Property Tax to Fall From March 20
By Lee Hyo-sik
Staff Reporter
The government said Friday that owners of high-priced homes will pay less capital gains taxes when selling their properties from March 20 as part of its efforts to increase the housing supply and revitalize the sluggish real estate market.
This is the Lee Myung-bak administration's first move to ease rules on the property market. During his presidential campaign, the President pledged to lessen property tax burdens on homeowners by lowering capital gains and transactions taxes, while overhauling the comprehensive real estate tax levied on owners of high-priced homes and land.
According to the Ministry of Strategy and Finance, the Cabinet will pass the revised Income Tax Law on March 11 to lower capital gains taxes on owners of one house. The ministry said the revised law will go into effect 10 days later.
Under the current law, capital gains taxes can be exempt by up to 45 percent for a long-time holder of a house. The revision is to raise the figure by 4 percentage points each year up to 80 percent for those who hold a single house for 20 years or longer.
For instance, under the current system, if an individual who bought a house at 210 million won 15 years ago sells his home for 1 billion won, he receives a 40 percent exemption rate on his capital gains of 790 million won.
The owner pays 49.5 million won in capital gains taxes. But under the revised law, the owner would get a 60 percent exemption rate and pay only 32.6 million won.
As for an individual who purchased a house at 43 million won 20 years ago and sells it now for 1 billion won, under the revision, the owner will be only asked to pay 15.4 million won, down from current 62.6 million won.
The ministry estimates that 230,000 households, or 80 percent of single house owners, will benefit from the revision, resulting in a 110 billion won reduction in tax revenue.
A ministry official said the revision will encourage many owners of high-priced homes to sell their holdings, increasing housing supplies and reinvigorating the stagnant real estate market.
Along with cutting capital gains taxes, the government had planned to lower transaction taxes this month. But the governing Grand National Party decided not to reduce the property transaction tax during an extraordinary session last month, saying it first needed to come up with measures to make up for the drop in tax revenue of municipal governments. The property transaction tax is part of local taxes.
The party said it will deal with the issue during a plenary session in June.