Changing Tax Burdens... How Will Multi-Homeowners and Small Investors Be Affected?

The biggest issue of 2020 was undoubtedly the real estate frenzy. Despite the government's bold promises to control housing prices no matter what, apartment prices soared to unprecedented heights, striking a blow to the hearts of ordinary citizens without homes. The apartment nightscape filling Seoul feels bitterly poignant. We hope the real estate market will stabilize in the new year of 2021. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Joo Sang-don] This year, the tax burden on multi-homeowners will increase, while the tax burden on stock investors will decrease. The comprehensive real estate tax top rate for owners of three or more homes will rise from 3.2% to 6.0%, and the capital gains tax surcharge rate will increase from 20 percentage points to 30 percentage points. On the other hand, the KOSPI securities transaction tax will decrease by 0.02 percentage points compared to this year.

First, from January 1 next year, the comprehensive real estate tax rate will increase by up to 2.8 percentage points. Accordingly, the basic tax rate for comprehensive real estate tax will rise from 0.5% to 0.6% for properties valued at 300 million KRW or less, and from 1.0% to 1.2% for properties valued between 600 million and 1.2 billion KRW. The tax rates will increase more steeply for owners of three or more homes and for owners of two homes in regulated areas. For properties valued at 300 million KRW or less, the rate will increase from 0.6% to 1.2%, and for those between 600 million and 1.2 billion KRW, from 1.3% to 2.2%. For properties exceeding 9.4 billion KRW, the rate will rise from 3.2% to 6.0%. Corporations will be subject to a flat tax rate of 6.0%, regardless of property price.

The tax burden cap for owners of two homes in regulated areas will be raised from 200% to 300%, and the tax burden cap for corporations will be abolished. However, to reduce the burden on genuine single-homeowners, the tax credit rate for elderly owners holding one home per household will be increased by 10 percentage points per bracket, allowing those aged 70 or older to receive a 40% deduction. The controversial joint ownership deduction for married couples will allow couples to each deduct up to 600 million KRW, totaling 1.2 billion KRW, or to have one spouse claim the deduction and choose the more favorable option between the elderly deduction or the long-term holding deduction.

From June 1 next year, the capital gains tax burden on multi-homeowners owning two or more homes in regulated areas will increase when selling their properties. From next year, owners of two homes will pay an additional 20 percentage points on the basic tax rate, and owners of three homes will pay an additional 30 percentage points. At this time, pre-sale rights acquired after January 1 next year will also be counted as part of the number of homes when determining multi-homeowner status.

To revitalize the securities market, the transaction tax rate on stock sales will be lowered. The KOSPI rate will be reduced from the current 0.1% to 0.08%, and the KOSDAQ rate from 0.25% to 0.23%. This will apply to transfers from January 1 next year through 2022. In 2023, in line with income tax (20-25%) on stock capital gains, the KOSPI transaction tax will be completely abolished to 0%, and the KOSDAQ rate will be further reduced to 0.15%. However, the special rural tax (0.15%) must still be paid separately.

The tax burden on small business owners will decrease. From next year, the simplified VAT taxpayer threshold will be expanded from the current annual sales of less than 48 million KRW to less than 80 million KRW. However, the current 48 million KRW threshold will be maintained for real estate rental businesses and taxable entertainment venues. Additionally, newspaper subscription fees will be added to the income deduction targets for credit card and other usage amounts for workers earning 70 million KRW or less annually. The deduction rate is 30%, and the deduction limit, including books, performance fees, and museum/art gallery admission fees, is up to 1 million KRW.

The Individual Savings Account (ISA) will also be fully revamped. Eligibility will be expanded to residents aged 19 and older (and residents aged 15 to 18 with earned income), and investment in domestic listed stocks will be allowed. The contract period will be relaxed from the previous minimum of 5 years to a minimum of 3 years, and contract extensions will be permitted. These changes will apply to accounts opened, extended, or terminated from January 1 onward (including existing account holders).

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