Reducing Acquisition and Registration Taxes

Beginning as early as next year, real estate agencies may begin producing reports of actual dealing prices to the local self-governing body. Accordingly, an acquisition tax and a registration tax might increase sharply in the trading of houses.

In the meantime, real estate agencies have reduced the acquisition tax and registration tax of consumers by registering transactions with much lower standard market prices than actual prices.

Upon consultation with the Ministry of Construction and Transportation on July 30, the Uri Party and the government decided to confront an amendment of the real estate brokerage law by putting the registering of transactions with the actual prices under obligation.

However, the ruling party and the government also decided to drive forward an amendment of a local tax law by lowering the registration tax rate, which is two percent, of dealing prices and an acquisition tax rate, which is three percent, because the buyers` required tax could be drastically increased if it is registered with the actual prices.

This proposal includes not only the prohibition of drawing up double contracts but also the requirement of taxation authorities to ensure the actual price by obligating people to inform the contents of a transaction contract to local authorities.

The ruling party and the government also decided to examine the vesting rights of directing in the National Association of Real Estate Brokers so that it can autonomously supervise illegal acts such as brokering without enrolling and lending a certificate of qualification, as well as prohibit a “mobile agency” from promoting speculation in lots for apartment sale.

In addition, they decided to deal with an amendment of a real estate investment corporation law reducing regulations on real estate investment trusts (REITs) drastically in order to increase indirect investment on real estate.

According to the amendment, the minimum capital of the REITs is reduced from 50 billion won to 25 billion won and financing stocks is also possible in a range of 50 percent of the total capital. However, the ruling party and the government plan to prepare a regulation based on direction from the Financial Supervisory Commission, to strengthen internal control for the protection of investors.

Hoon Lee dreamland@donga.com