Basic Market Value of Housing and Commercial Building Increases by 5∼7% Next Year

Being a calculation base of a capital gains tax or inheritance tax to be paid a sale and inheritance of a detached house or commercial building, the basic market value of the building will be raised by average 5~7% next year.

In particular, for a new high-rise mixed-use apartment such as Tower Palace in Gangnam-gu Seoul and Trump World not considered the basic market price of a public housing, the basic market value of the building will be raised by 40% and the tax burden will be bigger.

National Tax Administration (NTA) announced ‘2003 basic market value of the building’ containing the above contents on December 29 and decided to apply it from next January 1.

The announcement adjusted the basic construction price of the building to 460,000 won from 420,000 won/㎡ considering the price increase rate as one of the calculation elements of the basic building market price.

To reflect an actual price or earning value of the building, a location index applied based on the land value by public announcement published by the ministry of construction & transportation (MOCT) was subdivided to the system of eleven stages(the minimum 50,000 and maximum 10,000,000 won/㎡) from the current system of five stages (the minimum 200,000 won and maximum 5,000,000 won/㎡).

The minimum index, which is mostly applied to agricultural and fishing areas, will decrease to 80 from 90. On the other hand, the maximum index corresponding to a downtown building will increase to 130 from 110.

As a purpose index applying an additional rate according to the building purpose is adjusted, it will be raised by 10 points to 110 from 100 for the apartment and to 140 from 130 for the five-star hotel or department store. In particular, owing to an upward adjustment of the purpose index for the apartment, the basic price of the public housing will seem to be raised.

As the control rate of the individual building characteristics applied only at the calculation base of a capital gains tax or inheritance tax is modified, the additional rate of 40% will be newly levied for the high-rise apartments with advanced functions.

Accordingly, when people receive the new high-rise mixed-use apartment such as Tower Palace in Gangnam-gu, Seoul and Trump World before the basic price of public housing is announced, they must pay the inheritance tax or capital gains tax according to the increasing basic market price of the building. However, the residents of the existing high-rise apartments must pay the tax according to the basic market price of the public housing published last year.

Jin-Hup Song Ki-Jeong Ko jinhup@donga.com koh@donga.com