[Asia Economy Sejong=Reporter Son Seon-hee] If the '2022 Tax Reform Plan' prepared by the government passes the National Assembly, it has been found that even for households with the same single house, the tax burden effect varies depending on whether the ownership is joint by a couple or sole ownership.
According to related ministries on the 1st, the basic deduction for comprehensive real estate tax (종부세) for couples with joint ownership of a single house in next year’s tax reform plan is set at KRW 1.8 billion in official assessed value. As the basic deduction for 종부세 rises from the current KRW 600 million to KRW 900 million, the basic deduction for couples with joint ownership of a single house increases from KRW 1.2 billion to KRW 1.8 billion. Based on market value, this is expected to be around KRW 2.22 billion. This corresponds to the top 1% bracket based on joint ownership by couples.
Couples with joint ownership of a single house will see their 종부세 burden decrease this year and next year following last year. Although the basic deduction remains KRW 1.2 billion this year, the fair market value ratio has been lowered from the previous 95% to 60%. For next year, the official assessed value ratio is expected to rise again to 80%, but since the basic deduction is set at KRW 1.8 billion, which is KRW 600 million higher than before, the tax burden will continue to decrease.
On the other hand, for sole ownership of a single house by one household, the 종부세 will significantly decrease this year but is expected to slightly increase next year. In this year’s tax reform plan, the government set the basic deduction for sole ownership of a single house at KRW 1.2 billion (market value KRW 1.6 billion, official assessed value realization rate 75.1%) for next year. This is KRW 100 million higher than the current basic deduction of KRW 1.1 billion (market value KRW 1.46 billion, official assessed value realization rate 75.1%).
The initial plan to apply the official assessed value from 2021 or 2020 instead of this year’s official assessed value only for this year fell through, so the basic deduction will be temporarily raised to KRW 1.4 billion (market value KRW 1.86 billion) this year.
In other words, the 종부세 threshold for sole ownership of a single house by one household will decrease from the current KRW 1.1 billion to KRW 1.4 billion this year, and then to KRW 1.2 billion next year.
The fair market value ratio, which was 95% last year, was temporarily lowered to the 60% range this year and is expected to rise to around 80% next year. Accordingly, the 종부세 burden for sole ownership of a single house by one household will temporarily decrease this year but is expected to increase again next year due to the increase in basic deduction and the upward adjustment of the official assessed value ratio.
However, since sole ownership of a single house by one household can apply age and holding deductions up to 80%, if the relevant conditions are met, the tax burden may be lower than that of joint ownership. Considering this, the government is granting couples with joint ownership the option to pay 종부세 as if they were sole owners.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
