MoEF Considers Easing Comprehensive Real Estate Tax on Corporations Holding Reconstruction Properties in Speculative Overheated Zones

Ministry of Economy and Finance Proposes Alternative to Comprehensive Real Estate Tax Act Amendment
Considering Easing Corporate Comprehensive Real Estate Tax for Overheated Districts Holding Only Reconstruction Properties

[Asia Economy Reporter Jang Sehee] The Ministry of Economy and Finance is reportedly considering measures to ease the comprehensive real estate holding tax (종합부동산세) burden on corporations holding houses in speculative overheated districts. Through the July 10 real estate measures last year, the government planned to apply a 6% comprehensive real estate holding tax rate to corporations owning three or more houses, effective from June. However, even before implementation, the Ministry of Economy and Finance is pushing for some revisions, raising concerns that this could undermine the original legislative intent and further confuse the market.

According to the National Assembly on the 5th, the Ministry of Economy and Finance proposed an alternative to the "Partial Amendment to the Comprehensive Real Estate Holding Tax Act" at the Tax Subcommittee of the Planning and Finance Committee at the end of last month. The Tax Subcommittee was reviewing the "Comprehensive Real Estate Holding Tax Act Amendment" proposed by Yoon Hoo-duk, chairman of the Planning and Finance Committee and member of the Democratic Party, when the Ministry submitted its revision.

The Ministry’s alternative includes applying the previous tax rates to corporations holding houses in speculative overheated districts that received a sales request from reconstruction associations established and approved before the July 10 measures. Previously, tax rates ranged from 1.2% to 6% depending on the tax bracket, so this could mean a benefit of nearly 5 percentage points.

This proposal comes as lawmakers have continuously called for reductions in the comprehensive real estate holding tax rates through their bills. Representative Yoon argues that corporations holding houses in speculative overheated districts should be allowed to apply the previous tax rates. However, the Ministry maintains that since the comprehensive real estate holding tax is calculated by aggregating individual holdings, it is not possible to apply different rates by distinguishing houses in overheated districts from those in other areas.

A Ministry official stated, "The comprehensive real estate holding tax is calculated by applying the same tax rate to all houses combined," adding, "It is difficult to differentiate cases and apply different tax rates." The official explained, "This approach is a special case where the corporation holds 100% of the houses subject to sales requests within the speculative overheated district."

From June, the tax burden on corporations will increase further. The government applies the highest individual tax rate to houses held by corporations, uniformly applying a 3% rate for two or fewer houses and 6% for three or more houses. In particular, the 600 million KRW deduction for corporations has been abolished, increasing the tax burden.

Alongside this, the Ministry also indicated it would apply the previous tax rates to corporations that are project implementers obligated to supply rental housing and received project plan approval before the July 10 measures. If a corporation holds only mandatory supply rental housing, the previous tax rates will be applied for four years from the initial rental start date.

However, the Ministry clearly opposed bills from both ruling and opposition parties that seek to ease the comprehensive real estate holding tax for single-homeowners. Kim Yong-beom, First Vice Minister of the Ministry of Economy and Finance, said, "The comprehensive real estate holding tax burden was significantly strengthened through the July amendment last year," and expressed concern that "raising the basic deduction amount for the comprehensive real estate holding tax, which is being reflected from this year, could greatly undermine the policy effect."

Democratic Party Representative Park Hong-geun has proposed a bill that provides deductions of 20% for actual residence periods between two and five years, 40% for five to ten years, and 100% for over twenty years for single-homeowners. The opposition party has also proposed raising the long-term holding deduction limit from the current 50% to 70%.

Attention is focused on the National Assembly after March. As these bills are discussed, some amendments to the Comprehensive Real Estate Holding Tax Act are inevitable. Professor Kwon Dae-jung of Myongji University’s Department of Real Estate said, "Easing the comprehensive real estate holding tax only for corporations could contradict the original purpose of the tax," adding, "Instead of adjusting the tax rate itself, it is necessary to reconsider the tax base (amount)." He also advised, "For rental business operators, the period should not be unified to 10 years but diversified to 4, 6, or 8 years."

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