Inheritance and Transfer Taxes Jump For Detached and Multifamily Housing

The outlook for the national tax rate is expected to rise three times higher at the highest starting from May 2005, including the inheritance tax, transfer tax, and capital transfer tax for detached home and multifamily housing.

It is because the government will be advancing a plan to adopt the posted price that the Ministry of Construction and Transportation is to announce as the tax base for the national tax (the standard amount for assessing tax), starting from April 2005; the plan sets the price as 80 percent of the posted price for detached home and multifamily housing.

The tax base for the inheritance tax, transfer tax, and capital transfer tax for detached home and multifamily housing is presently only at a level of 30-40 percent of the posted price, so if the tax base changes into a level of 80 percent of the posted price starting from the end of April 2005, it will be inevitable for the tax burden to increase to that extent.

A high official from the Ministry of Finance and Economy said on November 28, “The posted price for detached home and multifamily housing which the Ministry of Construction and Transportation is to release at the end of April 2005 will also be used as the tax base for the national tax,” and added, “In order to do so, we are advancing a plan to revise the income tax law.”

The posted price that the Ministry of Construction and Transportation is to release was originally on behalf of the use of the local tax like property tax.

Presently, when imposing an inheritance tax or transfer tax or capital transfer tax for detached home and multifamily housing, after deriving each separate price for the official land price for the land itself, and the price of the building according to the arithmetic expressions of the National Tax Service, one adds the result together and adopts it as the tax base.

The tax base calculated in such way is extraordinarily low compared to the posted price; because of that, many people who inherit or contribute or sell and buy detached home and multifamily housing are filing only 30-40 percent of the actual market price or transaction price.

However if the tax base for detached home and multifamily housing changes to the price that the Ministry of Construction and Transportation releases from May 2005, then considering the progressive tax rate, the tax base is expected to rise as much as three times at the highest depending on the kind of housing.

An authority from the Ministry of Construction and Transportation said, “The posted price for the detached home and multifamily housing which will be posted starting from the end of April 2005 will reach at least 80 percent of the posted price.” and added, “Also, in the case of the inheritance tax or transfer tax or capital transfer tax for detached home and multifamily housing, the taxation equity will become higher.”

Chi-Young Shin higgledy@donga.com