As President Lee Jae-myung has reiterated the principle of taxation centered on "primary residence" regarding real estate taxes, the government is preparing a comprehensive tax reform plan that covers the entire process of home ownership—including acquisition, holding, and capital gains taxes—to curb speculation.
According to relevant authorities on Tuesday (June 9), the government is reportedly examining a direction to redesign the entire tax system based on the "total tax burden" of taxpayers from the acquisition of a home to its holding and eventual sale.
The intention is to move away from piecemeal adjustments of specific tax items and instead examine the tax structure by comprehensively considering the overall housing ownership structure, such as whether an individual owns multiple homes and the nature of the transactions.
Authorities explained that since the total tax burden from acquisition to sale is more important to taxpayers than whether individual tax rates are raised, they plan to refine the overall tax structure by comprehensively referencing domestic and international tax levels and cases.
The area where the "primary residence principle" will be most prominently reflected in this reform is the capital gains tax, with the reform of the long-term holding special deduction being a primary topic of discussion.
Currently, the long-term holding special deduction for single-home owners provides a maximum deduction of 40% each for the holding period and the residency period, for a combined maximum deduction of 80%.
The government is considering a plan to significantly strengthen the differentiation of taxation based on actual residency by reducing or abolishing the deduction based solely on the holding period, while increasing the proportion of benefits tied to the actual period of residence.
For the reform of holding taxes, the government is keeping all options open, including matters requiring parliamentary legislation and those that can be handled through amendments to government enforcement decrees.
Methods being discussed include amending laws such as the property tax and the comprehensive real estate holding tax to subdivide tax base brackets or increase nominal tax rates.
There is also the option of raising the "fair market value ratio," which the government can adjust independently without parliamentary consent.
If this ratio, which serves as the basis for tax calculation, is raised from the current 60%, it would have the effect of increasing holding taxes in practice by expanding the tax base without touching nominal tax rates.
The acquisition tax, which is levied at the stage of purchasing a home, is also reportedly included in the review, based on the total tax burden structure alongside holding and capital gains taxes.
The government plans to outline its tax law amendment proposal by the end of this month, based on the interim results of a research project aimed at rationalizing real estate taxes.
A government official stated, "We are currently in the stage of establishing a broad framework on how to adjust the gap between the current tax burden and the target level," adding, "Specific details will be adjusted during the future discussion process."
※ Please note: This article was translated by AI and may contain errors.