Building`s Standard Value to Rise Five Percent

The standard values the government uses to appraise buildings, which are used to calculate taxes on real estate transactions, inheritances and donations, will rise 5 percent next year. Therefore, taxes on inheritances and donations will rise 2 to 3 percent. Taxes on real estate transactions will not rise since the tax rate is to decrease.

The National Tax Service (NTS) said on Friday that it would increase the basic value of the building construction price from 400,000 won to 420,000 won next year.

The building`s standard values will rise since it is estimated based on the basic value of the building construction price multiplied by structure index, usage index, location index, scrap value rate per age, and adjustment rate of characteristics of individual building. However, the building`s standard values will drop only to the degree of depreciation (2 to 4 percent), thus, they will not rise by the same rate as the basic value of the building construction price.

By applying the adjustment rate of characteristic of individual building (0.6 percent) to the storage, bathroom, and washroom of the single house, the NTS lowered taxes. The adjustment rate is applied only to taxes on inheritances and donations.

Although it is a principle that the value of building should be estimated by market value according to the law on the inheritance tax and donation tax, the NTS` building standard value is applied when it is difficult to estimate its market value.

Compared with this, it is a principle that taxes on donation should be paid according to the building`s standard value. When a taxpayer reports the real market price with proof, tax will be levied based on this.

The NTS provides information service on the building`s standard value through its internet homepage (www.nts.go.kr) and phone (1588-0060).

Kwang-Am Cheon iam@donga.com