Reducing Property Tax Burden for Single-Homeowners... Maintaining Fair Market Value Ratio This Year as Well

Legislative Notice of the 'Local Tax Act Enforcement Decree' Amendment
43-45% Fair Market Value Ratio Based on Publicly Announced Price... Extension Applied
Separate Taxation for Enterprise Cities in Population-Decreasing Areas Promoted

The government will maintain the special fair market value ratio for single homeowners at around 43-45% this year to ease the property tax burden. This measure takes into account domestic and international uncertainties and the economic conditions of ordinary citizens.

On the 14th, the Ministry of the Interior and Safety announced that it will publicly notify the amendment to the 'Local Tax Act Enforcement Decree' for this special fair market value ratio measure starting from the 15th.

The government will maintain the special provision for the fair market value ratio this year as well. This measure, considering domestic and international uncertainties and the economic conditions of ordinary citizens, is expected to reduce the property tax burden for single-homeowners. Yonhap News

The fair market value ratio determines the proportion of the publicly announced price reflected when calculating the property tax base. It was introduced in 2009 and maintained at 60% until 2021. To ease the tax burden caused by the sharp rise in publicly announced prices in 2021-2022, it was temporarily lowered to 45% for single homeowners in 2022. Subsequently, in 2023, it was further adjusted according to the housing publicly announced price as follows: ▲43% for up to 300 million KRW ▲44% for over 300 million KRW up to 600 million KRW ▲45% for over 600 million KRW, and the same rates were applied in 2024.

With the special fair market value ratio extended for another year this year, the tax burden on single homeowners is expected to decrease. For example, for a house with a publicly announced price of 400 million KRW, a lower fair market value ratio of 44% is applied, resulting in a property tax of 172,000 KRW, which is about 40% less than if the special measure were not applied.

There is also a plan to separately tax property tax for five years on land used for industrial purposes in enterprise cities located in population-decreasing areas (89 locations). This is a measure to revitalize the local economy and promote investment and development by private companies in underdeveloped areas. These areas are designated under Article 2 of the 'Local Decentralization Balanced Development Act' and include Haenam, Yeongam, and Taean, among others. When subject to separate property tax, a low single proportional tax rate (0.2%) is applied, and comprehensive real estate tax is not levied, thereby reducing the tax burden.

The Ministry of the Interior and Safety explained that this is the result of recognizing the need for policy protection and support for the relevant land through the 'Feasibility Evaluation of Land Subject to Separate Property Tax' conducted by the Korea Local Tax Research Institute, a tax-specialized organization. For the relevant land, separate taxation will be applied for five years, and upon sunset, the extension will be decided after clearly analyzing the support effects.

The public notification period for this amendment will continue from the 15th until the 7th of next month. After collecting various opinions from all sectors during the notification period, the procedures including review by the Ministry of Government Legislation and approval by the State Council will be completed by May, and the amendment will be applied starting from this year's property tax imposition. Han Soon-gi, Director of the Local Finance and Economy Office, stated, "Considering the recent difficult economic situation for ordinary citizens, we prepared this amendment to reduce the housing cost burden on the public," and added, "We will continue to improve the local tax system to revitalize the local economy."