Due to Official Land Price Drop, Property Tax on 1.7 Billion Won Single-Family House Decreases from 3.72 Million to 3.12 Million Won

Tax Burden Likely to Change According to Comprehensive Real Estate Tax Amendment and Fair Market Value Ratio
Official Price of a 1.7 Billion Won Detached House Drops by About 150 Million Won, Holding Tax Decreases by 600,000 Won

[Image source=Yonhap News]

[Asia Economy Reporter Cha Wanyong] As the government lowers the real estate official price realization rate (the ratio of official price to market price) to the 2020 level next year, the burden of holding tax is expected to decrease somewhat. However, the actual perceived tax burden is expected to vary significantly depending on whether the comprehensive real estate tax (종부세) amendment bill, which has not yet passed the National Assembly, and the fair market value ratio for next year are decided.

According to the Ministry of Land, Infrastructure and Transport on the 14th, the nationwide standard land (land) official price change rate for next year is -5.92%, which is 16.09 percentage points lower than this year's 10.17%. The nationwide standard detached house change rate is also -5.95%, down 13.29 percentage points from this year's 7.34%. The nationwide residential land price increase rate until October this year is 2.47%, and the detached house market price rose by 1.86%.

The official price is used as a standard for 67 administrative systems including property tax, comprehensive real estate tax, health insurance premiums, and basic pension. Due to the decline in official prices, the burden of holding tax is expected to decrease somewhat.

According to the holding tax simulation results by Woo Byungtak, team leader of Shinhan Bank Real Estate Advisory Center, the official price of a detached house with an actual transaction market price of 1.7 billion KRW as of last November will decrease from 1.4352 billion KRW this year to 1.2801 billion KRW next year.

Assuming the owner of the house is a single homeowner and receives an 80% tax credit, the holding tax to be paid will decrease by about 600,000 KRW from 3,723,000 KRW this year to 3,125,000 KRW next year.

Also, if the official price, which was 3.11 billion KRW this year, falls by 10.81% to 2.803 billion KRW next year, the holding tax burden (without tax credit) will decrease by 13% from 553.104 million KRW this year to 480.89 million KRW next year.

The tax burden on multi-family housing is also expected to decrease significantly. The official prices of standard multi-family housing such as apartments, row houses, and villas will be announced in March next year. Considering the recent sharp decline in house prices, the official prices of multi-family housing are expected to fall more sharply than those of standard land and standard houses.

However, the passage of the 종부세 amendment bill currently underway in the National Assembly is important. Currently, the ruling and opposition parties are discussing ▲ lowering the basic 종부세 tax rate (0.5~2.7%) ▲ applying the basic tax rate to two-homeowners in regulated areas ▲ raising the deduction amount for multi-homeowners to 900 million KRW ▲ maintaining the fair market value ratio at 60%.

Particularly, attention is focused on the 종부세 amendment bill that adjusts the definition of multi-homeowners. Under the current 종부세 law, whether one is a multi-homeowner is the dividing line for applying the heavy tax rate. The tax rates applied according to the number of houses are 1.2~6.0% for multi-homeowners and 0.6~3.0% for single homeowners. In other words, multi-homeowners must pay 종부세 at about twice the heavy tax rate.

The ruling and opposition parties have agreed on an amendment bill that reduces the scope of multi-homeowners subject to the heavy tax rate to those owning three or more houses regardless of whether they are in regulated areas, and applies the general tax rate to those owning three or more houses if their taxable standard does not exceed 1.2 billion KRW.

They have also negotiated to raise the basic deduction amount for 종부세 from the current 1.1 billion KRW to 1.2 billion KRW for single homeowners, and from 600 million KRW to 900 million KRW for the basic deduction. However, since the heavy tax rate applied to those owning three or more houses exceeding 1.2 billion KRW has not yet been agreed upon, it could become a variable in the future.

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