Government Fine Tuning Real Estate Tax Rates

The government decided that it will apply new real estate policies only to those who are subject to the comprehensive property tax. The policies include imposing a property tax on a household basis, removing the ceiling of a 50 percent increase in property tax, and raising the effective real estate tax to one percent by 2009.

In other words, the new property policies to be unveiled at the end of this month are designed to increase taxes on those with high-priced houses or land, but lower the tax burden falling on the rest. Acquisition and registration taxes imposed when one buys real estate are expected to go down about 0.5 percent.

Cheong Wa Dae, the ruling Uri Party and the ministry of Finance and Economy said on August 23 that they would sharply raise capital gains taxes on owners with two homes regardless of their location in speculation areas or not, or price of the houses. But they are considering delaying the enforcement of the policy for more than a year.

Presidential aide on the economy, Jeong Mun-su, said in a KPF forum hosted by Korea Press Foundation at the Seoul Foreign Correspondents’ Club that “we are trying to lower acquisition and registration taxes to as low a level as possible even though we have to seek ways to complement revenues of local governments.”

The government and the ruling party are considering cutting acquisition and registration taxes currently set at four percent of housing prices by about 0.5 percent. With respect to real estate taxes, its maximum limit of a 50 percent increase from one’s payments the previous year will be eliminated for houses worth 600 million won or more (or on land worth four million won or more), which are also subject to the comprehensive property tax. But it will be kept under 50 percent for the rest.

They also decided to maintain the system where an owner of home worth over 600 million won would be subject to a discount in his or her capital gain tax liability if he or she owned the home for a long time.

Jeong said that “we are seeking a measure to ensure that the tax burden will not become dramatically heftier for pensioners with houses valued at over 600 million won.”

Ki-Jeong Ko koh@donga.com