Heavy Capital Gains Tax for Multiple Homeowners Starts May 10... Apply for Land Transaction Permit by May 9 to Avoid Higher Rates

Gangnam 3 Districts and Yongsan

Registration Must Be Completed by September 9

Yonhap News Agency

The temporary suspension of the heavy capital gains tax on owners of multiple homes will end on May 9. Starting May 10, the maximum tax rate on capital gains for owners of multiple homes selling properties in regulated areas will rise to as much as 82.5% of the capital gains (including local income tax). However, if an application for a land transaction permit for a sale in a regulated area is completed by May 9, there is some leeway to finalize the transfer process—depending on the area, sellers may have until as late as November to complete the transaction.

According to government ministries on May 3, in principle, owners of multiple homes must complete the entire transfer process—including signing the sales contract, paying the balance, and registering the transaction—by May 9 in order to benefit from the temporary suspension of the heavy capital gains tax. The current basic capital gains tax rate is 6% to 45%. After May 9, an additional 20 percentage points will be added for those with two homes in regulated areas, and 30 percentage points for those with three or more homes. Including the 10% local income tax, the effective tax rate can reach up to 82.5%.

However, as all of Seoul and 12 areas in Gyeonggi Province were designated as land transaction permit zones under the October 15 policy last year, extending the transaction period, some supplementary measures were introduced to give owners of multiple homes more time if they intend to sell. If the application for a land transaction permit is submitted by May 9, the heavy capital gains tax will not be applied.

In Seoul’s Gangnam 3 Districts (Seocho, Gangnam, and Songpa) and Yongsan District—which were already classified as regulated areas before the October 15 policy—if the land transaction permit application is submitted by May 9, the permit is obtained, and the sales contract is signed, then as long as the transfer (including payment of the balance and registration) is completed by September 9, the heavy capital gains tax will be exempted. In the first supplementary measure announced on February 12, the government required that the sales contract be completed by May 9 and the transfer finalized within four months of the contract date. However, as the land transaction permit review process can be time-consuming and make transactions tight, a second supplementary measure was announced last month to allow the permit application—rather than the contract itself—to serve as the cutoff.

In the remaining 21 districts of Seoul and 12 areas in Gyeonggi Province that were designated as regulated areas after the October 15 policy, if the land transaction permit is applied for by May 9 and the transfer process is completed by November 9, the heavy capital gains tax will not be applied.

Even if the property to be sold by an owner of multiple homes has a tenant, a special measure will allow the relaxation of the occupancy obligation—but only if the buyer is without a home.

For homes with existing lease contracts as of February 12—the date the revision of the Enforcement Decree of the Act on Real Estate Transaction Reporting, etc. was announced—if the land transaction permit is applied for by May 9, the occupancy requirement will be deferred until the end of the current lease contract. Depending on the duration of the lease, occupancy can be postponed until as late as February 11, 2028.

However, if the lease contract was renewed after the announcement of the amendment, the deferral will not be permitted. The occupancy obligation deferral is only allowed when a home in a regulated area owned by an owner of multiple homes is purchased by someone without a home, and the buyer must be without a home as of the land transaction permit application date. If the seller owns only one home, the occupancy deferral does not apply. In addition, according to the June 27 measures last year, in regulated areas, buyers were required to move in within six months of taking out a mortgage. With this new deferral, however, buyers can now postpone moving in until the later of either six months from the loan execution date or one month after the end of the lease contract.

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