"Inherited Houses Exempted Up to 5 Years... Temporary Two-Households in Regulated Areas Must Dispose Within 1 Year"

Ministry of the Interior and Safety Announces Legislative Notice for Amendment to the Enforcement Decree of the Local Tax Act Related to Real Estate Measures

[Asia Economy Reporter Jo In-kyung] Following the revision of the Local Tax Act that strengthens acquisition tax rates for multi-homeowners, the government has decided that inherited houses will not be counted in the number of owned houses for up to 5 years from the date of inheritance commencement. In cases where a person temporarily owns two houses in regulated areas due to moving, studying, or employment, the previous house must be disposed of within one year to avoid the higher tax rate.

On the 28th, the Ministry of the Interior and Safety announced that it will publicly notify the amendment to the Enforcement Decree of the Local Tax Act, which includes delegated matters and detailed operational standards from the law, from July 31 to August 3, following the resolution of the 'Local Tax Act' amendment at the National Assembly's Public Administration and Security Committee plenary meeting.

The amendment first defines the scope of one household, which is the basis for determining multi-homeowners, as a household composed of family members (parents, spouse, children, siblings, etc.) registered together on the household resident registration. Spouses and children under 30 years old are considered part of the same household even if they are not registered on the same household resident registration as the person acquiring the house.

However, an exception is made for children under 30 who have a certain income (monthly 700,000 KRW) and live separately, allowing them to be considered a separate household. Additionally, if children combine households to support direct ascendants aged 65 or older (including the spouse's direct ascendants), the households of the 65 or older direct ascendants and the children are regarded as independent households.

The amendment also stipulates that houses acquired for public purposes or necessary for housing supply projects, which are difficult to be considered speculative, are excluded from the total number of houses and are not subject to the higher tax rate. This includes family daycare centers, senior welfare housing, nationally registered cultural assets, rural houses, public rental housing by public housing providers (such as LH and local corporations), and houses acquired for demolition purposes for redevelopment projects.

In the case of inherited houses, considering various inheritance situations such as share inheritance, the houses will not be counted in the total number of houses for up to 5 years from the date of inheritance commencement.

Detailed standards for applying the one-house tax rate in cases where a person temporarily owns two houses due to moving, studying, or employment are also specified. If a one-house household acquires an additional house, disposing of the previous house within 3 years allows the new house to be taxed at the one-house rate (1-3%). However, if both the previous and new houses are located in regulated areas, the previous house must be disposed of within one year; failure to do so will result in a retroactive tax adjustment.

When a house with a publicly announced price of 300 million KRW or more in a regulated area is gifted, the acquisition tax rate for the recipient increases from the current 3.5% to 12%. For other houses, the current 3.5% rate applies. Furthermore, for one-house households unrelated to speculative demand, gifting to a spouse or direct ascendants/descendants will be subject to the 3.5% rate even in regulated areas.

This content was produced with the assistance of AI translation services.