Expansion of Tax Reduction for Home Purchases in Depopulated Areas
Salaries for Parental Leave Replacement Workers to Be Deducted from Local Employee Resident Tax Base
The tax reduction benefit on acquisition tax, which was provided to first-time homebuyers, will be extended. In addition, to promote a culture of work-life balance, salaries paid to employees hired as replacements for those on parental leave will be deducted from the tax base for the local employee resident tax.
On August 28, the Ministry of the Interior and Safety held the Local Tax Development Committee and announced the “2025 Local Tax System Reform Plan,” which includes these measures.
First, in consideration of supporting housing stability for newlyweds and young people, the benefit of acquisition tax reduction when purchasing a home will be extended.
Under current law, first-time homebuyers who do not own a home can receive an acquisition tax reduction when purchasing a house worth up to 1.2 billion won. For multi-family housing, urban-type residential housing, and multi-unit houses with an exclusive area of 60 square meters or less and a purchase price of up to 300 million won (or up to 600 million won in the Seoul metropolitan area), the reduction is up to 3 million won. For other types of housing, the reduction is up to 2 million won.
However, this system was set to expire at the end of this year, meaning that from next year, first-time homebuyers would no longer be eligible for the acquisition tax reduction. With the extension of the acquisition tax reduction period for first-time home purchases, it is expected that this will help minimize cases where young people and newlyweds, who have difficulty building assets, postpone or give up on buying their own home. The sunset date for the revised measure is December 31, 2028.
The acquisition tax reduction benefit for homes purchased for childbirth or child-rearing purposes will also be extended. Under current law, parents who give birth by the end of this year and purchase a home within five years of the child's birth for the purpose of living with the child can receive an acquisition tax reduction of up to 5 million won. The previous sunset date was December 31 of this year, but under the revised plan, it will be extended to December 31, 2028.
A new system will also be introduced to deduct the salaries of replacement workers for employees on maternity or parental leave from the tax base for the local employee resident tax. For example, if Company A hires a replacement worker (a contract employee with an annual salary of 42 million won) for an employee on one-year parental leave, the replacement worker's salary (3.5 million won per month) can be excluded from the total payroll for up to one year (the duration of the original employee's leave).
According to Statistics Korea, the number of employees on parental leave increased from 142,038 in 2017 to 195,986 in 2023.
The Ministry of the Interior and Safety stated, “The number of employees taking parental leave continues to increase due to stronger legal protections for parental leave, higher parental leave pay, and the spread of a work-life balance culture. However, while hiring replacement workers is inevitable to minimize work gaps, companies face real operational burdens, such as labor costs, due to a lack of support for these replacement workers.”
The ministry added, “To respond to the era of low birth rates, promote a work-life balance culture, and encourage the hiring of replacement workers, it is necessary to expand deductions for the local employee resident tax. Therefore, when employees hired as replacements for those on maternity or parental leave perform the duties of regular employees, their salaries will be deducted from the tax base for the local employee resident tax.”
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