The government's move to shift the axis of the comprehensive real estate tax from the number of homes to aggregate property value stems from its assessment that the current system has encouraged a preference for owning "one premium home." The aim is to correct a structure in which tax rates and deduction benefits differ significantly depending on the number of homes owned, even when the total value of properties is the same, thereby imposing a tax burden commensurate with the size of owned assets. However, concerns have also emerged that the system could become more complex if the current rate structure—which applies differently to those owning two or fewer homes versus three or more—is changed to a differentiated taxation method reflecting factors such as actual residence, home prices, location, and ownership purpose.
◇Ultra-High-Value Threshold at 3-4 Billion Won in Assessed Value... Targeting the "Premium Home"= Inside and outside the government, an assessed value of around 3 to 4 billion won is being cited as the threshold for ultra-high-value homes that will face significantly higher comprehensive real estate tax burdens. Applying the 69% assessment ratio for apartment values, this corresponds to roughly 4 to 5 billion won in market value. While maintaining the principle that "single-home ownership is protected," the government intends to revise the current system, which taxes homes worth around 12 billion won—the current basic deduction threshold—and ultra-high-value homes worth 3 to 4 billion won or more within the same single-home framework. (Note: The Korean text states basic deduction of 12억 won, i.e., 1.2 billion won.)
President Lee Jae-myung also indicated at a Cabinet meeting on the 14th of this month that the tax burden could be raised on ultra-high-value single homes even if they are owner-occupied residences. Within the government, a plan to establish a separate taxation bracket for homes worth more than 4 to 5 billion won in market value, or around 3 to 4 billion won in assessed value, is being actively discussed. Options under review also include subdividing the tax base for the ultra-high-value bracket or applying higher tax rates.
The government's shift toward taxation centered on aggregate value stems from its assessment that the current comprehensive real estate tax is relatively favorable to ultra-high-value single homes. Currently, even when the tax base is the same, owners of three or more homes are subject to a separate heavy tax rate, sharply increasing their tax burden. According to the National Tax Service, in the bracket with a tax base of more than 3 billion won and up to 5 billion won last year, the per-person comprehensive real estate tax for owners of three or more homes was 66.66 million won, or 41.94 million won more than the 24.72 million won paid by single-home owners. This is why some point out that the tax differentiation based on the number of homes has served as an incentive driving demand toward ultra-high-value single homes.
◇Raising the 12 Billion Won Basic Deduction Under Review= Along with the ultra-high-value threshold, the basic deduction line is considered a core element of this reform. Under the current comprehensive real estate tax, single-home owners in a single household deduct 1.2 billion won and multi-home owners deduct 900 million won from their per-person aggregate assessed value, then multiply by the 60% fair market value ratio to calculate the tax base.
The government is considering a plan to modestly raise the basic deduction for single-home owners above the current 1.2 billion won, taking into account recent increases in home prices and inflation. The measure aims to intensively raise the tax burden on ultra-high-value homes while reducing or maintaining at current levels the burden on ordinary owner-occupied single-home owners.
The overall taxation system is likely to be reorganized into three groups: a tax-exempt bracket below the basic deduction, a moderate-burden bracket, and an ultra-high-value bracket. The method of applying a separate heavy tax rate of up to 5% to owners of three or more homes would be abolished or integrated into the general rates, creating a structure that applies the same basic progressive tax rate to per-person aggregate value regardless of the number of homes. Deductions and reductions would then differ according to factors such as actual residence, home location, and ownership purpose, or weighting factors would be reflected in the final tax amount.
◇Focus on Actual Residence Rather Than Long-Term Holding... Exceptions for Unavoidable Non-Residents= The comprehensive real estate tax deduction system is expected to change in a direction that emphasizes actual residence over simple long-term holding. Currently, if a single-home owner in a single household has held the home for five years or more, or is aged 60 or older, they can receive long-term holding and elderly tax deductions even if they do not actually reside there. Combining the two deductions can reduce the comprehensive real estate tax by up to 80%.
The government is considering a plan to expand deductions and reductions for owner-occupied homes, homes owned by ordinary and middle-class people, and provincial homes, while limiting benefits for non-resident ultra-high-value homes, multiple homes, and holdings with clear investment or speculative purposes. The government plans to establish exceptions, such as recognizing as actual residents those single-home owners who cannot live in their own homes due to unavoidable circumstances such as job relocation, overseas assignment, long-term medical treatment, caring for parents, or children's education.
◇Difficult Task of Identifying "Speculative Intent"... Tax Burden Surges with Overlapping Surcharges= Concerns are also being raised over the direction of the comprehensive real estate tax reform. Objectively defining "holdings for investment or speculative purposes"—which the government has said it will subject to higher tax burdens—under tax law is itself no easy task. It is difficult to conclude speculative intent based solely on the fact that a person does not actually reside there, and even for rental homes, it is hard to clearly distinguish between subsistence-based rentals and investments aimed at capital gains.
The extent to which weighting factors such as ultra-high value, multiple homes, non-residence, and speculative purposes will be applied is also a point of contention. If all the individual weighting factors are applied to someone who owns multiple ultra-high-value homes without actually residing in them, the tax burden could increase excessively.
Suh Jin-hyung, a professor in the Department of Real Estate Law at Kwangwoon University, said, "It is not easy to design factors such as actual residence as objective taxation criteria under tax law." He added, "While the direction of strengthening property taxes is clear, considerable controversy is expected in the process of establishing detailed criteria."
