National Tax Service Launches Investigation, Toughens Taxes for Single Residences

National Tax Service will launch an on-site investigation into some 600 real estate agencies in Seoul, Gyeonggi and Chungcheong provinces.

The on-site investigation is mostly designed for entertainment and restaurant businesses which will be checked for tax evasion. This is the first time that tax investigators will be sent to real estate agencies.

Re-construction apartments that do not apply for business proposals until the housing construction promotion law is revised this July could collect regular subscriptions only when over 80 percent of construction is completed at those sites.

For apartments housing commercial shops and 300 households, only those who subscribed to the relevant passbook would be entitled to reside in those apartments by this July.

The government announced its 5.23 housing price stabilization measures after a meeting with the Construction and Transportation Minister, the Planning and Budget Minister and Minister of Government Administration and Home Affairs along with the Financial Supervisory Committee Chairman and National Tax Service Director. The event was held at the Gwacheon Government Complex and hosted by the Vice President and Minister of Finance and Economy Kim Jin-pyo.

The National Tax Service decided to send its officials to 600 real estate agencies alleged to have promoted and thereby overheated real estate market since last October.

The on-site investigation will mobilize the largest number of officials in history, totaling around 3000 people. Areas will cover Gangnam in Seoul, Gwangmyeong, Gimpo and Paju in Gyeonggi Province and other six major cities in Chungcheong Province.

Restrictions on distribution of re-construction apartments will be implemented only for those apartment complexes that do not apply for business plans by this July when regulations will tie in with housing supply.

Reselling distributorship for apartments with commercial shops will be banned after the related law is revised. However, those who apply for construction approval before July will be able to resell those properties.

The government plans to designate most city areas except some natural protection areas and a few islands along with Daejon, Asan, Chonan, Chungju and Chungwon as overheated speculation areas.

Holding-taxes will be dramatically raised and a dual taxation system will be put in place; a basic self-governing body will impose tax by item as well as unit tax, and then the central government will impose additional tax for 50,000 to 100,000 real estate holders which will then become distributed taxes for local self-governing bodies.

The government is also considering ways to levy a transfer tax on one household with one residence in the long-term.

Economic Vice President Kim said at a press conference that “there has been an argument over why Korea insists on a non-taxation system for one household with one residence. This problem should be more discussed in public, so that a transfer tax can function more effectively.”

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