A bill that would allow a one-time contribution of up to 600 million won to an individual retirement pension (IRP) when selling a home in the greater Seoul area and buying a home in a non-capital region has been introduced in the National Assembly. IRPs defer taxation until the pension is received and are taxed at a low rate when paid out, making them known as a representative tax-saving product. The annual contribution limit is capped at 18 million won, and the core of the bill now introduced is to lift this cap.
According to the National Assembly on the 18th, Park Min-gyu of the Democratic Party of Korea introduced a "Partial Amendment to the Income Tax Act" reflecting this plan. To rein in skyrocketing home prices in the greater Seoul area, the Lee Jae-myung administration rolled out a series of real estate measures last year, including the "June 27 loan regulations" and the "Oct. 15 housing market supply plan," and the latest amendment is in the same vein.
Under the amendment, a person who sells a dwellings in the greater Seoul area, buys a dwellings in a non-capital region, and completes resident registration transfer to that area can deposit up to 600 million won from the dwellings capital gains into an IRP account. An IRP defers taxation on revenue until the pension begins and, even after commencement, is taxed at a minimum rate of 3.3%.
Thanks to these advantages, it is considered an essential account for growing an asset. Because the annual contribution is limited to 18 million won, some personal finance enthusiasts have voiced disappointment, and the current Income Tax Act amendment addresses this shortcoming. To prevent people from reaping only the benefit of expanded IRP contribution limits, the bill also includes a provision to revoke the benefit if the person acquires a dwellings in the greater Seoul area again or transfers resident registration back to the greater Seoul area within 10 years.
Park Min-gyu said, "The rise in dwellings prices and supply shortages in Seoul are difficult to resolve with simple regulations," adding, "This bill will serve as an institutional mechanism that allows households that sell dwellings in the greater Seoul area to transfer to the provinces while ensuring old-age security."