The government is reportedly reviewing a plan to divide dwellings by price brackets and differentiate tax burdens as it overhauls the comprehensive real estate tax. It aims to split them into three groups based on the "basic deduction" and "ultra-high-priced" thresholds to increase the burden on ultra-high-priced dwellings, often called the "smart one home."
According to relevant government ministries on the 26th, the government is analyzing post-reform revenue and changes in payer burdens for a comprehensive real estate tax overhaul that includes these details. A method to divide dwellings into three groups—basic deduction, medium burden, and ultra-high-priced—and differentiate the tax burden is reportedly under discussion.
The basic deduction group would remain a band with no comprehensive real estate tax burden, as it is now, and for the medium-burden group between the basic deduction line and the ultra-high-priced threshold, options include maintaining the current burden or raising it moderately. In contrast, for the ultra-high-priced group, the government is considering increasing the tax burden by subdividing the taxable base brackets or raising rates. The ultra-high-priced threshold is being discussed at 3 billion–5 billion won based on market price.
Lee Jae-myung, the president, on the 23rd proposed a differentiated tax system at the "National Grand Debate on Real Estate Policy." Lee said, "We will set an appropriate basic holding burden based on a typical one dwelling and offer relief for dwellings used for actual residence, for working- and middle-class dwellings, and for regional factors in the provinces," adding, "For luxury and ultra-high-priced dwellings, multiple dwellings, and clearly speculative nonresidential dwellings, we are considering adding weighted factors to create step-by-step differentiation."
A plan to shift the comprehensive real estate tax structure from the number of dwellings to the value of dwellings is also reportedly under discussion. Under the current system, rates and deduction levels vary by the number of dwellings owned, drawing criticism that, even with assets of the same size, tax burdens differ depending on how the dwellings are held. For example, a multiple-dwelling owner with three 1 billion won dwellings can face a higher rate than a single-dwelling owner with one 3 billion won dwelling.
The deduction system is also being reviewed to more actively reflect whether the property is used as a primary residence. Currently, a single household with one dwelling that has been held for more than five years can receive a 20%–50% tax credit depending on the holding period, and those age 60 or older can receive a 20%–40% tax credit depending on age, with the two credits overlapping up to a maximum of 80%.
The government plans to collect additional opinions at the National Grand Debate on Real Estate Policy chaired by Prime Minister Han Seong-sook on the 27th and announce the final draft of the tax law amendment early next month.