Comprehensive Real Estate Tax, Just a Preview This Year... Next Year Will Be More Frightening

Record-high Property Tax This Year Sparks Taxpayer Complaints
But Property Tax Likely to Rise Further Next Year
Official Prices and Fair Market Value Ratio Increased
Next Year's Presidential Election a Variable... Multi-Homeowners' Mixed Fortunes

[Image source=Yonhap News]

Amid growing controversy over the 'comprehensive real estate tax bomb,' there are projections that both the number of taxpayers and the taxable amount will increase significantly next year. This is because the official property prices for next year, which serve as the basis for calculating the comprehensive real estate tax, are expected to rise sharply due to this year's rapid surge in housing prices, and the fair market value ratio, a discount rate concept, will also be raised to 100%.

According to the Ministry of Economy and Finance and industry sources on the 23rd, the factors determining the comprehensive real estate tax are △official property price △official property price realization rate △fair market value ratio. The housing comprehensive real estate tax is imposed on the tax base calculated by subtracting the basic deduction amount from the total official property price of all houses owned nationwide by an individual as of the tax base date, June 1, and then multiplying by the fair market value ratio. This year, the nationwide average official property price for apartment complexes rose by 19.05%, the highest in 14 years, and the tax rate was also increased, resulting in a heavier comprehensive real estate tax burden.

The problem is that the comprehensive real estate tax is expected to rise steeply again next year. The biggest factor is the official property price, which is calculated based on housing market prices. The government announces the official property prices for apartment complexes on April 29 each year, based on January 1 of the same year. Since housing prices rose significantly this year, an increase in official property prices next year is inevitable.

According to the Korea Real Estate Board, the cumulative nationwide apartment price increase rate up to last week this year was 12.51%, more than double last year's rate of 5.34% for the same period. Seoul saw a 6.09% increase during this period. Considering that the apartment sales price increase rate compiled by the Korea Appraisal Board last year was 3.01%, but this year's official property prices rose by 19.91%, there is a high possibility that next year's official property prices will also rise significantly.

The official property price realization rate is also a factor driving price increases. The government plans to raise the official property price realization rate for apartment complexes from 70.2% this year to 71.5% next year. The realization rate indicates the gap between the official property price and the market price. For example, if this rate is 70%, the official property price of a house valued at 1 billion KRW in market price would be assessed at 700 million KRW. The government's goal is to raise this rate to 90% by 2030.

The increase of the fair market value ratio from 95% this year to 100% next year is also a burden. The fair market value ratio serves to lower the tax base to prevent taxpayers' tax burdens from increasing excessively, but the current government has raised this ratio by 5% annually to curb real estate speculation, and next year it will be raised to 100%, meaning no discount at all. This change alone will cause a 5.3% increase in the taxable base.

The industry expects that next year's presidential election will be a variable in the imposition of the comprehensive real estate tax. If the new government takes office and adjusts the tax rate, fair market value ratio, or realization rate before June 1, the tax burden could be reduced. Since the comprehensive real estate tax payment is made in December, if tax law revisions are completed by August even after the tax base date, retroactive application may be possible.

Earlier, Yoon Seok-yeol, the presidential candidate of the People Power Party, stated, "In the mid to long term, we will consider integrating the comprehensive real estate tax into the property tax or exempting single-homeowners." On the other hand, Lee Jae-myung, the presidential candidate of the Democratic Party, has proposed a completely opposite pledge to strengthen housing stability by establishing a stronger land holding tax than the comprehensive real estate tax.

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