From Next Year, Maximum Comprehensive Real Estate Tax at 6%... Multi-Homeowners with 10 Billion KRW Must Pay 190 Million KRW More

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki is announcing a comprehensive real estate plan, including strengthening the comprehensive real estate holding tax for multi-homeowners, at the Government Seoul Office in Jongno-gu, Seoul on the 10th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Joo Sang-don] From next year, the highest comprehensive real estate tax rate will rise to 6%. As a result, the tax burden on owners of two or more houses will increase significantly.

On the 10th, the government announced the "Housing Market Stabilization Management Plan" containing these details. This is the 22nd measure introduced under the Moon Jae-in administration as a follow-up to the June 17 real estate measures.

First, the government decided to raise the highest comprehensive real estate tax rate to 6%. The current tax rate ranges from 0.6% to 3.2%, with the highest rate applied to properties exceeding 9.4 billion KRW, but this will be increased to 1.2% to 6.0%. According to the June 17 measures, housing holding corporations will also be subject to the highest individual tax rate, so multi-home corporations will be taxed at the highest additional rate of 6%.

Capital gains tax will be increased for those who buy and sell houses within less than two years to gain profits, or for multi-home owners who sell houses in designated adjustment areas to gain capital gains. The capital gains tax rate for sales within one year will rise from 40% to 70%, and for sales within two years, the basic rate of 60% will apply. However, this will be deferred until June 1, 2021, the date when the comprehensive real estate tax is imposed next year, to encourage sales.

Accordingly, from next year, the comprehensive real estate tax payable by owners of two or more houses will increase significantly. According to the Ministry of Strategy and Finance, for a two-home owner in a designated adjustment area subject to the additional tax rate, if the combined market price this year is 1 billion KRW, the comprehensive real estate tax is 480,000 KRW, but next year it will increase to 1.78 million KRW. For 2 billion KRW, it rises from 5.68 million KRW to 14.87 million KRW, an increase of 9.19 million KRW. For a combined market price of 3 billion KRW, it goes from 14.67 million KRW to 37.87 million KRW, and for 5 billion KRW, from 42.53 million KRW to 104.97 million KRW. For 10 billion KRW, the comprehensive real estate tax increases from 128.11 million KRW to 319.45 million KRW, requiring an additional 191.34 million KRW.

Ham Young-jin, head of the Zigbang Big Data Lab, said, "The holding tax burden for the Gangnam area of Seoul, riverside areas along the Han River, and owners holding excessive housing is expected to increase sharply in the short term, which is likely to have the effect of preventing additional home purchases by multi-home owners." He added, "However, with capital gains tax surcharges on multi-home owners in adjustment areas blocking exit routes, the sharp increase in comprehensive real estate tax rates raises concerns about punitive taxation and tax resistance."

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