Higher Real Estate Taxes Announced

Starting January 1, 2006, the price of studio apartments and commercial buildings located in the capital region, including Seoul, and major five metropolitan cities will go up 15 percent and 16.8 percent on average, respectively.

The government-announced prices will serve as the basis of its transfer, inheritance, and donation taxes, so the tax burden in these areas is expected to grow.

The National Tax Service (NTS) yesterday unveiled the standard prices of 254,797 studio apartments and 309,385 commercial buildings in the capital area and five metropolitan cities that will take effect starting January 1.

This government-announced prices will be posted on the NTS homepage (www.nts.go.kr) starting at 6:00 p.m. on December 30, and they will be applied to transfer, inheritance, and donation taxes after January 1 of next year.

The standard prices of commercial buildings and studio apartments are not to be applied to local taxes such as property, acquisition, and registration taxation. Local taxes will be imposed based on the officially assessed individual land prices and the statutory standard prices for buildings.

The number of commercial buildings and studio apartments subject to the standard prices next year has increased by 74,833 and 80,400, respectively.

Some 84 percent, or 473,273 units, are concentrated in the capital area, including Seoul, Incheon, and Gyeonggi Province.

The NTS raised the proportion of the market price factored in the standard price (ratio of market prices over standard ones) from 60 percent to 70 percent. As a result, the ratio has jumped by 15.0 percent and 16.8 percent for studio apartments and commercial buildings, respectively.

Starting this year, the NTS will announce the stand price of studio apartments whose owners and residents differ, with gross floor areas of over 3,000 square meters (907.5 pyeong), or in commercial buildings with 100 units or more.

The buildings with the highest standard average-per-pyeong apartment prices were Shinpyunghwa Fashion Town in Shindang-dong, Jung-gu, Seoul, with prices of 44.44 million won per pyeong, and Building G of the Tower Palace in Dogok-dong, Gangnam-gu, Seoul, with prices of 10.74 million won per pyeong.

The number one commercial complex of the Tower Palace in Dogok-dong recorded the biggest jump, as its standard price went up 58 percent from this year. The Kolon Tripolis in Geumgok-dong, Bundang-gu, Seongnam-si, Gyeonggi Province posted the most significant rise among studio apartments with 46.8 percent.

The national tax authority explained that the government-announced price was applied differently, depending on floors or even locations within the same building.

Eun-Woo Lee libra@donga.com