By Lee Hyo-sik
Staff Reporter
People with a single house and who have resided there for an extensive period of time will be exempt from paying capital gains taxes when selling from October, two months earlier than initially scheduled. It is part of government efforts to ease the property tax burden on middle-income brackets and increase home supplies as early as possible.
The Ministry of Strategy and Finance said Sunday that anyone who owns and resides in a single home worth less than 900 million won for three years and two years, respectively, will not pay capital gains taxes when the property is sold, beginning next month.
Currently, the tax-exemption threshold stands at 600 million won. Owners of a single house in Seoul and its adjacent areas are subject to both the three-year ownership and two-residence requirements, while those in provincial areas can sell their units without paying capital gains taxes as long as they own them for more than three years.
Also, people who have two houses in provincial areas, each worth less than 300 million won, will also not be subject to punitive capital gains taxes, up from 100 million won. Heavy taxes on capital gains have been cited as a main factor restricting home supplies on the market and dampening transactions in the housing sector.
Capital gains taxes on real estate currently range from 9 percent to 36 percent. But the rates will be cut by 3 percentage points to 6 to 33 percent next year.
``In order to revitalize housing transactions as soon as possible, we decided to ease the capital gains tax regime on people holding one house, two months earlier than initially planned. Reducing capital gains tax rates and tax burden on long-time homeowners needs to be approved by the National Assembly. But the raising of the threshold to 900 million won from 600 million won for capital gains tax exemption can go into effect as soon as Cabinet approves it, which will be done later this month,'' said Baek Un-chan, director general of the ministry's property, VAT and consumption tax bureau. He said the early implementation would help encourage people to buy and sell houses.
Meanwhile, the ownership and residence requirements will be strengthened, beginning next July, as single home holders of less than 900 million won will be required to own and reside for at least three years in Seoul and five surrounding satellite cities in order not to pay capital gains taxes when the units are sold. The step is aimed at benefiting single home holders who actually reside in their unit, while making it more unprofitable for people who own multiple homes for investment purposes.
Also, single house owners in provincial areas will be required to reside in the house for at least two years to benefit from the tax exemption, on top of more than three-year ownership.