[Jiptech] What It Takes for the Jongbu Tax to Become the "National Rule"

An Exceptional System Rarely Seen in Advanced Countries
Unreasonable Tax Standards and System Instability Are the Real Problems
Need for Clear Targets, Purposes, and a Consistent System

Editor's NoteMore than 70% of the assets of Korean citizens are tied up in real estate. For us, a home is not only our most important asset, but also our closest and most comforting place. While living with our assets bound to our homes, we provide information necessary for buying and selling houses. Asia Economy, together with Hyosun Kim, Chief Real Estate Specialist at NH Nonghyup Bank, publishes [Jiptech] every three weeks to provide you with essential knowledge.

On the 27th, apartment prices in Mapo and Seongdong districts of Seoul rose at the largest rate since related statistics began to be published in 2013. The expectation that Seoul apartment prices will continue to rise is forecasted to sustain the upward trend for the time being. The photo shows a panoramic view of apartment complexes in downtown Seoul as seen from Namsan, Seoul. 2025.06.27 Photo by Dongju Yoon

Although real estate taxation was omitted from the '2025 Tax Reform Plan,' there are growing observations that adjustments to the comprehensive real estate holding tax (Jongbu tax) could be implemented with a time lag. A leading proposal is to once again raise the fair market value ratio, which was lowered to 60% in the first year of the Yoon Suk Yeol administration.

Real estate taxation tends to change direction depending on the administration. Among these, the Jongbu tax is particularly politically sensitive. Policy decisions have frequently shifted in response to political circumstances, repeatedly causing confusion for taxpayers. In 2021, there were cases where tax notices for some reconstruction and redevelopment homes were issued incorrectly, and when a Constitutional Court ruling found the tax unconstitutional, taxpayers were advised to file and pay voluntarily, as refunds would be difficult if paid according to the notice. Controversies over unconstitutionality and double taxation, concerns over delinquency among the elderly, and a lack of taxpayer convenience have all contributed to ongoing confusion.

Compared to other countries, the Jongbu tax is actually a rather exceptional system. Most advanced countries distinguish between holding taxes and transaction taxes, and minimize tax resistance through a simple and predictable structure centered on local governments. It is common to tax not on ownership itself, but on the way property is used and the profits from transactions.

In the United States, there is no federal-level Jongbu tax; instead, property taxes are imposed as local taxes by states and counties. The tax base and rates vary widely by state and county. Various exemption programs are widely operated by region, such as homestead exemptions (for owner-occupied residences) and senior citizen exemptions (New York’s STAR program provides additional exemptions for low-income seniors aged 65 or older).

In Germany, there is no Jongbu tax; instead, the main property tax (Grundsteuer) is imposed by local governments. The base tax rate is 0.35%, with local surcharges applied to determine the effective rate. Previously, the acquisition tax was relatively high at 3.5-6.5%, but a tax reform is being implemented from this year. The reform reduces the burden for owner-occupiers and reflects a principle of taxing gains on asset transfers.

Japan also does not have a central government-imposed Jongbu tax. Instead, a fixed asset tax (1.4% of the assessed value) and a city planning tax (0.3%) are combined for an annual holding tax of about 1.7%. The tax base is the officially assessed land price, and there is a cap to prevent a sharp increase in tax burden due to rising official prices. Owner-occupied homes receive tax benefits, and the reduction rate varies depending on family structure, reflecting living conditions.

France has a system similar to Korea’s Jongbu tax, but its approach is gradually changing. In the past, France operated a wealth tax (ISF) that included financial assets, but since 2018, it has been replaced by a real estate wealth tax (IFI), which focuses on real estate assets and high-value art transactions. The tax base is net real estate assets exceeding 1.3 million euros (about 2 billion KRW), with a progressive rate of 0.5-1.5%. Deductions for liabilities are allowed, and tax reductions are granted for owner-occupied homes.

In contrast, Korea’s central government directly imposes the Jongbu tax on high-value real estate owners. In addition to the local property tax, the Jongbu tax is levied separately on the portion of the officially assessed value exceeding 1.2 billion KRW for single-home owners. This standard itself differs from market prices, and the ratio of official to market prices also varies by region and housing type. The volatility of reductions one year and increases the next undermines trust in the tax system. The main issues are not the tax itself, but the unreasonable standards and instability of the system.

Holding taxes play an important role beyond simple taxation, contributing to wealth redistribution and stabilization of the housing market. Appropriate holding tax policies can help curb real estate speculation and improve the quality of community services. Each country’s holding tax system reflects its historical, cultural, social, and economic context. While no single system can be deemed absolutely right, international examples can provide insight for establishing a system suitable for Korea.

It is necessary to clarify the scope and purpose of taxation and to revise the system toward a consistent, local government-centered approach. A simplified tax structure, fair standards, and predictable burdens?if these three elements are in place, the Jongbu tax can be accepted as a reasonable tax with reduced resistance and increased public trust.

Hyosun Kim, Chief Real Estate Specialist, NH Nonghyup Bank