Real Estate Tax Could Triple This Year

Real estate-related taxes, including property taxes, and Korea’s Officially Assessed Reference Land Price (OARLP), used as the basis for compensation for land development projects, increased by an average of 17.81 percent this year, according to a government announcement yesterday.

In response, those owning land in the Gangnam area are expected to pay more property and comprehensive real estate taxes. Their burden could increase three times compared to last year.

The Ministry of Construction and Transportation (MOCT) announced yesterday that the country’s OARLP increased by an average of 17.81 percent from the previous year, and that the OARLP in Seoul, Incheon, and Gyeonggi Province, five metropolitan cities excluding Incheon, and other areas went up by 20.76 percent, 7.84 percent and 12.25 percent, respectively.

The country’s OARLP increased by 19.34 percent in 2004 and 15.09 percent in 2005, and the accumulated increase rate of the OARLP since the inauguration of the incumbent government has been 61.81 percent.

Yeongi County and Gongju City in South Chungcheong Province, designated as new administrative city locations, saw their OARLPs go up by 60.93 percent and 40.01 percent, respectively.

The Gangnam area, Songpa-gu, Seocho-gu in Seoul, and Bundang-gu, Pyeongtaek City, and Yongin City in Gyeonggi Province saw their OARLPs go up by 37.79 percent, 34.74 percent, 25.46 percent, 44.94 percent, 30.85 percent and 30.26 percent, respectively.

Park Sang-wu, the MOCT’s official in charge of land planning, said, “The average increase rate of land price nationwide stood at 4.98 percent last year, but the government increased the OARLP more than actual land prices in a bid to seek fair taxation.”

Those who live in areas where the OARLP went up greatly are expected to pay up to three times more property taxes, including comprehensive real estate taxes, than last year.

This is because the comprehensive property tax code increased from 50 percent based on OARLP last year to 70 percent this year, and because the ceiling on property taxes went up from 150 percent last year to 300 percent this year.

Meanwhile, the MOCT created controversy because it did not explain the changes in its system for OARLP assessment in advance.

If the OARLP was calculated by the previous system, this year’s OARLP would have increased 17.94 percent, and its accumulated increase rate for the last three years would be 78.02 percent.

Regarding the controversy, Park explained, “The government changed the system because the system to assess increasing land values failed to reflect the increase in land prices nationwide until last year.”

If landholders who take issue with the OARLP announcement file a protest against the MOCT by March 30, they will be eligible for a review process that will last through April 20.