The government is reviewing the "exclusion from heavy capital gains tax" benefit that has applied to business operators of purchased rental apartments in areas subject to adjustment. While general multiple-home owners will face greater pressure to sell after the "end of the heavy capital gains tax grace period" on May 9, registered rental housing that meets certain conditions can be excluded from heavy taxation, weakening incentives to sell, critics have said.
Koo Yun-cheol, Deputy Prime Minister and Minister of Economy and Finance, held a meeting of the Emergency Economic Headquarters and a meeting of ministers related to the economy and real estate on the 8th, saying, "We are discussing various measures so that properties that have been locked up will come onto the market after May 9 and go to end users," and added, "There has been criticism that the permanent benefit of exclusion from heavy capital gains tax for business operators of purchased rental apartments in areas subject to adjustment is excessive in terms of taxes fairness, so we are examining various options."
Under the rental housing registration system, various tax benefits have been granted on the condition of mandatory leasing for a certain period (typically eight years) and limits on rent increases, depending on the type and timing of registration. The problem is that for some registered rental housing, the benefit of exclusion from heavy capital gains tax can continue even after the mandatory leasing period ends. The government believes such benefits work as an incentive for long-term holding and could lead to "locked-up listings" after the heavy capital gains tax grace period ends on May 9.
Earlier, at a Cabinet meeting in February, the deputy prime minister noted, "We will set a deadline for sale so that the benefit of exclusion from heavy capital gains tax is granted only if the property is sold within a certain period after the end of the lease."
The deputy prime minister said, "The real estate market has moved away from its past overheated pattern and is entering a transition period being reorganized around end users," adding, "There are concerns that locked-up listings may appear after May 9, but the government's policy resolve is different from the past."
He continued, "While the government will focus on expanding the supply of dwellings in Seoul and the greater metropolitan area, we will block speculative demand and create an environment in which transactions for end use proceed smoothly," adding, "We will concentrate all capabilities so that the public can feel the results of increased dwelling supply."