© Archyde.com. The government fixes the transfer tax-acquisition tax heavy tax system this year… Abolition of heavy tax when holding for more than one year
The government will significantly ease the heavy tax rate of capital gains tax on short-term holdings of less than two years this year. The heavy transfer tax system for multi-homed people, such as those with two homes in the area subject to adjustment, is expected to be virtually abolished.
The Ministry of Strategy and Finance recently embarked on the task of revising the tax law to reform the heavy transfer tax system. Heavy tax rates are imposed on short-term real estate transfer transactions and real estate transfer transactions held by multi-homed owners, and the plan is to revise the overall transfer tax system through a tax law revision to be announced in July.
First of all, when transferring a house held for a short period of less than two years, the burden of transfer tax is reduced. According to the current tax law, a single heavy tax rate of 70% is imposed on the transfer of a house that has been owned for less than one year, and 60% for more than one year and less than two years. The Ministry of Strategy and Finance plans to lower the heavy tax rate to 45% for houses owned for less than one year, completely abolish the heavy transfer tax for houses held for more than one year, and apply the basic tax rate (a progressive tax rate of 6 to 45%). If you own a house for more than one year, you can avoid heavy transfer tax.
The same standard applies to lot-to-lot rights with the same heavy tax rate structure as housing. If you hold the right to sell for more than one year, you are exempt from heavy taxation, and when you transfer it following holding it for less than one year, a 45% tax is imposed. Short-term capital gains tax relief is applied regardless of the number of houses.
The abolition of the heavy transfer tax for multi-homed people who were temporarily excluded until May next year is being strongly considered. Currently, 20 percentage points are imposed on those with two houses in the area subject to adjustment, resulting in a tax rate of 26 to 65%, and multi-homed persons with three or more houses are subject to a heavy tax burden of 30 percentage points, resulting in a tax rate of 36 to 75%. Including the local tax rate, the highest tax rate reaches 82.5%.
The Yoon Seok-yeol administration delayed the application of the heavy tax rate for one year on May 10 last year, immediately following its inauguration, and announced that it would extend the grace period to May 2024, which was extended for another year through a recently announced economic policy direction. The transfer tax can be suspended or suspended by amending the enforcement ordinance of the Income Tax Act at the government level without the consent of the National Assembly.
The abolition of the heavy duty system requires the National Assembly to amend the Income Tax Law. If the tax law revision bill is passed by the National Assembly at the end of this year, the transfer tax reform bill is expected to apply to transfers following January 2024. As the government announced its policy to lift some of the areas subject to adjustment remaining in the metropolitan area within this month, the effectiveness of the heavy transfer tax system is expected to virtually disappear.
Prior to the transfer tax, the government plans to submit a statutory amendment to the National Assembly in February to ease the heavy acquisition tax for multi-homeowners. Currently, heavy tax rates of 8% for owners of two houses in the area subject to adjustment and 12% for owners or corporations of three or more houses in the area subject to adjustment are applied, but the government has decided to reduce them to 4% and 6%, respectively.
Reporter Hwang Jeong-hwan [email protected]
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