The government will keep the basic comprehensive real estate tax deduction for owners of a single home they do not live in at the current 1.2 billion won ($880,000) in officially assessed value. The decision, made 29 days after the government said in last month's tax reform proposal that it would lower the deduction to 900 million won, reverses the original plan. A plan to raise the ceiling on comprehensive real estate tax increases to 200% was also dropped, leaving the current 150% limit in place.
The Ministry of Finance and Economy said 11 tax code amendments containing these measures were finalized at a Cabinet meeting on the 1st. The government plans to submit the amendments to the National Assembly by the 3rd of this month for review during the regular session.
Under the revised proposal, the basic deduction for single-household, single-home owners who do not live in the property was adjusted to 1.2 billion won from the 900 million won in the earlier government plan. The change effectively maintains the current deduction level. For married couples who jointly own a single home they do not occupy, the per-person deduction was raised to 600 million won from the 400 million won originally proposed. Combined, the couple's deduction totals 1.2 billion won.
Tax benefits for owners who live in their single home will be expanded as announced in the earlier proposal. The basic deduction will rise to 1.4 billion won from the current 1.2 billion won. Married couples who jointly own and occupy a single home will continue to receive a 900 million won deduction each. The ministry said the revision was "intended to adjust the comprehensive real estate tax burden on single-household, single-home owners and on married couples who jointly own a single home."
The ceiling on tax increases for the housing and land portions of the comprehensive real estate tax will also remain unchanged. In last month's tax reform proposal, the government had planned to raise the cap, currently set at 150% of the previous year's tax bill, to 200%, but withdrew the measure in the revised version.
The government had initially put forward a principle of owner-occupancy, expanding deductions for those living in the single home they own while reducing them for those who do not, to create a tiered tax system. After the tax reform proposal was announced, however, objections mounted that differentiating tax burdens solely on the basis of whether owners live in the property goes too far, given that frequent moves and living under jeonse, a lump-sum deposit lease, are common in South Korea.
Calls for a review also spread within the ruling party. Voices inside the party arguing for easing or eliminating the tax differential based on occupancy grew louder in particular after Kim Min-seok was elected leader of the Democratic Party of Korea.
The government gathered opinions last month through interagency consultations and a public notice of proposed rules, then held a vice-ministerial meeting on the 27th before finalizing the revised proposal at the Cabinet meeting the same day.
