Choi Sujin of the People Power Party:
"Temporary Reduction Needed Until 2028"
A bill to reduce the burden of original acquisition tax on construction companies has been proposed.
According to the construction industry on the 2nd, Choi Su-jin, a member of the People Power Party, officially proposed an amendment to the 'Local Tax Special Cases Act' on the 28th of last month, which temporarily reduces the original acquisition tax paid by housing construction businesses on newly built houses intended for sale. The amendment allows construction companies to receive an acquisition tax reduction if they sell the house within one year from the date of the usage inspection after originally acquiring the house, valid until December 31, 2028.
Under current law, housing construction businesses must pay an acquisition tax of 2.8% at the time of acquiring an apartment built for sale. This follows the tax principle of imposing taxes at the time of real estate acquisition and reflects the intention to secure tax revenue and prevent speculation. The current law considers that even if construction companies temporarily hold houses for sale, they are subject to taxation as they own the property for a certain period.
Afterward, once the sale is completed, the buyers also pay an additional acquisition tax of 1-3%. The construction industry has pointed out the issue of double taxation, as the same house is taxed twice. Representative Choi stated, "Housing construction businesses only temporarily own the houses," and added, "While automobiles, ships, and aircraft are exempt from acquisition tax if intended for sale, only housing construction businesses are required to pay acquisition tax, which violates tax fairness."
In the construction industry, liquidity problems are becoming serious as unsold units after completion, known as 'malignant unsold units,' accumulate and construction costs rise. According to the Ministry of Land, Infrastructure and Transport, as of the end of last month, the number of unsold units after completion reached 22,872, the highest in 11 years and 3 months since October 2013. Construction companies are complaining that it is difficult to lower sale prices due to the burden of construction costs. Representative Choi said, "Acquisition tax is increasing the burden on businesses," and added, "It is necessary to alleviate the burden through acquisition tax reductions."
In December last year, Representative Choi also proposed two bills to revitalize the purchase of unsold houses in local areas. One bill reduces acquisition tax by up to 50% for domestic buyers purchasing unsold houses in local areas. Another bill stipulates that if unsold houses priced at 900 million KRW or less outside the metropolitan area are purchased by December 31, 2029, capital gains tax will be fully exempted if sold within five years, and if sold after five years, capital gains generated within five years after acquisition will be deducted from taxable income.
It is uncertain whether the amendment will pass in the National Assembly. The government did not include tax benefits such as acquisition tax and capital gains tax in the February 19 local construction market stabilization measures. Starting this year, the government will recognize existing single-homeowners as single-homeowners for capital gains tax and comprehensive real estate tax calculations if they purchase unsold houses after completion with a floor area of 85㎡ or less and acquisition price of 600 million KRW or less outside the metropolitan area. Additionally, if housing construction businesses utilize unsold houses after completion in local areas as rental properties for more than two years, a plan to reduce the original acquisition tax by up to 50% is being implemented.
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