Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Foreigners may face heavier acquisition taxes
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By Park Jae-hyuk
By Park Jae-hyuk
Foreigners could be slapped with heavier taxes than Koreans when buying houses here, as lawmakers consider tightening regulations on real estate investments by non-Koreans to curb skyrocketing house prices.
Independent lawmaker Lee Yong-ho recently called for a special acquisition tax on foreigners buying apartments and multi-unit dwellings.
“According to the land ministry, a two-year-old American owned a parcel of land for housing in Yongin, Gyeonggi Province, at the end of 2018,” he said Thursday. “Koreans may have to pay their rents to foreign landlords, while paying taxes to the Korean government. Measures to curb real estate speculation by foreigners are urgently needed. Singapore has already adopted a 20 percent special acquisition tax on foreigners.”
In Singapore, foreigners pay higher acquisition taxes than locals, who pay up to 15 percent, depending on the number of houses they own.
Canada's British Columbia introduced a 15 percent acquisition tax on foreigners in August 2016 after a rapid rise in Vancouver property prices due to investments by foreigners, including Chinese. The provincial government raised the tax to 20 percent two years later.
An aide to Lee said Friday the lawmaker is considering proposing a bill to introduce a regulation similar to Singapore's.
Rep. Kim Kyo-heung of the ruling Democratic Party of Korea told a local news outlet that the government needs to check whether the tightened real estate regulations discriminate against Koreans in favor of foreigners.
Data compiled by the Korea Appraisal Board (KAB) showed the number of building transactions by foreigners was 2,090 last month, the most since the KAB started collecting statistics in 2006. The number of house transactions in Seoul by foreigners was 418 last month, up from 291 a month earlier and 278 a year earlier.
The government has emphasized that foreigners have been subject to the same regulations on loans and the same taxation on owners of multiple houses.
Critics have rejected the claim, saying foreigners can avoid regulations on multiple home owners because the Korean government faces difficulties in checking whether they own properties overseas.
There is also speculation that foreigners ― most of whom are Chinese ― buy houses here after borrowing money from banks in their own countries to avoid the loan-to-value (LTV) ratio limit.
Myongji University professor of real estate studies Kwon Dae-jung, however, advised the government to ease real estate regulations on Koreans, rather than imposing stricter regulations on foreigners, if it wants to avoid controversy.
“Fair competition is one of the principles of a market economy,” he said.
Considering foreign investors have mentioned heavy corporate taxes and uncertain regulations as main reasons Korea cannot become the next premier financial hub in Asia, some experts fear the envisaged additional taxation on foreigners could further shrink their investments here, making Korea a less attractive country to make investments.