Real Estate Transaction Taxes to be Reduced

Starting next year, corporations will be subject to a comprehensive real estate taxation scheme, which has been levied only on individuals, when they posses excessive real estate such as buildings, stores, and parking lots for business purposes.

However, implementation of such a measure is likely to be delayed by one year because some members of the ruling party are suggesting a one-year delay on levying the tax.

The government and the ruling Uri Party held a senior members council on party affairs yesterday with the participation of Prime Minister Lee Hae-chan, Uri Party Chairman Lee Bu-young, and Finance Minister and Deputy Prime Minister Lee Hun-jai, in which they decided to introduce a comprehensive real estate tax which is progressively levied on those who own an excessive number of houses or estates.

Accordingly, the tax base for houses and estates is expected to increase to 50 percent of a real estate’s official price and standard market price, thereby augmenting the burden of the nation’s possession taxes.

The government, on the other hand, decided to reduce transaction taxes such as the acquisition tax and the registration tax, which are levied on housing transactions and the purchase of new houses.

Lee Jong-kyu, the chief of the tax and customs office of the Ministry of Finance and Economy, said, “In accordance with the new tax system, a comprehensive real estate tax will be levied when one possesses real estate for business purposes that is more than a certain standard. However, when it comes to transaction taxes, we plan to reduce the tax rate, which is currently 5.8 percent.”

This decision was made thanks to the members of the ruling Uri party who vehemently demanded the reduction of the transaction taxes at the council.

It was also pointed out that if it raised possession taxes without reducing transaction taxes, the government will likely face serious national resistance against taxes.

“To prevent the radical increase of possession taxes, we are also considering putting a cap on the amount of the tax, “ said Lee.

The Ministry of Finance and Economy, after settling measures in an additional council meeting which is scheduled to open this week, plans to submit the bill to the National Assembly. The new tax system is slated to take effect starting from next year.

Ji-Wan Cha Ji-Wan Cha cha@donga.com yhchoi65@donga.com