The Democratic Party Passes Another Batch of Real Estate Bills... Legal Affairs Committee Also Passes Without Delay

On the 4th, the plenary session is expected to simultaneously handle the comprehensive real estate tax law, income tax law, and local tax law for heavy taxation of multi-homeowners

[Asia Economy Reporter Moon Jiwon] Real estate-related bills that significantly increase holding and transaction taxes for multi-homeowners were once again passed without interruption at the National Assembly's Legislation and Judiciary Committee on the 3rd. The Real Estate Transaction Reporting Act, which mandates the reporting of jeonse and monthly rent transactions as part of the 'Lease 3 Acts,' also passed the committee. The bills passed on this day are expected to be processed at the plenary session of the National Assembly on the 4th.

According to the National Assembly, Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, and Ministry of the Interior and Safety on the 3rd, the ruling party, the Democratic Party of Korea, plans to process all the real estate-related bills that passed the Legislation and Judiciary Committee at the plenary session on the 4th.

The number of bills scheduled for processing at the plenary session is as many as 11. By ministry, there are three under the Ministry of Economy and Finance: amendments to the Comprehensive Real Estate Tax Act, Income Tax Act, and Corporate Tax Act; six under the Ministry of Land, Infrastructure and Transport: Real Estate Transaction Reporting Act, Housing Act, Special Act on Private Rental Housing, Special Act on Public Housing, Act on Excessive Profits from Reconstruction, and Act on Vacant Houses and Small-scale Housing Maintenance; and two under the Ministry of the Interior and Safety: Local Tax Act and Restriction of Special Cases on Local Tax Act.

Here is a summary of the major real estate bills to be submitted to the plenary session on the 4th.

Top Comprehensive Real Estate Tax Rate for Multi-homeowners Jumps to 6%

The amendment to the Comprehensive Real Estate Tax Act includes proposals to raise the tax rates for multi-homeowners and corporations. The top comprehensive real estate tax rate for owners of three or more homes with a taxable value exceeding 9.4 billion KRW (for two homes in regulated areas) will increase to 6.0%. For general taxpayers subject to the comprehensive real estate tax, the rate will increase by 0.1 to 0.3 percentage points, and for owners of three or more homes (two homes in regulated areas), the rate will increase by 0.6 to 2.8 percentage points.

Additionally, the cap on the tax burden for owners of two homes in regulated areas will be raised from 200% to 300% compared to the previous year.

However, the tax credit rate for elderly owners holding one home per household will be increased by 10 percentage points per bracket, and the maximum combined credit rate will be raised from 70% to 80%.

For corporations, a single tax rate will be applied regardless of the number of homes held, matching the highest individual comprehensive real estate tax rates (3%, 6%), and the cap on tax burden will be removed. The 600 million KRW tax exemption will also be abolished, so tax will be imposed regardless of the housing value.

The revised comprehensive real estate tax rates will apply from the tax imposed next year.

70% Tax on Gains from Houses Held Less Than One Year

Capital gains tax burdens on short-term held houses and multi-homeowners will also increase significantly.

The capital gains tax rate for houses held less than one year will be raised to 70%. This includes cooperative members' occupancy rights and pre-sale rights. The capital gains tax rate for houses held less than two years will also increase to 60%.

When selling houses in regulated areas, an additional 20 percentage points will be imposed on owners of two homes, and 30 percentage points on owners of three or more homes, on top of the existing capital gains tax rates.

However, to encourage existing multi-homeowners to dispose of their properties, the increased capital gains tax rates will be deferred until the end of May next year.

Additionally, from January next year, pre-sale rights acquired will be included in the count of the number of houses when calculating capital gains tax.

The requirements for the special long-term holding deduction for single-homeowners selling houses priced over 900 million KRW will also be strengthened. Previously, the deduction rate was 8 percentage points per year of holding, but going forward, the annual holding deduction rate will be lowered to 4%, combined with a 4% deduction for actual residence period.

For houses held by corporations, an additional 20% tax rate will be imposed on top of the basic corporate tax rate (10?25%). The additional tax rate will also apply to cooperative members' occupancy rights and pre-sale rights acquired by corporations for acquiring houses.

Acquisition Tax Rate for Three Homes in Regulated Areas Raised to 12%

The amendment to the Local Tax Act includes raising the acquisition tax rates for multi-homeowners. Currently, a 4% acquisition tax applies to owners of four or more homes, but the amendment proposes applying 8% for two homes and 12% for three or more homes in regulated areas. In non-regulated areas, the current rates of 1?3% will apply up to two homes, but 8% for three homes and 12% for four homes will be applied.

The amendment also includes office-tels, pre-sale rights, and occupancy rights in the count of houses when determining whether a multi-homeowner is subject to acquisition tax surcharges. The combined office-tels, pre-sale rights, and occupancy rights subject to counting apply only to those acquired after the amendment takes effect.

To block gift tax avoidance through gifting, the acquisition tax rate on gifts has also been raised. For owners of two or more homes who gift a house with a publicly announced price of 300 million KRW or more in regulated areas, the gift acquisition tax rate will increase from 3.5% to 12%.

Mandatory Residence of Up to 5 Years for Winners of Private Land Price Ceiling System Housing

At the plenary session on the 4th, in addition to tax strengthening, laws mandating reporting of jeonse and monthly rent transactions and mandatory residence requirements for housing under the private land price ceiling system are also expected to pass.

Regarding the last of the 'Lease 3 Acts,' the Jeonse and Monthly Rent Reporting System, starting from June next year, landlords and tenants involved in jeonse and monthly rent transactions must report these to local governments within 30 days. The report must include contract parties, deposit, monthly rent, and lease period.

An amendment to the Restriction of Special Cases on Local Tax Act, focusing on acquisition tax reductions for first-time homebuyers, will also be submitted. The regulation, previously applied only to newlyweds, will be expanded so that first-time homebuyers are exempt from acquisition tax in full when purchasing homes priced at 150 million KRW or less, regardless of marital status or age.

For homes priced at 300 million KRW (400 million KRW in the metropolitan area) or less, acquisition tax will be reduced by 50%. In this case, the income requirement is a combined household income of 70 million KRW or less.

Winners of housing under the private land price ceiling system will be required to reside for up to five years depending on the difference between the sale price and market price. Illegal resale will result in a 10-year ban on applying for housing subscriptions.

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