Lee and Yoon Both Say "Will Reduce Real Estate Taxes"...Selective vs. Comprehensive, Differences in Approach

Lee Jae-myung, the Democratic Party presidential candidate, and Yoon Seok-youl, the People Power Party presidential candidate, are attending the Local Autonomy Awards and Korea Regional Development Awards ceremony hosted by the Korea Local Newspaper Association at the Press Center in Jung-gu, Seoul on the 27th, exchanging greetings. Photo by the National Assembly Press Photographers Group

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[Asia Economy Reporter Kim Hyemin] Regardless of who becomes the 21st president, changes in real estate taxation are anticipated. Unlike the Moon Jae-in administration, which strengthened both holding taxes and transaction taxes, the presidential candidates from both ruling and opposition parties have emphasized "reducing the burden." However, there are some differences in how far and in what way they plan to revise real estate taxation.

◆ Lee Jae-myung emphasizes easing transaction taxes... Introduction of Land Holding Tax is a flashpoint = Lee Jae-myung, the Democratic Party candidate's real estate tax policy is essentially selective easing. It involves reducing tax burdens by specifying targets and timing.

Lee has expressed his intention to ease real estate transaction taxes. This includes temporarily postponing the increased capital gains tax on multi-homeowners. This method features a differentiated exemption rate depending on the period. If the property is disposed of within 6 months from the postponement date, the increased portion is fully exempted; within 9 months, half is exempted; within 12 months, only one-quarter is exempted; and after one year, the increased tax is maintained as planned. However, this was not included in the final pledge book.

There is also analysis that holding taxes may actually increase. This is due to Lee's flagship pledge, the "Land Profit Dividend System (Land Holding Tax)." The core of this system is to collect taxes on privately held land and redistribute them to 90% of the population who have little or no land. Lee has stated that to avoid double taxation, this system will be integrated with the Comprehensive Real Estate Holding Tax (종부세, Jongbu-se). Although it was not included in the pledge book, likely due to public opinion, since Lee has mentioned it several times, there is a high possibility it will be discussed again at any time.

There are also plans to reduce tax burdens for single-homeowners or temporary two-homeowners. For example, low-income individuals who have held one home for a long time, retirees living on pension income while owning one home, or elderly retirees relying on allowances from children may defer paying the Comprehensive Real Estate Holding Tax until they generate income or dispose of the property, provided they meet certain limited conditions. Additionally, pledges include excluding temporarily owned second homes due to job changes or inherited homes from parents from the count of owned homes for a certain period to prevent increased Comprehensive Real Estate Holding Tax.

◆ Yoon Seok-youl, virtually all real estate taxes eased... Comprehensive overhaul of the Comprehensive Real Estate Holding Tax = Yoon Seok-youl, the People Power Party candidate, has pledged to ease virtually all real estate taxes. The scope of tax reductions covers acquisition tax paid when buying real estate, capital gains tax paid when selling, as well as holding taxes including the Comprehensive Real Estate Holding Tax.

Notably, Yoon has announced plans to integrate the Comprehensive Real Estate Holding Tax with property tax, effectively abolishing it. This reflects market criticism that the Comprehensive Real Estate Holding Tax, which applies progressive rates based on the number of homes owned, is punitive taxation. The Comprehensive Real Estate Holding Tax is levied on single-homeowners with a publicly announced housing price exceeding 1.1 billion KRW and multi-homeowners with properties exceeding 600 million KRW.

However, implementing this pledge carries burdens. The Comprehensive Real Estate Holding Tax, a national tax, is fully allocated to local governments, designed so that financially weaker regions receive more resources. If integrated with the local property tax, tax revenue may concentrate in the metropolitan area where high-priced homes are concentrated, potentially causing regional imbalances. Opposition from local governments is expected during the process.

Therefore, Yoon regards this pledge as a long-term task and currently aims to improve the system by reducing tax burdens. He proposed freezing the fair market value ratio, which affects the increase in publicly announced prices, and lowering the "tax burden cap" that limits how much the tax can increase compared to the previous year’s Comprehensive Real Estate Holding Tax payment. He also plans to reduce the tax rate for single-homeowners to the level before the current administration and allow long-term single-homeowners to defer payment until the time of sale or inheritance regardless of age.

To ease transaction taxes, Yoon also plans to postpone the application of increased capital gains tax on multi-homeowners for up to two years. This contrasts with Lee’s pledge, which differentiates exemption rates by period. Yoon has also pledged to reduce acquisition tax burdens by unifying acquisition tax rates and easing progressive rates for owning two or more homes in regulated areas.

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