32 Trillion Land Compensation... Full Brainpower Activated for Tax Saving

Compensation Underway in Capital Region New Towns
Save Up to 100 Million KRW in Taxes by Reporting Year by Year

[Asia Economy Reporter Kangwook Cho] This year alone, land expropriation compensation amounting to 32 trillion won is expected to be distributed mainly in the Seoul metropolitan area, drawing attention to tax-saving methods. Experts advise that if capital gains tax is reported in different years, tax savings of over 100 million won are possible for farmland cultivated for more than 8 years.

According to the Ministry of Land, Infrastructure and Transport on the 25th, land compensation is currently being carried out in public housing districts such as Hanam Gyosan, Incheon Gyeyang, Namyangju Wangsuk, and Seongnam Nakseong. Additionally, land compensation is scheduled to proceed this year in areas like Goyang Changneung and Yongin Platform City. According to Jijon, a specialized land compensation platform, a total of 92 land compensation sites are estimated for this year, with compensation payments reaching 32 trillion won. Combined with last year, which saw the largest compensation payments in history, the total compensation scale over two years amounts to around 80 trillion won.

When receiving land compensation, capital gains tax is imposed on the relevant real estate, as it is considered a sale of land to the state. Accordingly, capital gains tax is levied based on the land category, actual usage, and holding period, but exemptions are granted for expropriation for public purposes. The exemption rate is 10% if received in cash and 15% if received in bonds. If bonds are held until maturity, the exemption increases to 30%, and for bonds with a maturity of over 5 years, up to 40% exemption is possible. Land designated as a development-restricted zone after acquisition receives a 40% exemption, and land in such zones held for over 20 years receives a 20% exemption. For farmland cultivated for more than 8 years, the exemption rate is 100%, the highest. In this case, proof of cultivation for over 8 years must be provided through documents such as the agricultural register, receipts for pesticides and fertilizers, sales receipts of crops, and certificates of self-cultivated farmland.

Receiving compensation in different years can be a significant method to reduce capital gains tax. This is because the progressive tax rate system (6.6~49.5%, including local income tax) applies exemption limits annually. For example, if farmland cultivated for more than 8 years is compensated and registered in different years, tax savings of over 100 million won are estimated. Also, in the case of a household owning two houses, if both are expropriated, receiving compensation for the house with the larger capital gain later can maximize non-taxable benefits.

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