Housing Acquisition Tax Cut Announced

As early as next month, the rate of registration and acquisition taxes will be lowered as much as 50 percent when buying houses such as apartments.

The government and the ruling Uri party announced this plan to lower real estate transaction tax rates on August 3 after a consultation meeting at the National Assembly.

Under this plan, the registration and acquisition taxes, which are required to be paid after buying new houses, will be cut almost in half to 2.0 percent (with registration tax of 1.0 percent and an acquisition tax of 1.0 percent) from the current 4.0 percent (with 2.0 and 2.0 percent, respectively).

When it comes to individual transactions, those taxes will be lowered by 0.5 percent point to 2.0 percent (with acquisition taxes of 1.0 percent and registration taxes of 1.0 percent) from the current 2.5 percent (with 1.5 percent and 1.0 percent, respectively).

In this case, the transaction tax (including regional education tax) on an apartment traded at 400 million won will be down from the current 17.60 million won to 8.8 million won.

The government and the ruling party are planning to revise the local tax law at the special session of the National Assembly held from August 21 and implement a lower tax rate immediately.

With regard to lowered tax revenue of local governments stemming from the change, the government will compensate entire shortfalls from the comprehensive real estate taxes, which is a national tax.

The government and the ruling Uri Party will apply the property tax cap system, which they announced last June, retroactive to this year by revising relative laws at the special session of the National Assembly.

The property tax system was introduced to make sure that the increase rate of property tax will not exceed 5.0 percent compared to previous year if the real estate is traded at less than 300 million won and 10 percent with the real estate worth less than 600 million won.

However, there is an exception to this law, but in order to prevent local governments from lowering property taxes to appeal to their constituency, it is only allowed when unusual needs are incurred, such as by natural disaster. In such cases, the tax will be applied elastically during the year.

Meanwhile, the opposition Grand National party is asking for another 0.5 percent point decrease in the real estate transaction taxes, saying it is not low enough.

The opposition party is now hoping to come up with some measures and succeed in further lowering the cap on property tax increases at the regular session of the National Assembly starting September.

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