[2024 Local Tax Law Amendment] Acquisition Tax Halved for Housing Purchases in Population Declining Areas

'2024 Local Tax Revenue Related Law Amendments' Released to Boost Economic Vitality
New Acquisition Tax Exemption for Housing in Population Decline Areas... Local Tax Exemptions for Rental Housing
Increased Benefits for Companies to Maintain Regional Competitiveness... Encouraging Normalization of Insolvent Businesses
Extension of Tax Relief Support for Transferred Assets to Improve Financial Structure

The government has decided to reduce acquisition tax by up to 50% when purchasing houses in population-declining areas. This measure targets 89 population-declining areas nationwide as a way to overcome ultra-low birth rates and regional extinction. In particular, the acquisition and property tax reductions for corporations and factories relocating outside of overcrowding control zones will also be extended for three years.

On the 13th, the Ministry of the Interior and Safety held the Local Tax Development Committee meeting and announced the "2024 Local Tax Revenue Related Law Amendment" containing these measures aimed at "enhancing economic vitality" and "supporting livelihood stability." This amendment was prepared through a process of collecting opinions from local governments and experts via institutional improvement forums, the Local Tax Development Committee, and integrated reviews of local tax reductions.

Enhancing Regional Vitality by Attracting Population... Inducing Residents' Livelihood Stability through Tax Benefits

This amendment focuses on promoting regional and corporate vitality and supporting residents' livelihood stability. First, to increase the resident population and revitalize the local economy in population-declining areas, a new acquisition tax reduction for housing within these areas has been introduced.

▲Conditions include being a non-homeowner or owning only one house, acquisition price of 300 million KRW or less ▲Population-declining areas within the metropolitan area (excluding border areas) and metropolitan cities (excluding county areas) ▲Mandatory holding period of three years, but the intention is to actively utilize this as a regional population attraction measure. The target excludes six areas among the 89 population-declining areas nationwide (Nam-gu and Seo-gu in Daegu, Dong-gu, Seo-gu, and Yeongdo-gu in Busan, and Gapyeong-gun in Gyeonggi). Although metropolitan areas and metropolitan cities are excluded from population-declining areas, border areas within the metropolitan area and county areas within metropolitan cities are included.

A new measure to reduce acquisition tax when utilizing unsold apartments for rent after local completion has also been introduced. The core is to reduce new construction acquisition tax when unsold apartments outside the metropolitan area are used as rental housing. This also has conditions such as ▲Apartments completed between January 10, 2024, and December 31, 2025 ▲Exclusive area of 85㎡ or less, acquisition price of 300 million KRW or less ▲Rental contract signed by December 31, 2025, with a mandatory rental period of two years or more.

Measures to expand local investment and enhance regional vitality have also been introduced. To promote regional balanced development, the local tax reduction for corporate and factory relocations to local areas will be extended. Although 100% reduction benefits are currently received, these will be maintained for five years and then a 50% reduction benefit will be granted for an additional three years.

Medical facilities are also included in the benefit targets. Medical institutions providing quality medical services for local residents and fulfilling social responsibilities such as infectious disease response are eligible. Public health medical institutions such as local medical centers, national university hospitals, and the National Cancer Center will have their current reduction benefits of 15-75% extended depending on the facility. Additionally, inducements for population inflow into rural and fishing villages are included. Tax reductions for returnees to farming, fishery workers, and rural housing improvement projects will be extended.

Increasing Corporate Benefits to Maintain Regional Competitiveness... Benefits for Financial Structure Improvement and Distressed Asset Processes

Corporate benefits will also increase. To normalize business sites facing difficulties in real estate development projects due to rising interest rates and raw material prices, new reduction benefits for acquisition of such business sites have been created. The targets are real estate of distressed project finance investment companies acquired by project finance investment companies and land acquired by the Korea Land and Housing Corporation for corporate debt repayment. These targets will receive 50% and 25% reduction benefits respectively in the future.

To improve corporate financial structures, support for tax reductions on properties acquired from distressed financial institutions under the government's timely corrective measures will be extended. Properties acquired by financial institutions, Korea Asset Management Corporation, Deposit Insurance Corporation, resolution financial companies, NongHyup, Suhyup, Credit Unions, Forestry Cooperatives, and Saemaeul Geumgo currently receive 100% acquisition tax reduction benefits.

A notable measure to reduce the burden on small business owners by supporting resident tax is also included. The sunset on exemption from additional resident tax for business establishments will be extended for two years to alleviate the burden on small business owners who were unaware of the changed system and to encourage employment expansion by raising the exemption threshold for resident tax employee portions.

Additionally, acquisition tax reductions will be supported when acquiring shares to become a major shareholder in order to improve corporate management and dispose of distressed assets. Furthermore, to protect domestic investors and develop the capital market, local income tax on financial investment income will be abolished. Until now, income realized from financial investments such as stocks and bonds has been taxed.

The government plans to collect opinions from various sectors through legislative notice until the 9th of next month regarding this amendment, then proceed with review by the Ministry of Government Legislation and approval by the Cabinet meeting, and submit it to the regular National Assembly session in early October. Minister of the Interior and Safety Lee Sang-min stated, "This amendment was prepared through consultations with experts from various fields and discussions with local governments and related organizations," and added, "We ask for continuous interest so that this amendment can pass the National Assembly and achieve tangible results for residents and businesses."