"Need for System Review to Prevent 'Second LH Scandal'... 50% Reduction Possible on Farmland Acquisition Tax"

Joseyeon 'Discussion on Improving Agricultural Land Speculation Prevention System'... "Comprehensive Real Estate Tax Should Not Be Imposed Either"

A land in Mujinae-dong, Siheung-si, Gyeonggi-do, where allegations of land speculation by some employees of Korea Land and Housing Corporation (LH) in the Gwangmyeong-Siheung new town were raised, was densely planted with Yongbeodeul saplings on March 10./Siheung=Photo by Kim Hyun-min kimhyun81@

[Sejong=Asia Economy Reporter Moon Chaeseok] There has been a call to review the entire taxation system on farmland to prevent a second Korean Land and Housing Corporation (LH) scandal. Under the current system, there are cases where farmland acquisition tax is reduced by up to 50%, and comprehensive real estate tax is not even applied, making it difficult to eradicate speculative incidents exploiting these loopholes.

Lee Dongsik, a visiting research fellow at the Korea Institute of Public Finance (and professor at Kyungpook National University), stated this on the 21st during a keynote presentation at the "Institutional Improvement Measures to Prevent Farmland Speculation" forum hosted by the National Research Council for Economics, Humanities and Social Sciences.

Under the current system, a lower tax rate of 3% is applied to farmland acquisition compared to the general rate of 4%. Even for weekend or experiential farming, if certain land conditions are met, the farmland acquisition tax rate can be applied.

For self-cultivating farmers who engage in farming as their main occupation for more than two years, a 50% reduction in acquisition tax is granted when acquiring farmland, livestock sheds, greenhouses, etc., for direct agricultural use. For farmland gifted to farming children, gift tax is exempted up to 100 million KRW for five years.

Since farmland is basically subject to separate taxation, comprehensive real estate tax is not imposed. Taxable lands under tax law are divided into three groups: comprehensive aggregation, separate aggregation, and separate taxation. Comprehensive real estate tax is levied only on lands subject to comprehensive or separate aggregation taxation. Weekend or experiential farmland can also be separately taxed if actually used for agriculture, thus avoiding comprehensive real estate tax.

When imposing property tax, farmland actually used for farming is taxed at a lower rate of 0.07% compared to the general land tax rate of 0.2%. There is no difference in capital gains tax rates between farmland and other lands upon transfer. However, if a resident living in the farmland location transfers farmland that they have directly cultivated for more than eight years, the capital gains tax on the income generated is fully exempted. Capital gains tax is also fully exempted when a resident exchanges land for farming needs.

Professor Lee pointed out, "Since farmland is given preferential tax treatment compared to other lands in most tax categories, it is necessary to consider more strictly limiting the natural persons who can acquire farmland and receive tax reductions." He added, "It is necessary to remove the general preferential tax rates for farmland and maintain exemption special cases only for self-cultivating farmers. There is no reason to provide preferential tax rates for farmland acquisition for weekend or experiential farming purposes compared to general land acquisition."

He also diagnosed, "When land is classified as a separate taxation object for property tax imposition, it not only receives preferential tax rates but also results in no comprehensive real estate tax being imposed. Therefore, the detailed criteria for the expression 'farmland actually used for farming,' which is the standard for separate taxation, should be set more clearly and strictly."

Concerns were also raised about agricultural corporations receiving tax benefits at the same level as farmers. Professor Lee argued, "To check whether agricultural corporations are operating according to their original purpose, it is necessary to shorten the current three-year cycle of field surveys. Also, if farmland is traded not for farming use but to gain real estate capital gains, measures to recover those profits should be included." He added, "In light of the LH speculation scandal, it is necessary to comprehensively review the taxation system on farmland."

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