Minimum 35% Increase in Tax despite Fall in Housing Prices

It was recently disclosed that this year, the comprehensive real estate tax per house will rise by more than 40% on average.

In particular, in some parts of Seoul, such as Gangnam, the comprehensive real estate tax will more than double despite the fall in housing prices compared to last year; and even the tax authority is worried that a serious resistance against taxation will arise.

On November 8, a senior official of the National Tax Service said, “The comprehensive real estate tax on privately owned houses will rise by 35% in any case, regardless of the changes in housing prices, because the official price which is the standard upon which this tax is calculated rose steeply and the percentage of market prices reflected in the taxation standard also rose.”

The official price of community housing nationwide rose by 22.9% on average this year, and the market price percentage in the taxation standard increased from 70% to 80%. According to an estimation by the National Tax Service, this is enough to raise the comprehensive real estate tax on privately-owned houses to 35% automatically.

But considering that the official price of houses valued at over 600 million won rose by 31.5% on average, it is expected that the tax to be paid by house-owners, upon whom the comprehensive real estate tax is imposed, will increase by more than 40% on average.

Because the official price is decided based on the figure on January 1 every year, changes in price that occur after this date are not considered.

Actually, the official price of a 112m² (34 pyeong) Eunma Apt, Daechi-dong, Gangnam-gu, jumped significantly from 681 million won last year to 1.08 billion won this year and the market price fell from 1.35 billion won at the end of last year to around 1.1 billion won currently.

Despite the fall in price, the comprehensive real estate tax on this apartment will rise by 2.31 million won (a 634.2% increase) from 364,500 won to 2.68 million won. But due to the regulation preventing excessive increases in tax, the gross amount of ownership tax, including comprehensive real estate tax and property tax, will not jump by more than 200% compared to the previous year.

Meanwhile the gross amount of comprehensive real estate tax imposed on individuals and enterprises for their houses and land is estimated to be around 2.8814 trillion won, a 68% rise from that of last year.

koh@donga.com