Key facts
- South Korea proposed tax code revisions to increase property taxes on owners of high-value homes.
- The comprehensive real estate holding tax will shift from a home count-based system to one based on total home value.
- The threshold for the comprehensive real estate holding tax will be raised for single-home owners who live in the property.
- Capital gains tax deductions for long-term home ownership will be capped and their basis shifted to residency period.
- The proposals are expected to generate an additional 3.44 trillion won in tax revenue from 2027-2031.
- The tax code proposals will be submitted to the National Assembly by September 3.
South Korea has proposed significant revisions to its tax code, primarily targeting owners of high-value homes with the aim of creating a more 'reasonable' property tax system. The changes, which require approval from the National Assembly and the Cabinet, are intended to shift the tax burden towards those with multiple or expensive properties.
Key among the proposals is the revamp of the comprehensive real estate holding tax system. Currently based on the number of homes owned, it will transition to a system that considers the total market value of properties. Starting in 2028, the tax rate will be unified at 0.5 percent to 5 percent, regardless of whether an owner possesses one, two, or three or more homes. The threshold for this tax will be raised to 1.4 billion won for single-home owners who reside in their property, effectively exempting homes valued up to approximately 2 billion won. However, for single-home owners who do not live in their property, the basic deduction will decrease from 1.2 billion won to 900 million won.
Further adjustments include changes to capital gains tax deductions for long-term home ownership. Starting in 2028, these deductions will be capped at 2 billion won and further reduced to 1 billion won from 2029, with the basis shifting solely to the homeowner's period of residence. For homeowners of properties valued below 3 billion won and owned for at least 10 years, the basic capital gains tax deduction will see a tenfold increase to 25 million won. Temporary measures are also proposed to lower capital gains taxes for elderly homeowners selling homes in the greater Seoul area and purchasing new ones outside the region.
While a finance ministry official stated the revisions are not directly intended to stabilize housing prices, it is believed they could encourage owners of multiple homes to list more properties, potentially having a stabilizing effect on the market. Beyond property taxes, the revision includes new tax incentives for domestic production in strategic sectors like solar energy, semiconductors, and AI robots, and reorganizes tax benefits for start-ups. The government anticipates these changes will generate an additional 3.44 trillion won in tax revenue between 2027 and 2031.