Ahead of Next Month's Capital Gains and Comprehensive Real Estate Tax Rate Hikes... Party and Government Affirm "No Change in Real Estate Policy Principles"

Song Young-gil, the newly appointed leader of the Democratic Party of Korea, is attending the Supreme Council meeting held at the National Assembly on the 3rd and delivering an opening remark. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Kim Hyun-jung (Sejong), Jang Se-hee, and Koo Chae-eun] One month before the implementation of the tax law revision that raises capital gains tax and the highest comprehensive real estate tax rates, the ruling party and government have begun supplementary measures to ease the burden on actual buyers and suppress speculative demand, taking advantage of the election of the new leadership of the ruling party. While maintaining the Moon Jae-in administration’s ‘principles and direction’ to stabilize the real estate market in broad terms, the plan is to find solutions in detail by relaxing some deduction criteria and reducing benefits that could encourage speculation.

According to officials from the National Assembly and the government on the 3rd, the ruling party and government are currently working on supplementing and revising real estate policies centered on the Real Estate Special Committee within the Democratic Party of Korea, but they have settled on not readjusting the capital gains tax and comprehensive real estate tax rates that were raised through last year’s tax law revision.

Kang Byung-won, the newly appointed Supreme Council member, said at the Supreme Council meeting that morning, "After the by-elections, voices have emerged to raise the comprehensive real estate tax threshold and reduce the number of taxpayers," but emphasized, "However, easing the comprehensive real estate tax could send the wrong signal to the market and risk a recurrence of market surges." Kang added, "Fine adjustments that reduce the actual burden on taxpayers with insufficient income, such as expanding the housing pension or introducing deferred payment, can be made," but stressed, "The principle of strengthening holding taxes to suppress speculation and resolve asset inequality must not be shaken."

Within the party’s Real Estate Special Committee, discussions are underway to lower the burden on actual buyers by expanding the maximum limit of the comprehensive real estate tax credit (80%) or relaxing the holding period criteria, while reducing or cutting tax benefits for rental business operators, who have been identified as the main culprits behind rising house prices. In particular, the leadership strongly believes that tax incentives for rental business operators have been exploited by multi-homeowners as a loophole to ‘evade’ regulations, contributing to distortions in the real estate market.

According to this policy, the highest capital gains tax rate for homes held less than two years and multi-homeowners in regulated areas is scheduled to rise from the current 65% to 75% starting next month on the 1st. When trading homes held for less than one year, the capital gains tax rate will increase from 40% to 70%, and for homes held between one and two years, the rate will be adjusted from the basic rate (6?45%) to 60%. The capital gains tax rate for multi-homeowners in regulated areas will also increase by 10 percentage points, resulting in a maximum rate of up to 75% for short-term holders of multiple homes.

The tax base date for applying the increased comprehensive real estate tax rates from this year is June 1. If the combined publicly announced price of individually owned houses and land exceeds 900 million KRW based on the one-household-one-home standard, the tax will be imposed. The basic tax rate will rise from 0.5?2.7% to 0.6?3.0%, and for two-homeowners in regulated areas or those owning three or more homes, the rate will increase from 0.6?3.2% to 1.2?6.0%.

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