On the 21st, the Yoon Seok-yeol government announced ‘the rental market stabilization plan and the real estate normalization task for the third quarter’. The announcement also included measures to ease the burden of comprehensive real estate tax. This year, the publicly announced real estate prices soared, raising concerns that the tax burden would increase. Previously, plans such as a reduction in the fair market value ratio (100% → 60%) and the introduction of a special deduction of 300 million won for one household per household this year were announced.
Temporary two-homeowners, owners of some inherited houses, and owners of low-cost local housing can benefit. Among them, if you look at the contents of inherited housing, even if a single householder inherits a house, it is not considered a multi-family house when tax is levied for at least 5 years. In addition, if the announced price of the inherited house is 600 million won or less (300 million won or less in non-metropolitan areas), or if the ownership ratio is 40% or less regardless of the price, benefits are granted to one homeowner per household even after 5 years have passed.
Sharing the shares in the inherited house reduces the ownership tax burden
If so, how much will the estate tax be reduced when three children (or a spouse and two children) inherit a house and share a third of the house? The Korea Economic Daily commissioned a simulation by Woo Byung-tak, head of the real estate team at Shinhan Bank’s WM Consulting Center. It has been 5 years since Mr. A, who owns Eunma Apartment in Daechi-dong, Seoul (exclusive area 84.43 m², published price 2.026 billion won) inherited a 33.3% stake in Hannam The Hill in Hannam-dong, Seoul (exclusive area 235.31 m², published price 5.4 billion won) assumed The fair market value ratio was set at 60% by reflecting the standards included in the new government’s economic policy direction.
As of before the implementation of this measure, there is no benefit for one house per household, and after the implementation of the measures (revision and enforcement of the Tax Act), one household per household can receive benefits. According to the simulation results, the tax imposed on Mr. A will be reduced by a quarter from 43.55 million won to 9.77 million won depending on the application of the measures. The total ownership tax burden, including property tax on each house, will be reduced from 65.48 million won to 24.95 million won.
The difference is larger compared to when the fair market value ratio is applied as 100%. If the fair market value ratio does not decrease and there is no benefit to be considered as one house per household related to the equity ratio of the inherited house, Mr. A will have to pay 86.98 million won in tax. The total property tax that A has to pay is 117.6 million won. If this measure is applied to the fair market value ratio of 60%, the ownership tax will be reduced by 92.65 million won.
Temporary reduction of tax burden for two-family homeowners
How much would the estate tax to be borne by temporary two-family homes and local low-priced homeowners have been reduced? The Ministry of Strategy and Finance simulated this and announced it. The Ministry of Strategy and Finance assumes a 65-year-old B, who owns a house worth 1.5 billion won (US$1.5 million) for 5 years and then owns another house worth 1.5 billion won (US$1.5 million) for the purpose of moving. As of before the implementation of this measure, Mr. B had to pay 32.54 million won in tax, but when the tax law was revised, he would only have to pay 4.27 million won. However, if Mr. B does not dispose of the old house by two years after acquiring the new house, the reduced tax amount and the amount equivalent to interest will be additionally collected.
What if Mr. C, who has the same conditions as Mr. B, bought a house worth 100 million won in an eup/myeon area other than the metropolitan area or metropolitan area? Previously, you had to pay 3.41 million won, but with the change in the system, the tax burden will be reduced to 250,000 won.
Experts predict that if the property tax law is revised according to the government’s plan, the burden of property tax on inherited house owners and temporary two-home owners will be greatly reduced. In addition to this, the government plans to revise the tax rate, etc., when announcing the tax law revision next month. A lower tax rate could further ease the burden. However, to amend the tax law, a majority vote in the National Assembly is required. If the Democratic Party, which holds a majority in the National Assembly, opposes it, it means that the law cannot be amended.
Reporter Do Byung-wook dodo@hankyung.com
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