[2024 Local Tax Law Amendment] Half-Price Automobile Acquisition Tax for Two Children... Increased Lifetime First-Time Exemption Limit

Ministry of the Interior and Safety, 2024 Local Tax Revenue Related Law Amendments
Expansion from Only 3 or More Children to 2 Children
Non-Apartment Rental Housing Acquirers Maintain First-Time Qualification

The automobile acquisition tax reduction benefit, which had so far been applied only to families with three or more children, will be expanded to include those raising two children. Acquisition tax reduction benefits will also be increased for first-time homebuyers and those acquiring small or low-priced rental housing to stabilize housing for low-income households.

On the 13th, the Ministry of the Interior and Safety held the Local Tax Development Committee and announced the "2024 Local Tax Revenue Related Law Amendment Bill" to boost economic vitality and support the stabilization of people’s livelihoods. Minister Seo stated, "We will seek to reverse the low birthrate trend through robust local tax support for child-rearing."

Automobile Acquisition Tax: 50% Reduction for Two Children, 100% for Three or More

First, the automobile acquisition tax reduction benefit for parents with multiple children will be expanded so that those raising two children will receive a 50% reduction in automobile acquisition tax. Previously, only parents with three or more children were eligible for a 100% acquisition tax reduction. For passenger cars with six or fewer seats, the limit is KRW 700,000 for two children and KRW 1,400,000 for three or more children. A Ministry of the Interior and Safety official explained, "Considering the trend of relaxing the criteria for multiple children at the government-wide level, the reduction target has been expanded to households raising two children."

To promote a culture of corporate and social shared childcare, acquisition tax and property tax for workplace daycare centers will be 100% exempted. Previously, acquisition tax was reduced by 50% and property tax by 100% only for employers obligated to install workplace daycare centers, but now the exemption benefit will be expanded to all workplace daycare centers.

Housing-related acquisition tax benefits to stabilize housing for low-income households have also been increased. First, the limit for the 100% acquisition tax exemption granted to first-time homebuyers has been raised from KRW 2 million to KRW 3 million. A special provision has been introduced so that if a person acquires a small or low-priced house after living in it for more than one year under a lease or monthly rent (jeonse or wolse) and later purchases an apartment or other housing, they can maintain their eligibility for the first-time homebuyer tax exemption.

Local tax reductions for persons with disabilities, national merit recipients, and Hansen’s disease patients will be extended. Currently, persons with disabilities and national merit recipients receive a 100% reduction in automobile acquisition tax and automobile tax, while veterans eligible for compensation receive a 50% reduction. Hansen’s disease patients receive a 100% exemption on acquisition tax and property tax for real estate in their residential areas.

To strengthen safety measures such as earthquake damage prevention, local tax reductions for seismic reinforcement buildings will also be expanded. A 5% acquisition tax reduction will be extended for newly constructed buildings certified as "Earthquake Safety Facilities." Even buildings not subject to mandatory seismic safety confirmation can receive a 50% property tax reduction for five years after deducting seismic reinforcement costs from the acquisition tax base if they have undergone "seismic performance confirmation."

A Ministry of the Interior and Safety official said, "Despite the continuous strengthening of mandatory seismic reinforcement standards, the seismic reinforcement rate of private buildings was only 16.7% as of the end of last year, which is very low compared to 78.1% for public buildings. Tax support is necessary to emphasize the importance of seismic reinforcement and to create an environment encouraging voluntary participation by non-mandatory subjects."

Relaxation of Criteria for Taxpayer 'Agent' Appointment... "Creating a Convenient Environment"

The criteria for taxpayers to appoint agents when undergoing rights protection procedures such as pre-assessment reviews before taxation will be relaxed. Until now, only individuals could apply for free agents from local governments, but from now on, corporations will also be eligible. The objection application amount criterion for appointing family members as agents will also be raised from under KRW 10 million to under KRW 20 million.

The deduction rate for benefits when paying automobile annual tax in a lump sum was originally scheduled to be lowered to 3% next year but will be adjusted upward to 5%. The government introduced the annual payment deduction system to improve collection rates, but due to its limited effect and criticism that the deduction rate was excessively high compared to the low-interest rate trend, a phased reduction was decided in 2020. The deduction rate was planned to be reduced to 7% in 2023, 5% in 2024, and 3% thereafter, but considering the ongoing high-interest rate trend after 2023, the deduction rate after 2025 has been adjusted upward.

Additionally, if an inherited vehicle is scrapped and deregistered by the acquisition tax reporting and payment deadline, the acquisition tax will be exempted. Currently, there is confusion among taxpayers because the non-taxable conditions for "deregistration deadline" and "reporting and payment deadline" differ. Especially for cases where inheritance began before the revised law takes effect, the law can be applied even if less than six months have passed since the end of the month of the inheritance commencement date.

The local tax revenue-related laws include the "Local Tax Basic Act," "Local Tax Collection Act," "Local Tax Act," "Local Tax Special Cases Restriction Act," and the "Act on Collection of Local Administrative Penalties and Charges." The amendments will be announced for public comment from the 14th until September 9. Afterward, they will undergo review by the Ministry of Government Legislation, approval by the Cabinet, and are expected to be submitted to the regular National Assembly session in early October.