Inheritance Houses Facing 'Tax Bomb', Excluded from Comprehensive Real Estate Tax for Up to 3 Years

MoEF, Guidance on 2021 Amendment to the Enforcement Decree of the Comprehensive Real Estate Tax Act

[Asia Economy Sejong=Reporter Kwon Haeyoung] In the future, inherited houses will be excluded from the calculation of comprehensive real estate tax (CRE tax) for 2 to 3 years after inheritance. The CRE tax burden for social enterprises, social cooperatives, and Jongjung (ancestral clan associations) will also be eased.

The Ministry of Economy and Finance announced on the 22nd the amendment to the 2021 CRE tax enforcement decree containing these details.

First, in the case of inherited houses, they will be excluded from the number of houses counted for CRE tax calculation for 2 to 3 years from the date of inheritance commencement (date of death of the decedent). Previously, inherited houses were excluded from the house count only if the ownership share was 20% or less and the official assessed price was 300 million KRW or less. Going forward, in the Seoul metropolitan area and special self-governing cities (excluding eup and myeon areas) and metropolitan cities (excluding gun areas), the exclusion period will be 2 years, and in other regions, 3 years.

Accordingly, a single-house owner who inherits one house was previously considered a two-house owner and subjected to a tax rate of 1.2% to 6.0%, but now can be subject to a tax rate of 0.6% to 3.0%.

For example, if Mr. A, who owns one house (official assessed price 1 billion KRW) in a regulated area, inherited one house (official assessed price 600 million KRW) in the regulated area on March 1 last year, the CRE tax will decrease from 18.33 million KRW last year to 8.49 million KRW this year, a reduction of 9.84 million KRW.

Taxation will be based on the tax base date of June 1 this year, and even if the inheritance occurred before the enforcement of the decree, if 2 years (3 years in local areas) have not passed from the inheritance commencement date to the tax base date, the new regulations can be applied. However, CRE tax already paid due to inherited houses cannot be refunded.

An official from the Ministry of Economy and Finance explained, "If 2 to 3 years have passed since inheritance but the inherited house is not sold and is continuously held, the inherited house will be included in the house count and CRE tax will be imposed according to the taxation principle."

Additionally, social enterprises, social cooperatives, and Jongjung have been added to corporations subject to the general progressive tax rate, easing their tax burden. Accordingly, a basic deduction of 600 million KRW, progressive tax rates (0.6% to 3.0%, 1.2% to 6.0%), and tax burden caps (150%, 300%) will apply.

Houses scheduled for demolition by housing construction businesses, cultural assets registered by cities and provinces, and houses used for daycare centers can also be exempted from CRE tax through exclusion from the aggregate house count.

An official from the Ministry of Economy and Finance stated, "Through this amendment to the enforcement decree, the CRE tax burden on holders of inherited houses and others is expected to be significantly reduced starting from the 2022 tax notice. We also plan to announce specific supplementary measures in March to ease the holding tax burden for genuine single-household homeowners."

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