Real Estate Taxation and Subscription Rules to Change Significantly Next Month... "Be Careful When Holding or Transferring"

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[Asia Economy Reporter Yuri Kim] This year, as real estate measures to curb housing prices poured out, numerous tax and system standards changed starting from January next year. Experts pointed out that it is necessary to carefully check the changed standards not only when confirming subscription criteria but also when owning or transferring a house.

According to the real estate industry and Real Estate 114 on the 20th, from next month, tax changes following the government's 'one household, one home actual residence' policy will become clear. In particular, attention should be paid to the changed standards when selling a house.

Households holding pre-sale rights should note that from next year, pre-sale rights will also be considered as housing for capital gains tax purposes. Until now, if a one-household-one-home owner held pre-sale rights and transferred the corresponding house, it was considered as one home to determine whether capital gains tax exemption applied. However, from next month, newly acquired pre-sale rights will be included in the number of houses. However, if a one-household-one-home owner acquires pre-sale rights for purposes such as moving, a temporary two-home capital gains tax exemption will be applied.

The long-term holding special deduction method for one-household-one-home owners will also change significantly. For owners transferring homes exceeding 900 million KRW, a residence period requirement will be added to the long-term holding special deduction. Currently, the deduction is 8% per year based on the holding period, but now it will be split into 4% per year for holding period and 4% per year for residence period, each deductible up to 40%. Therefore, even if the holding period is long, if the residence period is short, the deduction rate will be low, potentially increasing the tax burden.

The highest income tax rate will increase and the taxable income brackets will be adjusted. Previously, the highest income tax rate of 42% applied to taxable income exceeding 500 million KRW; now, a new bracket with a highest rate of 45% applies to taxable income exceeding 1 billion KRW. For income occurring after the 1st of next month, if taxable income is 1 billion KRW or less, the highest rate remains unchanged, but if it exceeds 1 billion KRW, a 45% rate, which is 3 percentage points higher, will apply to the excess income.

Comprehensive real estate tax rates will also increase up to a maximum of 6%. For owners of two or fewer homes, the tax rate ranges from 0.6% to 3.0% depending on the taxable base, while owners of three or more homes or two homes in regulated areas will face rates from 1.2% to 6.0%. Since the comprehensive real estate tax taxable base date is June 1st, if the burden is significant, one should consider the situation carefully before deciding whether to dispose of properties. Corporations holding multiple homes will be subject to the highest comprehensive real estate tax rate (6%) and the 600 million KRW deduction will be abolished.

When corporations transfer houses, the additional tax rate on capital gains, which was previously 10%, will increase to 20% on top of the basic corporate tax rate (10-25%). This is a measure to prevent tax avoidance by exploiting the difference in tax burdens between individuals and corporations. Pre-sale rights and occupancy rights will also be subject to the additional tax rate.

One-household-one-home owners aged 60 or older as of the tax base date (including jointly owned by spouses) who have held the house for more than 5 years will receive a combined deduction of up to 80% of the comprehensive real estate tax amount, combining a 40% age deduction and a 50% holding deduction. This is a 10 percentage point increase from the current maximum of 70%.

Attention should also be paid to changes in subscription. From next year, income requirements for special supply will be relaxed. Currently, the income requirement for newlyweds special supply is 100% of the average monthly urban worker income (120% for dual-income households); this will be relaxed to 130% (140% for dual-income households). Among the special supply quotas for newlyweds and first-time homebuyers, 70% will be preferentially supplied to those with income below 100% (120% for dual-income), and the remaining 30% will be supplied through a lottery system to those who failed the preferential supply and those with income below 130% (140% for dual-income).

A prior notice of the scheduled move-in date for pre-sale houses will also be introduced. Until now, there was no regulation on when the project owner must notify the move-in date, so some project owners notified dates different from those announced in recruitment notices. This caused problems for residents in preparing the balance payment and disposing of existing homes. To prevent such issues, from next year, project owners must notify the scheduled move-in date at least two months before the actual move-in date and specify this in the supply contract.

Meanwhile, defect repairs before moving into apartment complexes will also be mandatory. Starting from the 24th of next month, project owners must complete repairs of defects found during pre-move-in visits before the move-in date. Project owners must conduct at least two pre-move-in visits for prospective residents at least 45 days before the start of the designated move-in period according to the housing supply contract, and provide necessary information for the visits at least one month in advance. Project owners must establish a plan to address defects found during the visits and submit it to the local government, which has the authority to approve use, within 7 days after the end of the visits. For general defects, private areas must be addressed by the delivery date to the prospective residents, and common areas must be addressed before the use inspection. Project owners must inform prospective residents of the status of repair works on the delivery date and submit the results to the use inspection authority after completion.

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