Capital Gains Tax Exemption Given Only to 2-Year Residents

Starting from next year, single-home owners in Seoul, Gwachon City and five newly-built cities in the Seoul Metropolitan Area have to possess their home for at least three years and live in it for two if they are to be exempted from capital gains tax. Currently people are exempted from the tax if they own a house for just three years.

Starting September 5, the mandatory proportion of small-sized housing in a reconstructed apartment complex will be increased from 20% to 60% in places designated as highly-speculative areas in Seoul.

A tax investigation will be launched against 448 people who purchased real estate in Gangam, south of Seoul from January to July of this year and are suspected of property speculation.

These are the major measures of "the Housing Price Stabilization Policy" announced by the Ministry of Economy and Finance, the Ministry of Construction and Transportation and the National Tax Service.

Under the new rule, the Ministry of the Economy and Finance will give capital gains tax benefits only for those who have only one house, possess it for more than 3 years and have lived in it for over 1 year. But from January 1 of next year, the required residing period will be increased to over 2 years.

The conditions for tax benefits are strengthened in Seoul, Gwachon City and the 5 newly-built cities in the Seoul Metropolitan Area. Homeowners in the rest of the nation will be exempted from the capital gains tax if they meet the existing requirements. The ministry plans to revise the tax laws some time within this month.

The Ministry of Construction and Transportation will increase the mandatory share of 85 square-meter (25.7 pyong) modest-sized dwellings in reconstructed apartment complexes from 20% to 60%.

The new policy will be applied to all reconstruction apartment complexes with more than 20 housings that are located in highly populated parts of the Seoul Metropolitan Area and seek reconstruction permission from September 5.

Also starting early next year, when apartment complexes in speculative areas are given the green light for reconstruction, their residents will be banned from selling their membership to the reconstruction unions.

Owners of the apartments, which already got reconstruction permission, would be allowed to sell the membership only once.

To implement the policy, the construction ministry will rewrite `the City and Residential Environment Act` by the end of this year.

The new law is expected to affect 91,768 or 35% of 264,625 households, which got reconstruction permission and are seeking approval to form a reconstruction union.

The National Tax Service will conduct tax investigations into 448 individuals who bought reconstruction apartment houses and buildings with both housing units and commercial stores built in property-speculative areas in Seoul between January to July. Those individuals are suspected of tax evasion.

The authority also plans to take stock of transactions involving the buying rights for apartments in Gangam.

The National Tax Service said that it is closely looking into 1,708 individuals who sold the housing buying rights of 50 Gangnam apartment complexes of which the price went up by more than 40 million won between February last year to May of this year.