Non-Resident Holding Tax Increasing by 20 Percent

From the year 2005, composite real estate tax will be applied to housing in which an owner of more than two properties in which he/she does not reside, and the taxation for such housings increases by 20 times more than the current property tax. For instance, a 35-pyong Tower Place apartment in Dogok-dong, Gangnam will have the composite real estate tax of 5,240,000 won, which is almost 18 times more than the current year’s 280,000 won.

Also from next year, the real estate holding tax (property tax and composite land tax) is expected to increase by two or three times. For the case of a 31-pyong Eunma apartment in Daechi-dong, Gangnam-gu, it will have the holding tax of 568,000 won next year compared to 271,000 won this year, increasing by more than two times.

The government discussed these policies at the “Real Estate Holding Tax Revision Promotion Council” held at the Bank Hall in Myeong-dong Chunggu, Seoul on October 31.

The government is setting policies to change the building assessment addition and subtraction standard rate applied to apartments from “area” to “central market price” from July next year. In addition, they are considering policies to increase the addition and subtraction rate from the current 60 percent to 100 percent.

The composite land tax levied from October next year will have the rate of assessment standard readjusting to a realistic level increased by more than 3 percent this year, adjusting it to the national average level of 39.1 percent. If the rate of assessment standard increases, the composite tax assessment standard in Gangnam area will increase by 34-52 percent.

Along with these, the government is implementing the composite real estate tax from the year 2005, which is one year earlier than the previous plan. Especially, the composite real estate tax will be applied not only to land but also to buildings, aiming to levy heavily on a single family owning more than two housings.

For this purpose, the government is considering three policies: counting housings all around the nation belonging to an individual and levying progressively, heavy levying on housings in which the owner does not actually reside with the progressive rates or the maximum rate of 7 percent, and heavy levying on buildings and land added together. The government is considering lowering the maximum rate by a slight rate if they are adopting these policies.

In addition, the following cases are exempted from the heavy taxing: if the owner of one housing is residing in another housing while renting the housing, if the owner owns two housings or more momentarily from an inheritance, houses for long-term renting business, small-scale housings such as studios, and countryside housings in small counties.

The government is planning on notifying the dates of the composite real estate tax payment from October, 2005 after finalizing the taxation system of the first half of next year and passing it through the National Assembly.

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