[Q&A] National Tax Service: "Comprehensive Real Estate Tax, Abolition of Heavy Taxation and Joint Spouse Ownership Deduction of 900 Million Won Each"

500,000 Subject to Comprehensive Real Estate Tax · Tax Amount 4.7 Trillion Won
Basic Deduction Increased · Number of People Down 780,000 and Tax Amount Down 2 Trillion Won Compared to Last Year Due to Decline in Officially Announced Price

From this year, the comprehensive real estate tax (종합부동산세) surcharge on housing for owners of two houses in regulated areas and those with a taxable standard of 1.2 billion KRW or less will be abolished. The basic deduction amount will increase from 600 million KRW to 900 million KRW. In cases where a couple owns a house jointly, each can receive a deduction of 900 million KRW.

The National Tax Service (NTS) has sequentially sent payment notices to taxpayers liable for the 2023 comprehensive real estate tax starting from the 23rd. According to the NTS, the total number of taxpayers receiving notices this year is 500,000, with a total tax amount of 4.7 trillion KRW. For the housing portion, there are 410,000 taxpayers with 1.5 trillion KRW, and for the land portion, 110,000 taxpayers with 3.2 trillion KRW.

The basic deduction amount for the housing portion has been raised from 600 million KRW to 900 million KRW for individuals, and from 1.1 billion KRW to 1.2 billion KRW for single-household owners. Due to a decline in official property prices, compared to 2022, the number of taxpayers decreased by 780,000 and the tax amount decreased by 2 trillion KRW.

Below are the key Q&A introduced by the National Tax Service.

- How is the comprehensive real estate tax imposed?

▲First, property tax is levied by the local city, county, or district authorities where the real estate is located for owners of houses or land. Second, if the combined value of taxable properties nationwide by type (housing, comprehensive aggregated land, separately aggregated land) exceeds the exemption amount for each type, the comprehensive real estate tax is determined and notified. For property tax, houses are taxed individually by property, while land is taxed by aggregating all land located within the jurisdiction.

- What is a single-household single-house owner for comprehensive real estate tax?

▲It refers to a resident under the Income Tax Act who owns only one house subject to housing property tax within the household, with only one member owning that single house.

- What are the changes in calculating this year’s housing portion of the comprehensive real estate tax compared to last year?

▲This year, tax rates have been reduced, and the surcharge for owners of two houses in regulated areas and those with a taxable standard of 1.2 billion KRW or less has been abolished. The basic deduction amount has been increased from 600 million KRW to 900 million KRW (and from 1.1 billion KRW to 1.2 billion KRW for single-household single-house owners). The scope of low-priced local housing has been expanded (adding Yeoncheon, Ganghwa, and Ongjin within the metropolitan area), and the temporary two-house period requirement has been relaxed (from 2 to 3 years), overall easing the housing portion of the comprehensive real estate tax.

- How is the number of houses calculated for differential tax rates based on the number of houses?

▲Since the comprehensive real estate tax on housing is imposed only when property tax is levied on houses, the number of houses is calculated according to the property tax type. The number of houses for tax rate application is the total number of houses owned nationwide by an individual (including corporations and organizations). Even if only accessory land of a house is owned or only a partial share of a house is owned, it is counted as one house for tax rate calculation. However, rental houses excluded from aggregation for taxation are excluded from the house count for tax rate application. In cases where accessory land of inherited or unauthorized houses is owned, the taxpayer may apply to exclude those properties from the house count for tax rate application. For example, if a person owns two houses in Seoul (one of which is a rental house excluded from aggregation) and one house in Gangwon, the number of houses is counted as two. If a person owns two houses in Busan and one house in Gangwon (owning only accessory land), they are considered as owning three or more houses.

- What is the deduction amount when a single house is jointly owned with a spouse or family?

▲If a spouse or household member jointly owns a house, each owner is considered to own one house and can receive a deduction of 900 million KRW each. However, if a couple jointly owns one house and applies for a special case, they are regarded as a single-household single-house owner and can receive a deduction of 1.2 billion KRW along with tax credits based on holding period and age.

- Is aggregation exclusion possible when an individual acquires a house in a regulated area?

▲If a single household owns one or more houses domestically and acquires a newly built long-term general private rental house in a regulated area after September 14, 2018, aggregation exclusion is not applicable (subject to comprehensive real estate tax). However, if a sales contract was signed and a deposit paid by September 13, 2018, as verified by supporting documents, aggregation exclusion applies.

- What is the basis for determining regulated areas and what are the current regulated areas?

▲The determination of regulated areas for comprehensive real estate tax rate application is based on June 1 of each year, the tax base date. Most areas nationwide have been removed from regulated area status, and as of the 2023 tax base date, Seocho, Gangnam, Songpa, and Yongsan districts in Seoul remain regulated areas.

- What if the comprehensive real estate tax aggregation exclusion report is incorrect?

▲If aggregation exclusion is reported incorrectly despite not qualifying, the taxpayer must correct the report to include the property in the tax base during the comprehensive real estate tax filing period (December 1?15). Failure to report may result in imposition of the reduced tax amount and interest penalties.

- Are houses inherited with a certain share included in the house count?

▲Houses inherited with a certain share are included in the house count. However, if an inheritance house special case is applied for, the taxpayer is regarded as a single-household single-house owner for five years from the inheritance date, and the inherited house is excluded from the house count for tax rate application.

If more than five years have passed since the inheritance date, and the share ratio is 40% or less, or the official property price corresponding to the ownership share as of the tax base date (June 1 annually) is 600 million KRW or less (300 million KRW outside the metropolitan area), the inherited house is excluded from the house count.