Posted November. 28, 2008 03:00,
Those who buy unsold apartments in provincial areas next year will be exempt from the capital gains tax for five years.
The exemption will also benefit those who own more than one home, effectively scrapping a double tax on multiple home owners living in the provinces.
The Land, Transport and Maritime Affairs Ministry Wednesday briefed the ruling Grand National Party on the plan at a meeting between the party and the government at the National Assembly, according to sources from both the ministry and the party.
"Regardless of size or price, capital gains taxes will not be imposed for those who purchase unsold apartments in provincial areas over the next five years, said a ministry official. "After consulting with relevant ministries, we will present detailed plans."
The new tax plan seeks to prevent the construction slump from spreading to the financial sector amid a growing backlog of unsold houses despite a raft of government measures.
For example, if one buys an unsold apartment worth 300 million won (203,000 U.S. dollars) and the apartments value rises to 400 million won (270,000 dollars) five years later, the owner will be exempt from taxes on 100 million won (676,000 dollars) of capital gains.
If the price of the apartment rises to 500 million dollars (338,000 dollars) seven years later, the owner need only pay taxes on 100 million won (676,000 dollars) in capital gains, because he or she doesnt need to pay taxes on a price difference of 100 million won (676,000 dollars) arising over the five years.
As multiple homeowners are also expected to benefit from the exemption, double taxation on unsold apartments built in provinces will be scrapped.
At the end of August, 157,291 apartment units remained unsold and 86 percent (or 134,902 units) of them were in provincial areas.
The government will submit a revised tax bill to the National Assembly and implement it immediately upon approval. Chances are that the revised law will take effect next year, however, since the exemption will only apply to houses purchased next year.
Easy passage of the bill is unlikely, however, because of resistance from the opposition. As housing prices in provinces are not expected to see much appreciation, the government cannot meet its target of increasing housing demand, some experts said.