Posted March. 16, 2009 09:48,
Owners of three homes or more from today will benefit from lower capital gains taxes of six to 35 percent for the sale of one unit instead of 60 percent.
All punitive capital gains and corporate taxes that individuals or companies have had to pay when selling land for non-business purposes will also be lifted. The taxes had been introduced under the previous Roh Moo-hyun government to curb real estate speculation.
The Strategy and Finance Ministry said yesterday that it drafted a set of tax revisions to revive the economy to shore up the real estate market and stabilize the peoples livelihood.
The ministry plans to submit the bill to next months extra parliamentary session. Provisions of the cut in the capital gains tax will take effect immediately today, regardless of its passage by the National Assembly.
The revision bill seeks to cut the capital gains tax imposed on owners of three homes or more from 60 percent (45 percent from this year to next year) to six to 35 percent when such a homeowner sells a unit this year and between six and 33 percent when selling a unit next year.
For instance, if a owner of three homes reaps 100 million won (67,300 U.S. dollars) in profit by selling an apartment he or she has owned for more than two years, the owner had to pay 43.44 million won (29,270 U.S. dollars, including the resident tax and excluding tax deductions), or 45 percent of the capital gain. The new rule will cut the tax to 19.79 million won (13,330 dollars) if the home is sold this year and to 18.84 million won (12,700 dollars) next year, or a 55 to 57 percent reduction in the capital gains tax.
Under the old law, an owner of two homes was subject to the basic tax rate only until next year, but now will pay the basic rate even after 2011 following a tax reshuffle.
The rate of capital gains tax imposed on individuals selling land for non-business purposes had been 60 percent (66 percent including resident tax). The basic tax rate, however, will be applied to such property from today. The rate of capital gains tax imposed on companies selling land for non-business purposes is as high as 57.2 percent of the gain, including corporate tax (11-22 percent) and capital gains tax (30 percent). From today, however, only the corporate tax, whose rate will decline to 1020 percent from next year, will be imposed.
The government will also reintroduce a corporate restructuring tax instituted temporarily during the Asian financial crisis for two years to help speed up corporate restructuring.
To secure more foreign liquidity, non-residents or foreign companies investing in government bonds and currency stabilization bonds will be exempt from the capital gains tax and the corporate tax on interest income.
Ethnic Koreans overseas and other non-residents who purchase existing homes will be exempt from heavier taxes on multi-home ownership. They will also pay lower or no capital gains taxes for unsold new apartments or newly built ones for five years just like Korean citizens for home purchases made from today through February 11 next year.