Exclude heavy taxation... Maraepeu and Eunma two-homeowners, comprehensive real estate tax reduced from 43.89 million won to 22 million won

Two-Homeowners Subject to General Tax Rate, Not Heavy Tax Rate
Significant Reduction in Comprehensive Real Estate Tax Burden
Single-Homeowners' Deduction Amount Increased from 1.1 Billion to 1.2 Billion KRW
Three-Homeowners with Tax Base Under 1.2 Billion KRW Excluded from Heavy Tax Rate

[Image source=Yonhap News]

[Asia Economy Reporter Kim Min-young] Starting next year, all nationwide owners of two houses will be subject to the general comprehensive real estate tax (Comprehensive Real Estate Tax, 종부세) rates (0.5%~2.7%) instead of the heavy tax rates (1.2%~6%), significantly reducing the tax burden for two-house owners. Additionally, from next year, single-household single-homeowners with a publicly announced property price of 1.2 billion KRW or less will be exempt from the comprehensive real estate tax if the house is jointly owned by a married couple.

According to a holding tax simulation requested by Asia Economy from Woo Byung-tak, team leader of Shinhan Bank Investment Advisory Center, if the revised bill is applied, the 2023 holding tax for a two-house owner of an 84㎡ unit in Mapo Raemian Prugio in Ahyeon-dong, Mapo-gu, Seoul, and an 84㎡ unit in Eunma, Daechi-dong, Gangnam-gu, Seoul, will be 22.02 million KRW, a 58.89% decrease from the 2022 holding tax of 53.58 million KRW. Under the current system, a two-house owner holding both Mapo Raemian Prugio and Eunma apartments would have to pay 43.89 million KRW in holding tax next year. With the application of the general tax rate to all two-house owners nationwide starting next year, the holding tax decreases by about 49%. The holding tax is the sum of property tax, urban area tax, local education tax, comprehensive real estate tax, and agricultural special tax.

The holding tax for a two-house owner of an 84㎡ unit in Mapo Raemian Prugio and an 84㎡ unit in Yuseong Jukdong Prugio, Jukdong, Yuseong-gu, Daejeon, is also calculated to be 7.38 million KRW next year, a 57.56% decrease from this year’s 17.39 million KRW. If the heavy tax rate had been applied, the holding tax would have been 11 million KRW.

The significant reduction in the holding tax burden for two-house owners is due to the application of the general tax rate instead of the heavy tax rate. As the National Assembly agreed on next year’s budget and tax reform plan, starting next year, all two-house owners nationwide will be subject to the general comprehensive real estate tax rates (0.5%~2.7%) instead of the heavy tax rates (1.2%~6.0%). The highest tax rate applied to owners of three or more houses will also be lowered from the existing 6% to 5%. The basic deduction amounts for single-homeowners and multi-homeowners will increase to 1.2 billion KRW and 900 million KRW, respectively, which is expected to reduce the number of comprehensive real estate tax payers next year compared to this year.

With the increase in the basic deduction amount, the comprehensive real estate tax burden for high-priced single-homeowners will also decrease. According to the revised bill, the tax base threshold for single-household single-homeowners will rise from the current 1.1 billion KRW to 1.2 billion KRW next year. Applying this threshold to this year’s official apartment price realization rate (75.1%) means that apartments with a market price of about 1.6 billion KRW or less will be exempt from the comprehensive real estate tax. Accordingly, the Raemian Gongdeok 5th complex (84㎡) in Mapo-gu, with a publicly announced price of 1.178 billion KRW, is subject to the comprehensive real estate tax this year but will be exempt next year even if the publicly announced price remains the same. Also, owners of an 112.96㎡ unit in Acro River Park, who must pay 22.94 million KRW this year, are expected to see a slight decrease to 21.96 million KRW next year.

The burden on owners of three or more houses will also decrease. For multi-homeowners with three or more houses, if the combined tax base does not exceed 1.2 billion KRW (publicly announced price of about 2.4 billion KRW), the general tax rate will be applied without heavy taxation. This is expected to reduce the tax burden for those who own several low-priced local houses or became multi-homeowners through inheritance. For example, assuming a multi-homeowner owns three 84㎡ units of ‘Jukdong Prugio’ in Yuseong-gu, Daejeon, with an estimated publicly announced price of about 375 million KRW each, the holding tax next year would be 6.43 million KRW under the current system, but with the comprehensive real estate tax reform, the burden will be reduced to 3.08 million KRW.