Posted May. 12, 2005 23:25,
As of 2007, transfer income taxes of all real estate such as houses, land and shops, will be assessed by actual transaction costs.
This will bring a large increase in transfer tax burdens.
Currently, if not subject to particular circumstances, such as designated speculation areas or one household owning three houses, the transfer tax is assessed by tax standard value (in the case of apartments) or official land price (in the case of land), which is lower than the actual price.
On May 12, at a press conference, Deputy Prime Minister and Minister of Finance and Economy Han Duck-soo announced, At next years regular session of the National Assembly, we will submit a revised income tax bill entirely converting the taxation standard of transfer taxes to the actual transaction price that will be planned to come into effect by 2007.
The deputy prime minister disclosed, However, the fundamental rule is to maintain current tax exemption conditions, such as tax exemptions of one household owning one house.
Accordingly, the taxation standard will be converted back to the actual transaction price for the first time in over 20 years, since 1983.
Examples of the current tax exemption conditions are one household owning one house, disposal of farmland that was cultivated for over eight years, and mutual exchange of farmlands.
The current circumstances in which transfer taxes are assessed by actual transaction prices are transactions of land in the 41 land speculation areas such as Cheonan, Chungnam, transactions of housing in the 32 housing speculation areas such as Gangnam-gu, Seoul, transactions of real estate in such cases as one household owning over three houses, high-priced houses of over 600 million won, and transaction through camouflaged move-ins.
Last year, the number of real estate transactions that were hit by transfer taxes was 870 thousand among total real estate transactions of over 1.5 million. In addition, only 28 percent, 240,000, of the transactions were levied with transaction taxes based on actual transaction prices.
The director general for Tax Affairs at the Finance Economy Ministry, Lee Jong-gyu, communicated, The number of areas where the transfer tax is already taxed by actual transaction prices are considerable, and it is difficult to estimate how much tax revenues will increase because the yields of taxes are volatile due to prices and the number of transactions, adding, We will decide whether to decrease tax rates after careful consideration.
Meanwhile, Deputy Prime Minister Han announced, Since domestic demand isnt recovering as anticipated, the application of elastic tax rates of special consumption taxes subject to such products as automobiles will be extended to the end of this year.
The government has been applying elastic tax rates to special consumption taxes of passenger cars from March 24 of last year to the end of last year, alleviated tax burdens by 20 percent, and has already extended the measure to this June for the recovery of domestic demand.