Property Tax Increase Up to 23.7 %

Property taxes of apartments with official price of over 300 million won in real estate speculation zones surrounding the Seoul metropolitan areas will be raised up to 23.7% from next year.

The Ministry of Government Administration and Home Affairs announced Dec.20 adjusted guidelines for property tax applications that the standard value assessment rate of apartment houses in the real estate speculation zones will be raised to 4 to 30% from the current 2 to 10% and encouraged local governments to adopt the raised assessment.

According to the adjusted guidelines, in accordance with the official price set by the National Tax Office, the increased tax rate of apartment houses with the price of between more than 300 million won and 400 million won will be 4%, between more than 4 million won and 500 million won will be 8%, between more than 5 million won and 1 billion won will be 15% and between more than 1 billion won and 2 billion won will be 30%.

As a result, it is expected that property taxes of around 178,000 apartment houses with the National Tax Office-assessed value of more than 300 million won in the real estate speculation areas including Seoul and its vincinities such as parts of Namyangju, Goyang, Hwasung, and Incheon areas will increase by 8.3% to 23.7%.

In case of a 30-pyong D apartment worth of 400 million won in Youngsan, Seoul, the owner paid 120,000 won as property tax this year, but he will pay 130.000 won, up 8.3%, next year. And in case of a 78-pyong H apartment worth of 2.6 billion won in the Kangnam district, the owner will have to pay 3,503,000 won, 23.7% up from this year’s 2,832,000 won, as property tax next year.

However, the adjusted guidelines have some exceptions. If governors or mayor in real estate speculation zones judge that it is necessary to curb a sharp increase in tax burden of citizens and to strike the price balance among different areas, the adjusted standard tax assessment rates can not be applied or modified with local governments’ approval.

In addition, Gwacheon and Bundang city, which was not designated as real estate speculation areas, will be allowed to apply the adjusted rates if heads of the concerned local governments decide it is necessary, when the areas are included in the speculation area in the future.

As the result of the Ministry’s decision, each local government will determine the standard tax assessment rates of the year 2003 by the end of this month and notice the public of the adjusted official prices and which will take effect from January next year.

The adjusted standard tax assessment rates are far less than up to a 50% increase in property tax which the Ministry had previously suggested in last September. However, the Ministry backed down from its previous position because of strong demands for a sharp decrease in property taxes from some local governments, such as Seoul and Gyonggi Province.

Hyun-Doo Lee ruchi@donga.com