The government is reviewing a plan to abolish the heavy tax rate on multi-homeowners and impose price-based taxes. Its goal is to reduce the tax burden by lifting the punitive tax levied on multi-homeowners, which was introduced by the former Moon Jae-in administration. However, considering the current minority government, the heavy taxation of comprehensive real estate tax may be abolished in stages rather than all at once.
According to the Ministry of Strategy and Finance on Thursday, the government is considering a plan to include such measures in its “2022 Amendments to Tax Laws” to be announced on July 21. The ministry is reviewing a plan to unify the comprehensive real estate tax rates that are applied differentially for owners of a single home (two homeowners in non-speculation monitoring areas) and owners of two or more homes in speculation monitoring areas (three or more homes in non-speculation monitoring areas). Once amended, the heavy tax rate for multi-homeowners will be abolished, and instead, taxes will be levied according to the price of the house.
The current comprehensive real estate tax rates range from 0.6 to 3.0 percent for single-homeowners and 1.2-6.0 percent for owners of two or more homes in speculation monitoring areas. The comprehensive real estate tax rates, which were originally 0.5-2.0 percent regardless of the number of houses, were amended twice. As of Sept. 13, 2019, the tax rates went through a change in which differential rates were applied based on the number of homes, and the highest tax rate was raised to 6.0 percent last year. Accordingly, there were criticisms that the tax burden for multi-homeowners is excessive.
Now, the government is also considering adjusting the upper tax burden so that the tax rates can be applied differentially depending on the number of homes owned. Currently, the upper limit of the tax rate is 150 percent for single homeowners and 300 percent for owners of two or more homes in speculation monitoring areas. As for two-homeowners in speculation monitoring areas, there were arguments that the tax burden was excessive because the upper limit goes up from the initial 200 percent to 300 percent.
The abolition of the comprehensive real estate tax rates for multi-homeowners, which was a key policy creed of the Moon Jae-in administration, is highly likely to lead to strong opposition from the opposition party. With the current minority government in place, the government is considering to slow down the pace of comprehensive real estate tax abolition by significantly lowering the heavy tax rate for multi-homeowners. As the Democratic Party of Korea is preparing a reform bill with the objective of lowering the comprehensive real estate tax rates for multi-homeowners while maintaining the framework of the heavy penalty system, a compromise with the government's proposal may be reached.
Hye-Ryung Choi email@example.com