Reducing Tax Burden for Single-Homeowners and Strengthening Taxes for Multi-Homeowners... Retroactive Application Also Under Review

Ruling Party and Government to Begin Full Review of Property Tax and Comprehensive Real Estate Tax Relief Measures from Next Week
If Passed in May National Assembly, Implementation Starts This Year... Possibility of Retroactive Application Even After Law Passage

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[Asia Economy Reporter Kim Eun-byeol] The ruling party and government are pushing for a real estate taxation plan that imposes heavy taxes on holding and transaction taxes for multi-homeowners, while reducing the tax burden for single-homeowners. There is a mood of reviewing the amendment of the law on the premise that the tax law revision will be completed next month or, even if later, it will be applied retroactively for a certain period.

According to the Democratic Party and government authorities on the 25th, a plan to reduce holding taxes such as property tax and comprehensive real estate tax for single-homeowners is being finalized in May and aims to pass the National Assembly. A Democratic Party official said, "We need to discuss it through the party's special real estate committee, but we plan to finalize the plan by mid-next month and, if possible, pass it within the May extraordinary session of the National Assembly." In this regard, the Democratic Party plans to hold the first meeting of the real estate special committee next week. The government also takes the position of quickly organizing related matters.

The reason why the ruling party and government are rushing discussions is because June 1 is the tax base date for the comprehensive real estate tax and property tax. The timing for raising the capital gains tax rate for multi-homeowners in regulated areas is also June 1. Since the holding tax for this year will be finalized and transaction tax will change based on the tax law as of June 1, they want to complete the law amendment before then.

After the crushing defeat in the April 7 by-elections, the ruling party and government are reviewing various tax relief measures for single-homeowners. Initially, punitive holding and transaction tax reform plans were proposed to pressure speculative forces such as multi-homeowners and short-term home traders, but complaints arose that these taxes caused considerable damage even to genuine single-homeowners.

In this regard, the ruling party and government are reviewing raising the comprehensive real estate tax base for single-homeowners from the current 900 million KRW to 1.2 billion KRW, and providing more deductions for those who have lived in their homes for a long time. They are also seriously considering raising the property tax exemption ceiling from the current 600 million KRW to 900 million KRW.

The implementation date for the comprehensive real estate tax rate increase, which was completed in last year's tax law revision, is also June 1. Accordingly, the general tax rate will rise from the current 0.5?2.7% to 0.6?3.0%, and the rate applied to those with three or more homes or two homes in regulated areas will increase from 0.6?3.2% to 1.2?6.0%.

If a house held for less than one year is sold after June 1, a capital gains tax rate of 70% applies; if held for one year or more but less than two years, a 60% rate applies. For multi-homeowners in regulated areas, two-homeowners pay an additional 20 percentage points on the basic rate, and those with three or more homes pay an additional 30 percentage points.

The ruling party and government are reportedly considering retroactive application if the tax relief plan for single-homeowners takes longer than expected or if the law is not passed by the National Assembly by May. A Democratic Party official said, "Since this is not a tax law revision unfavorable to taxpayers, if the related tax law passes the National Assembly before the payment of property tax or comprehensive real estate tax, the bill can be made to apply retroactively."

A government official explained, "If the tax law revision is completed before the government sends tax bills to taxpayers, retroactive application is not impossible. However, since June 1 is the reference date, the principle is to complete the law amendment procedure by May if it is to be applied from this year."

Property tax is usually paid in July and September, and comprehensive real estate tax is paid in December.

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