Comprehensive Real Estate Tax on Single-Homeowners Starting from KRW 1.57 Billion Market Value... 90,000 Fewer Eligible Taxpayers

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[Asia Economy Reporter Dongwoo Lee] This year, the comprehensive real estate tax (종합부동산세) threshold for first-generation single-homeowners is expected to be around KRW 1.57 billion in market value.

This is the result of specifying the tax base at a publicly announced price of KRW 1.1 billion instead of the 'top 2%' criterion.

The National Assembly's Planning and Finance Committee approved an amendment to the Comprehensive Real Estate Tax Act containing these details on the 19th. The amendment mainly raises the additional deduction for first-generation single-homeowners from the existing KRW 300 million to KRW 500 million.

Since the basic deduction for the comprehensive real estate tax is KRW 600 million, the total deduction for first-generation single-homeowners will increase from KRW 900 million to KRW 1.1 billion. A publicly announced price of KRW 1.1 billion corresponds to a market value of approximately KRW 1.571 billion when applying a 70% price realization rate.

The ruling party expects that if the deduction threshold remains at KRW 900 million, there will be 183,000 first-generation single-homeowners subject to the tax this year, but if the threshold is raised to KRW 1.1 billion, the number will decrease by 89,000 to 94,000.

There was no separate mention regarding joint ownership by spouses, which is interpreted to mean that the existing system, where each spouse receives a basic deduction of KRW 600 million for a total of KRW 1.2 billion, will be maintained. Converted to market value, couples with joint ownership will be subject to the comprehensive real estate tax at around KRW 1.71 billion.

Since the deduction amount for first-generation single-homeowners (KRW 1.1 billion) is lower than the joint ownership deduction amount of KRW 1.2 billion, the advantage of joint ownership continues.

The ruling party initially pursued an amendment to set the tax base at the top 2%, but on this day, they compromised on a publicly announced price of KRW 1.1 billion.

For this year, the top 2% corresponds roughly to a publicly announced price of KRW 1.1 billion, but the opposition party argued that a fixed amount (KRW 1.2 billion), not a percentage, should be the threshold, and this compromise reflects that to some extent.

Considering the unique characteristic of the real estate market where prices are likely to rise over time, instead of changing the deduction threshold every three years to correspond to the top 2%, specifying a fixed amount is also a new aspect. This makes the taxable base clearer.

If the amendment passes in the plenary session, the implementation is expected to start with this year's comprehensive real estate tax assessments. Even considering that revising the enforcement decree takes 2 to 3 months, the legal and regulatory revisions can be completed by December, when this year's tax payments are due.

On the other hand, there is criticism that easing the comprehensive real estate tax will further overheat the real estate market.

The National Assembly's Planning and Finance Committee, having raised the tax rate just a year ago, has now passed a relaxation bill that increases the deduction threshold and reduces the tax.

Due to the increased deduction amount benefiting high-priced homes more, it is pointed out that in the short term, the phenomenon of concentrating on a 'smart single home' and 'Gangnam concentration' will intensify.

Since the market has received the signal that 'even if tax pressure increases, you can endure it,' there are concerns that the effectiveness of various real estate policies will diminish in the long term.

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