehensive real estate tax from the current 100% to 60%. For 'Sangsaeng Imdaein' (상생임대인, cooperative landlords) who raised housing rent by within 5% compared to the previous contract, the two-year actual residence requirement will be considered fulfilled, providing capital gains tax exemption benefits.

On the 25th, the government reviewed and approved a partial amendment ordinance of the Comprehensive Real Estate Tax Act, Income Tax Act, Corporate Tax Act, and Individual Consumption Tax Act through the Cabinet meeting·It will be promulgated and enforced on the 2nd of next month as a follow-up measure to the new government's economic policy direction and rental market stabilization plan.

First, the comprehensive real estate tax burden will be rationalized. To calculate the comprehensive real estate tax, the taxable base is obtained by subtracting the basic deduction amount from the total official housing price of owned houses and then multiplying by the fair market value ratio.The taxable base changes according to the fair market value ratio, which in turn affects the comprehensive real estate tax. This ratio was maintained at 80% from its introduction in 2008 until 2018, but then increased by 5 percentage points annually to 85% in 2019, 90% in 2020, 95% in 2021, and 100% this year. Additionally, with the official price of apartment complexes nationwide rising by an average of 17.2% this year,the comprehensive real estate tax burden expanded further, prompting the government to temporarily lower this ratio to 60% through the amendment ordinance. This will apply from the comprehensive real estate tax notices issued in November this year.

To stabilize the rental market, the capital gains tax special exemption system for Sangsaeng Imdaein will also be expanded and restructured. Landlords who raise rent by within 5% until the end of 2024 will receive capital gains tax exemption benefits even if they do not meet the two-year actual residence requirement. Currently, the recognized actual residence period is only one year, which limits the benefit, but this will be extended to two years. Sangsaeng Imdaein will also be eligible for the one household one house long-term holding special deduction (장기보유특별공제, Janggi Boyu Teukbyeol Gongje) benefit when selling their house later (up to 40%). Currently, to be recognized as a Sangsaeng Imdaejutaek (cooperative rental housing), the landlord must be a one household one house owner at the start of the lease, and the house price must be 900 million KRW or less based on the official price, but these conditions will be abolished.

Furthermore, for corporate construction rental businesses that transfer housing after fulfilling the mandatory 10-year rental period, the housing price threshold for exemption from the additional 20% corporate tax will be raised from the current 600 million KRW to 900 million KRW. The deadline for excluding the additional 20% corporate tax when corporations transfer land to public purchase rental construction businesses will be extended from the end of this year to the end of 2024.

Additionally, unsold houses after construction will be excluded from the comprehensive real estate tax aggregation for five years regardless of permit type or residence status, preventing excessive holding tax burdens during the temporary resolution of unsold housing.

Moreover, the individual consumption tax on liquefied natural gas (LNG) and bituminous coal for power generation will be temporarily reduced by 15% until the end of the year. This aims to alleviate the burden of rising power generation costs due to soaring fuel prices, induce price stability, and reduce the living cost burden on low-income households.