Government to Ease Property Tax to 2020 Levels... Announcement Expected on the 22nd

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Son Seonhee] The government is considering lowering this year's property tax to the 2020 level, before the sharp rise in official land prices. A plan to freeze the comprehensive real estate holding tax for single-home households at last year's level is also being discussed.

According to the government on the 13th, the Ministry of Economy and Finance, Ministry of the Interior and Safety, Ministry of Land, Infrastructure and Transport, and other real estate-related departments are expected to announce a plan to ease the burden of real estate holding taxes in line with the release of this year's official apartment prices on the 22nd. Since the official apartment prices rose by 19% last year and are expected to increase by around 20% this year, this measure aims to alleviate the rapidly increasing burden of property tax and comprehensive real estate holding tax.

This is the first real estate tax reform plan announced after the presidential election. Earlier, President-elect Yoon Seok-yeol pledged to lower the official housing prices to the 2020 level, before the two steep increases in official land prices this year, by reducing the fair market value ratio.

The fair market value ratio is the rate multiplied by the official price to determine the tax base. For property tax, the fair market value ratio is set at 60% for this year, and for the comprehensive real estate holding tax, it is 100%. The Local Tax Act stipulates that the fair market value ratio for property tax can be adjusted between 40% and 80% (for housing), and the Comprehensive Real Estate Holding Tax Act allows adjustment between 60% and 100% through enforcement ordinances.

The tax burden can be reduced by lowering the fair market value ratio to the legal minimum of 40% for property tax and to 60% for the comprehensive real estate holding tax. In particular, since the adjustment of the fair market value ratio is a matter of enforcement ordinance, it can be implemented by the government’s will alone without the consent of the National Assembly. However, to achieve the effect of lowering to the 2020 official price level, both the fair market value ratio and the official price realization rate must be adjusted together.

President-elect Yoon proposed lowering the tax rates for single-home households on the comprehensive real estate holding tax to the levels before the Moon Jae-in administration (from 0.6?3.0% to 0.5?2.0%) and freezing the fair market value ratio at last year's level (95%) to cap the increase in tax burden at 50%.

However, this approach is less effective than the comprehensive real estate holding tax relief plan currently being pursued by the ruling party and government. The ruling party and government are considering measures such as capping this year's tax burden at 100% of last year's level or applying last year's official land prices instead of this year's.

Nonetheless, the government is expected to hold further consultations with President-elect Yoon’s transition team, focusing on the existing ruling party and government plan, to finalize the proposal.

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