"Second Home" Tax Exemption for Single-Homeowners Applies to Population-Declining Areas Valued at 900 Million Won or Less

Capital Gains and Comprehensive Real Estate Tax Exemptions for Multi-Homeowners
Second Home Benefit Now Applies Beyond Single-Homeowners
Population-Decline Watch Areas Eligible for Properties up to 400 Million Won
Headquarters Relocation Tax Reduction Requirements Revised
Metropolitan Headquarters Staff Ratio Lowered from 50% to 40%

When multi-homeowners pay capital gains tax and comprehensive real estate tax, homes valued at 900 million won or less located in population-declining areas outside the Seoul metropolitan area are not counted toward the total number of properties owned. In addition, homes located in population-decline watch areas and similar regions are also excluded from the count if their value is 400 million won or less. For single-homeowners who acquire unsold, newly built homes in non-metropolitan areas, the same benefit applies if the purchase price of the property is 700 million won or less.

Apartment complex view from Namsan, Seoul. Photo by Yonhap News Agency

On January 16, the Ministry of Economy and Finance announced the "2025 Tax Reform Follow-up Enforcement Decree Amendment." This amendment includes a number of enforcement decree revisions to support the tax reform plan announced in July last year and the economic growth strategy released this month.

The government has taken steps to revitalize the local real estate market as part of its efforts to support regional growth. First, it decided to support the acquisition of homes in population-declining areas and population-decline watch areas. If a single-homeowner acquires a home in a population-declining area, it will be excluded from the property count for tax purposes. Notably, this second home exemption will now also apply to multi-homeowners.

Accordingly, when multi-homeowners pay capital gains tax and comprehensive real estate tax, homes acquired in population-declining areas, including those outside the metropolitan area, will not be counted toward the total number of properties owned. From this year, homes acquired in non-metropolitan population-declining areas are eligible if valued at 900 million won or less, while homes in population-decline watch areas and similar regions are eligible if valued at 400 million won or less.

Single-homeowners who acquire unsold, newly built homes in non-metropolitan areas can also benefit from the capital gains and comprehensive real estate tax exemptions, provided the purchase price is 700 million won or less. Previously, the threshold was 600 million won, but the amended enforcement decree raises the limit by 100 million won. The new standard applies to homes acquired from this month onward.

The government has also included measures in this follow-up enforcement decree to increase incentives for companies to relocate to non-metropolitan areas. If a corporation that has operated in the metropolitan area congestion control zone for more than three years relocates its headquarters from that area to a non-metropolitan region, it can defer corporate tax for up to 15 years. In this case, the required ratio of headquarters staff at the relocated corporation's metropolitan office, which determines the amount of tax reduction subject to recapture, will be lowered from 50% to 40%.

This aims to enhance the effectiveness of the tax reduction system applied when relocating headquarters by tightening the recapture requirements. An official from the Ministry of Economy and Finance explained, "Since the headquarters work requirement has been reduced, the conditions have become more stringent," adding, "This is a newly included provision." The stricter requirements will apply to those relocating factories or headquarters after the enforcement decree of the Restriction of Special Taxation Act containing these changes comes into effect.

The government also specified detailed requirements for tax reductions for companies established in employment disaster areas, employment crisis areas, and special industrial crisis response zones. According to the government, companies that invest at least 500 million won and employ at least 10 regular workers in these regions will be eligible for a 100% reduction in income and corporate taxes for five years, and a 50% reduction for an additional two years.