'Last Chance for 12% Gift Acquisition Tax'... Seoul Apartment Gift Transfers Hit Record High

3,362 Cases Last Month... Double the 1,632 Cases in January

Last-Minute Demand Avoiding Gift Acquisition Tax Rate Hike
Existing 3.5~3.8% → Increased to 12%

[Asia Economy Reporter Chunhee Lee] Last month, the volume of apartment gift transactions in Seoul reached an all-time high. This appears to be the aftermath of the gift acquisition tax increase implemented from the 12th of last month.

According to the Korea Real Estate Board on the 20th, there were 3,362 apartment gift transactions in Seoul last month. This is the highest number since the board began compiling related statistics in 2006. The previous record was 1,632 transactions in January.

The industry is calling it an "astonishing figure." Since the statistics began, the monthly number of apartment gift transactions in Seoul had never exceeded 2,000. Analysts believe this surge was due to a large influx of "last-minute demand" trying to avoid the government's stringent crackdown.

Recently, the government has been employing strategies to increase the supply of properties on the market by imposing heavier taxes on multi-homeowners. However, as multi-homeowners began responding with "rather than struggling with the tax burden, we will just gift the properties," the government and ruling party immediately took a tough stance, leading to intense strategic maneuvering among multi-homeowners trying to avoid the new measures.

On the 4th, the National Assembly passed a new Local Tax Act amendment, initiated by Representative Byeongdo Han of the Democratic Party (ruling party whip of the Administrative Safety Committee). The amendment was promulgated and immediately enforced on the 12th. The tax rate increase was fast-tracked, taking less than a month from the bill's proposal on the 14th of last month to enforcement.

The new Local Tax Act applies a 12% acquisition tax rate to multi-homeowners acquiring homes worth over 300 million KRW by gift in regulated areas. This rate is composed of the 4% standard tax rate plus four times the 2% additional tax rate. Previously, the acquisition tax rate was between 3.5% and 3.8%, so the rate more than tripled instantly. Considering the separately applied special rural tax and local education tax, the rate can rise up to 13.4%.

As a result, the number of multi-homeowners choosing gifting to avoid the tax increase surged. Woobyeongtak, team leader of the Real Estate Investment Advisory Center at Shinhan Bank (tax accountant), said, "Consultations poured in from the announcement of the July 10 measures until the National Assembly plenary session on the 4th," adding, "Many chose gifting as a tax-saving strategy while consulting on comprehensive real estate tax and other taxes."

However, this rapid increase in gifting is likely to cease from next month. Since the 12th, the tax-saving effect of gifting has effectively disappeared. Team leader Woo said, "Inquiries to catch the last train came until the 10th, but after enforcement, gifting inquiries have completely stopped," and added, "It is highly likely that the market will enter a lull this month and next."

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