Finding Compromise on Comprehensive Real Estate Holding Tax Deduction for Non-Resident Single-Home Owners... Focus on 1.2 Billion Won

▲ Real Estate Market

The tax authorities have begun reviewing whether to raise the basic deduction for non-resident single-home owners in the real estate tax revision plan, based on opinions raised during the high-level consultative meeting between the government and the ruling party.

With the September 3 submission deadline to the National Assembly fast approaching, the authorities are expected to focus on key issues raised by the ruling party and the government, such as the comprehensive real estate holding tax deduction for non-resident single-home owners and the upper limit on tax burden increases.

According to relevant authorities yesterday (August 24), the Ministry of Finance and Economy (MOFE) has initiated a review regarding the deduction scope for non-resident households with a single home for the comprehensive real estate holding tax, based on the results of the high-level party-government consultative meeting the previous day.

Discussions include reverting the basic deduction for non-resident single-home owners from the government's proposed 900 million won back to the current 1.2 billion won, or raising it to 1.4 billion won to match the level for owner-occupants.

However, as the government and the presidential office have consistently emphasized the "principle of actual residence," projections suggest there is a possibility of reaching a compromise at around 1.2 billion won—raising the basic deduction for non-resident single-home owners higher than the initial government proposal while differentiating it from owner-occupants.

In this case, the non-resident basic deduction amount would be determined between a market value of approximately 1.3 billion won (publicly assessed price of 900 million won) and 2.0 billion won (publicly assessed price of 1.4 billion won).

An official stated, "Raising the non-resident basic deduction to 1.4 billion won could undermine the principle of differentiating between residents and non-residents."

Additionally, critics point out that raising only the basic deduction amount for non-resident single-home owners while keeping the basic deduction for joint ownership by married couples at 900 million won each could violate fairness.

Consequently, speculations are emerging that this matter ultimately depends on the final decision of the presidential office.

In the previously announced "2026 Tax Law Revision Plan," the government raised the basic deduction amount for households with a single home from 1.2 billion won to 1.4 billion won, while reducing it from 1.2 billion won to 900 million won for non-resident single-home owners.

The objective was to establish the perception that housing is a place for living rather than buying by providing benefits to actual residents.

However, following the announcement of the tax law revision bill, opinions emerged that the measure was excessively strict for non-resident single-home owners in South Korea's reality, where moving is frequent and living in rented housing under jeonse is common.

Although the government decided to recognize the period as residence time when non-residence occurs due to unavoidable reasons, criticisms arose that these listed reasons—such as pursuing education, changing jobs or transferring, illness, school transfers, staying abroad, and supporting parents—fall short of actual real-world situations.

The main argument is that these reasons fail to encompass situations like grandparents moving to another region to look after their grandchildren or living in jeonse housing for children's education.

Accordingly, the government is reviewing plans to raise the non-resident basic deduction amount while also broadly recognizing unavoidable reasons.

However, this is a matter of enforcement decree revision that does not require approval from the National Assembly.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said during a meeting of the National Assembly's Special Committee on Budget and Accounts on this day, "We intend to resolutely convert reasonable cases of non-residence into residence to resolve the issue," adding, "We will listen closely to the voices of various citizens to devise a more rational plan."

In addition, the upper limit on tax burden increases is a major subject of discussion.

The government proposal decided to raise the tax burden limit from the current 150% to 200% to reflect the effect of higher comprehensive real estate holding tax rates.

However, as arguments emerged within the ruling party that the tax burden limit should be maintained at 150% to minimize the shock of increased comprehensive real estate holding taxes, a plan reflecting this is under review.

If the government modifies the government-proposed tax law revision bill following final coordination, it is scheduled to be submitted to the National Assembly after review by the Ministry of Government Legislation and the State Council.

The government is leaning toward not re-announcing the legislation even if it partially modifies the tax law revision bill.

Given that diverse opinions are being presented regarding the real estate revision plan, there is also a possibility that the government proposal will be submitted as originally drafted and discussed in depth within the National Assembly.

Democratic Party leader Kim Min-seok stated during his opening remarks at the high-level party-government meeting the previous day, "In-depth deliberation is required regarding the tax revision plan, which adjusts the comprehensive real estate holding tax basic deduction for non-resident single-home owners from 1.2 billion won to 900 million won and raises the tax burden limit to 200%."

Senior Spokesperson Park Sung-joon conveyed that discussions also took place regarding the tax burden upper limit and changes to the fair market value ratio.

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