South Korean Property Owners Braced For Tax Hike

by Mary Swire, Tax-News.com, Hong Kong

24 November 2004

South Korea’s acquisition tax on private homes could triple as a result of government plans to increase benchmark prices for property in order to better reflect fair market prices, a Ministry of Finance and Economy official indicated on Monday.

According to Kim Ki-tae, vice head of the ministry's taskforce on real estate policy, the new measures could be introduced next April and will mean that benchmark prices will be raised to between 70% and 90% of market value, up from 30%.

He announced that the new system will be used to calculate property taxes, including property registration tax.

“For fair taxation, we must raise the benchmark prices to up to 90 percent of market prices,” explained Kim.

As part of the new measures, wealthy property owners may be required to pay an additional 20% in the form of a special tax. Those who own homes worth less than 900 million won (US$850,000) will be exempt from the special tax, as will the owners of land worth less than 600,000 won and business-zoned land worth under 4 billion won.

To mitigate the effect of the new tax on the 60,000 property owners likely to be adversely impacted, the government is considering a revision to the property registration tax, which may be lowered to 1.5% of property value from 2%.

Before coming into force, the proposals must be approved by the National Assembly.

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