“Comprehensive Real Estate Tax” Set to Be Introduced Next Year

Those who own two 30-square-meter-plus apartments in the Seoul metropolitan area will have to pay more than six million won in property taxes if the government introduces a new comprehensive real estate tax next year without revising its current tax rate or taxation table.

Even after the readjustment of the taxation table, an estimated 533,000 will have to pay the comprehensive real estate tax, far more than the initially expected 100,000.

The Korea Institute of Public Finance announced projections for the new tax on buildings and ways to revise the tax table at a public hearing on July 22 at its headquarters.

As for the tax on buildings, the government think-tank made two separate proposals: first, it will be levied when the total value of houses exceeds a certain mark and second, low-priced houses will be exempted, but taxes will be levied on those who own two or more houses.

The institute said if the first proposal is adopted side-by-side with the current taxation table, the maximum total of property taxes for an individual will be 6.33 million won.

Currently, for a 33-square-meter apartment in newly developed towns in the Seoul metropolitan area, the taxation table puts taxes at 20 million won, and the property tax is 110,000 won, However, starting next year, under a new taxation table, about 30 million won will be levied upon it.

Therefore, about 60 million won will be levied on two 33-square-meter units, plus a building tax of 6.33 million won, which will be 27.5 times bigger than the current average property tax of 230,000 won (a per-unit tax of 115,000 won).

An adjustment of the tax margin and rate will reduce the total amount of taxes that an individual should pay, but it will increase the number of taxpayers who should pay additional taxes to a maximum of 530,000.

If low-priced houses are exempted from the building tax, an increase in taxes is inevitable in the Seoul metropolitan area where houses are relatively expensive.

“After the introduction of the comprehensive real estate tax, the building tax will jump while the land tax will stand where it is now,” said institute researcher Kim Jeong-hoon. “Public burdens should be lessened through a readjustment of the tax rate and table.”

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