Will the Tax Reform at the End of This Month Make 'Capital Gains Tax Surcharge' a Hot Issue?

The government is drawing attention as it is expected to unveil a card to ease the capital gains tax surcharge ahead of the tax reform scheduled for the end of this month. It is also anticipated that numerous tax support measures related to low birth rates, such as expanding the gift tax exemption scope for marriage funds, will be introduced.

According to government departments on the 11th, a plan to ease the capital gains tax surcharge on real estate is strongly being discussed in the upcoming tax law amendment. Initially, there was a high expectation that there was no need to rush the tax law revision since the application of the capital gains tax surcharge was temporarily deferred until May next year. However, as concerns over the insolvency of real estate project financing (PF) have recently increased, the need for regulatory easing is growing.

Under the current Income Tax Act, the capital gains tax surcharge is applied to short-term holders within 2 years and multi-homeowners. Specifically, the basic capital gains tax rate is imposed up to 45% depending on the housing tax base, but a 70% surcharge rate applies to transactions held for less than 1 year, and a 60% surcharge rate applies to those held for 1 year or more but less than 2 years. Additionally, for owners of two homes in designated adjustment areas, 20 percentage points are added to the basic tax rate, and for multi-homeowners with three or more homes, 30 percentage points are added.

Accordingly, plans to abolish the capital gains tax surcharge for multi-homeowners or to ease the application criteria for the capital gains tax surcharge on short-term transactions from 2 years to 1 year are strongly being discussed. The idea is to increase real estate transactions to alleviate market stagnation caused by interest rate hikes. However, the government explained that since real estate-related tax policies have a significant impact on the market, they will approach the decision cautiously.

Along with this, it is expected that many tax support measures to overcome low birth rates will be included. Notably, the government is considering raising the gift tax exemption limit for marriage funds from the current 50 million won over 10 years to over 100 million won. This means that gift tax will be exempted up to a certain amount for marriage funds gifted within two years before and after the marriage registration. Some expect that the basic exemption limit could increase by more than double. Additionally, the non-taxable limit for childbirth and childcare allowances related to childcare costs is also expected to be expanded from the current 100,000 won per month.

In the industrial sector, whether to expand the upper limit of investment subsidies for advanced strategic industry returnee companies is also a point of interest. Currently, the subsidy payment limit for returnee companies is up to 60 billion won per company. In the metropolitan area, the subsidy amount per company is up to 30 billion won (15 billion won per business site). Accordingly, since the government has decided to support more than 50% of investment in advanced strategic industry returnee companies, there is speculation that the subsidy payment limit may be partially adjusted.

On the other hand, it is uncertain whether this year’s tax reform will include corporate tax and inheritance tax revisions. Since the top corporate tax rate was reduced from 25% to 24% last year, there is a view that additional reform this year would be burdensome. Also, although there is talk of reforming the existing inheritance tax into an estate acquisition tax that taxes based on the amount inherited by the heir, the dominant view is that this will be difficult due to concerns over tax cuts for the wealthy and related controversies.

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