"Before June 1 Notification Date"... Ruling Party Discusses Easing Comprehensive Real Estate Tax and Acquisition Tax

Discussion on Reducing Acquisition Tax for the Homeless... Likely Difficult to Postpone Capital Gains Tax Surcharge

Song Young-gil, leader of the Democratic Party of Korea, and Kim Jin-pyo, chairman of the Special Committee on Real Estate, are attending the Special Committee on Real Estate meeting held at the National Assembly Members' Office Building on the 12th, and are talking during the meeting. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Jang Sehee] It has been confirmed that the Democratic Party of Korea plans to first revise real estate transaction taxes such as capital gains tax and acquisition tax. Since the property tax assessment notice will be implemented as early as next month, the intention is to reduce market confusion.

According to the government and the Democratic Party on the 16th, the currently prominent measures under discussion include raising the capital gains tax exemption threshold and reducing acquisition tax for non-homeowners. Kim Jin-pyo, chairman of the Democratic Party's Special Committee on Real Estate, maintained the stance of "easing transaction taxes and strengthening holding taxes" at the first meeting, and Song Young-gil, the party leader, also cited adjustments to property tax and capital gains tax as urgent tasks.

There is also discussion about easing capital gains tax to reduce the tax burden when a single-homeowner buys a new house for actual demand such as moving and then sells the existing house. Accordingly, raising the capital gains tax exemption threshold for a single household with one home, currently set at 900 million KRW, is being considered. However, since tax laws and loans regard high-priced homes as those around the 900 million KRW mark, this needs to be adjusted.

Unlike the comprehensive real estate tax, the fact that income has already been realized through the sale of a house and that under the existing system, deductions of up to 80% can be received through long-term holding and senior citizen deductions, serve as arguments against this. It is also evaluated that consensus within the ruling party is still insufficient.

There is also discussion about reducing acquisition tax for non-homeowners and single-homeowners. Chairman Kim previously mentioned, "While transaction tax can broadly include capital gains tax, it usually means acquisition tax," indicating that acquisition tax revision is still uncertain.

Currently, non-homeowners pay acquisition tax ranging from 1% to 3% of the acquisition price when buying a house. It is segmented by price brackets: 1% for up to 600 million KRW, 2.0% for 750 million KRW, and 3.0% for over 900 million KRW. In places like Seoul, where the average apartment price exceeds 1.1 billion KRW, the highest tax rate of 3.0% is already a given.

There is an acquisition tax reduction system for first-time homebuyers, but it targets up to 400 million KRW in the metropolitan area and 300 million KRW outside, which is far from the current market situation.

Since the government has also declared support policies for non-homeowners and actual demanders, acquisition tax reductions for non-homeowners could be considered on grounds of legitimacy. However, at present, it is not regarded as a major topic within the party, and it is known that the government has not conducted sufficient review yet.

Meanwhile, discussions on deferring the imposition of additional capital gains tax are considered unlikely to be adopted. This is based on the judgment that easing the tax burden for multi-homeowners and short-term sellers is difficult. A government official said, "If the multi-homeowner surcharge policy is overturned before implementation, the market may lose trust in future policies."

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